The HUD-1 Statement
The HUD-1 Settlement Statement is the master document of your closing. Required under the Real Estate Settlement Procedures Act (RESPA), it itemizes every fee and charge involved in the transaction — from lender fees to title charges to prepaid expenses. Your lender must provide the final HUD-1 at least one business day before closing.
Many buyers never ask for their HUD-1 in advance and arrive at closing seeing many of these numbers for the first time. That is a mistake. Request it as early as possible, review every line, and question any fee that differs significantly from what you were quoted on your Loan Estimate (formerly called a Good Faith Estimate).
Always Ask for Your HUD-1 Early: Your lender will not proactively give you the HUD-1 before they are required to. Ask for it explicitly. Arriving at closing with unanswered questions about your settlement statement is avoidable — but only if you request the document ahead of time.
Closing Cost Breakdown by Category
| Fee | Estimated Cost | Notes |
|---|---|---|
| Application / Credit Report | $75 – $300 | Per applicant; covers credit pull and processing |
| Loan Origination Fee | 1% – 1.5% of loan | Lender's fee for evaluating and preparing the loan |
| Discount Points | 0% – 3% of loan | Optional; each point buys down the interest rate |
| Appraisal | $400 – $700 | Confirms property value for lender |
| Home Inspection | $175 – $350 | Lender may require termite, structural, or septic |
| Prepaid Interest | Varies | Interest from closing date through end of month |
| Private Mortgage Insurance (PMI) | 0.5% – 1.5% of loan/yr | Required if down payment < 20%; first year prepaid |
| Homeowner's Insurance | $300 – $1,000 | First year premium due at closing (~$3.50/$1,000 of value) |
| Flood Determination Fee | $15 – $50 | Separate from flood insurance premium if required |
| Escrow / Reserve Funds | Varies | Upfront deposit for taxes and insurance escrow |
| Survey | $150 – $400 | Confirms property boundaries and improvements |
Application Fee
The lender charges an application fee to cover the cost of processing your loan request and pulling your credit reports. This fee typically ranges from $75 to $300 and is usually charged per applicant. In some cases it is collected upfront, before any other fees are incurred.
Loan Origination Fee
The origination fee compensates the lender for the work of evaluating, preparing, and processing your mortgage. It can cover attorney fees, document preparation, notary fees, and administrative costs. Origination fees typically run 1% to 1.5% of the loan amount. On a $350,000 loan, that is $3,500 to $5,250. This fee is negotiable — comparing Loan Estimates from multiple lenders is the most effective way to reduce it.
Mortgage Points (Discount Points)
Discount points are an optional upfront payment to reduce your interest rate. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%, though this varies by lender and market conditions. Points paid at settlement are generally tax-deductible in the year they are paid for a primary home purchase (different rules apply to refinances and second homes).
You are never required to pay points, but you will receive a higher interest rate without them. Whether paying points makes financial sense depends entirely on how long you plan to keep the loan. Calculate your break-even point: divide the upfront cost of the points by the monthly payment savings. If you plan to stay in the home longer than that break-even period, buying points is financially advantageous.
Negotiate Points With the Seller: In some purchase transactions, buyers negotiate for the seller to pay their discount points as part of the purchase offer. Seller-paid concessions can effectively reduce your rate without requiring additional cash at closing.
Appraisal
Lenders require an appraisal to confirm that the property is worth at least as much as the loan amount. The appraisal is performed by a licensed third-party appraiser and typically costs $400 to $700. You have the right to receive a copy of your appraisal. If you are refinancing and have a recent appraisal, some lenders may waive the requirement for a new one.
Lender-Required Home Inspections
Depending on the property and location, the lender may require a termite inspection, structural engineering assessment, septic system test, or water quality test. These inspections serve the lender's interests but you bear the cost, typically $175 to $350. Note that these lender-required inspections are separate from a buyer-initiated home inspection, which you should arrange independently regardless of what the lender requires.
Prepaid Interest
Your first regular mortgage payment is not typically due for six to eight weeks after closing. However, interest starts accruing the day you close. The lender collects prepaid interest at closing to cover the partial month from your closing date through the end of that month. For example, closing on the 16th means you pay interest for roughly 15 days. On a $300,000 loan at 7%, that is approximately $350–$400 in prepaid interest.
Private Mortgage Insurance
If your down payment is less than 20% of the home's purchase price, the lender will require private mortgage insurance (PMI). PMI protects the lender in case you default. At closing, you typically prepay the first year's premium, which costs 0.5% to 1.5% of the loan amount annually. You can request cancellation once you reach 20% equity based on the original purchase price, and PMI is automatically removed at 22% equity under federal law — provided your payments are current.
Some lenders offer Lender-Paid PMI (LPMI), where the lender absorbs the PMI cost in exchange for a higher interest rate. Unlike borrower-paid PMI, LPMI cannot be cancelled when you reach 20% equity — the only way to eliminate it is to refinance.
Homeowner's Insurance
Your lender requires proof of an active homeowner's insurance policy at closing. The first year's premium is typically due at closing and generally ranges from $300 to $1,000 depending on the value of the home and level of coverage. A rough rule of thumb is approximately $3.50 per $1,000 of the home's purchase price. Condo owners may have hazard insurance provided through their HOA fees, but should still consider personal property coverage.
Flood Determination Fee
The lender charges a small fee ($15 to $50) to determine whether your property is located in a designated flood hazard area. If the property is in a flood zone where federally subsidized flood insurance is available, the lender is required by law to mandate flood insurance as a condition of the mortgage. Flood insurance is a separate and additional cost beyond the flood determination fee, and can range from $350 to $2,800 per year depending on location and property characteristics.
Escrow (Reserve) Funds
Many lenders require an escrow account to ensure property taxes and insurance premiums are paid on time. At closing, you may need to deposit funds into this escrow account to ensure there is enough to cover upcoming tax and insurance bills. The amount required depends on when those payments are due. Lenders are limited by RESPA in how much they can require you to keep in escrow at any time.
Survey Costs
A survey confirms the exact location of buildings and improvements on the property and verifies that structures are within legal boundaries. Basic surveys typically cost $150 to $400. Some lenders require a more comprehensive boundary survey, which can cost significantly more. Surveys are especially important in rural areas or on properties where boundary questions may arise.
Loan Estimate and Truth in Lending Disclosure
Under the TRID rule (TILA-RESPA Integrated Disclosure), your lender must provide a Loan Estimate within three business days of receiving your mortgage application. The Loan Estimate shows your projected interest rate, monthly payment, and total closing costs in a standardized format designed for comparison shopping. Always collect Loan Estimates from at least three lenders and compare the total costs — not just the interest rate.
Your lender is also required under the Truth in Lending Act to provide a disclosure stating your total finance charge and Annual Percentage Rate (APR). The APR is a broader measure of loan cost than the interest rate alone, because it factors in discount points, origination fees, and certain other charges. Comparing APRs across lenders on loans with the same term provides a more accurate measure of true loan cost than comparing interest rates alone.
Pre-Closing Checklist
- Pull your credit report before applying — identify and correct any inaccuracies that may be lowering your score and increasing your rate.
- Compare mortgage rates from multiple lenders — use our mortgage rate comparison tables to benchmark offers.
- Request a Loan Estimate from every lender you consider — compare total closing costs, not just the interest rate or APR.
- Ask your lender for a copy of your credit report — lenders are required to provide this and it costs you nothing additional.
- Request your HUD-1 statement at least two days before closing — lenders must give it to you one day before closing, but asking earlier gives you more time to review.
- Compare the HUD-1 to your Loan Estimate — most fees cannot increase significantly from what was quoted; others are capped by law.
- Use a mortgage calculator — compare how a 0.25% rate difference affects your total cost over the life of the loan using our mortgage calculator.
