What Are Closing Costs?
Written for Louisiana Mortgage Handbook by Chasity Graff, Mortgage Broker/Owner of LA Lending, LLC.
Last reviewed: 2026-06-24
Quick Answer
Closing costs are the fees and charges connected to getting a mortgage and closing on a property.
They can include lender fees, title fees, appraisal, credit report, recording fees, prepaid interest, homeowners insurance, escrows, taxes, and other costs depending on the loan and property.
Why Closing Costs Matter
Closing costs matter because they affect how much money you need to bring to closing.
A buyer may focus on the down payment, but the down payment is only one part of the cash needed. Closing costs, prepaids, escrows, and insurance can all affect the final number.
What Can Be Included
Common items may include lender charges, discount points if chosen, appraisal fee, credit report fee, title company fees, lender title insurance, recording fees, prepaid interest, homeowners insurance, property taxes, and escrow setup.
The exact items depend on the loan program, property, closing date, insurance, taxes, lender, title company, and final figures.
My Thought Process
I do not like borrowers only looking at the down payment. The real question is cash to close.
If we know the full estimated cash needed early, it is easier to plan, negotiate, and avoid surprises.
Common Mistakes
- Assuming closing costs and down payment are the same thing.
- Forgetting about homeowners insurance.
- Forgetting escrows and prepaid items.
- Assuming the seller can pay unlimited costs.
- Waiting until the last minute to review cash to close.
Bottom Line
Closing costs are part of the money needed to close, but they are not the same thing as the down payment.
The best plan is to review the full estimate early and update it as taxes, insurance, rate, loan program, and closing date become clearer.
Related Questions
- What Is Cash to Close?
- Prepaids vs. Closing Costs
- What Are Seller Concessions?
- Why Closing Costs Can Change
- How Escrows Affect Cash to Close
Educational Note
Educational note: This page is meant to explain the mortgage process in plain English. It is not a loan approval, commitment to lend, rate quote, or legal/tax advice. Mortgage programs, pricing, payments, documentation requirements, and guidelines can change. Final approval depends on credit, income, assets, property approval, appraisal, title review, underwriting review, lender guidelines, and approved credit.