What closing costs really cover

Closing costs are the fees and prepaid items due when you sign. They usually add up to 2 to 5 percent of the loan amount.

Lender and loan fees

These include the origination or underwriting fee, any discount points you choose to pay for a lower rate, and the credit report. Your Loan Estimate lists each one within three business days of applying.

Third-party services

The appraisal, title search, title insurance, survey and the closing attorney's fee are paid to other companies. In North Carolina, an attorney handles the closing.

Prepaid items and escrow

Some costs are paid in advance at closing: interest until your first payment, the first year of homeowners insurance, and a few months of property taxes and insurance to start your escrow account.

Ways to lower them

Ask the seller to pay part of your costs, compare title insurance quotes, or take a slightly higher rate in exchange for a lender credit. Your Closing Disclosure arrives at least three business days before closing, so you can check every line against the Loan Estimate.