Understanding Closing Costs: What You Need to Know

A complete guide with real examples built into each topic (LE/CD)

Closing costs are one of the most misunderstood parts of buying a home. They affect your total cash-to-close and vary depending on loan type, location, and timing. This guide explains each cost and shows you exactly how they look on a Loan Estimate (LE) and Closing Disclosure (CD).

📄 Before We Begin: Two Key Documents You Will Receive

📌 Loan Estimate (LE)

• Provided within 3 days of applying

• Shows your estimated rate, fees, and closing costs

📌 Closing Disclosure (CD)

• Delivered 3 days before closing

• Shows your final and exact cash-to-close

Your LE is the preview —
Your CD is the final invoice.

📍 Sample Buyer Scenario Used for All Examples

• Home Price: $450,000

• Loan Amount: $360,000 (20% down)

• Interest Rate: 6.25%

• Loan Type: Conventional 30-Year Fixed

• Closing Date: March 15, 2025

• Location: Cumming, GA

⭐ 1️⃣ Lender Fees (Origination Costs)

These are fees charged by your lender to process and approve your mortgage.

💵 Example from LE / CD:

These will appear identically (or close) on both the LE and CD.

⭐ 2️⃣ Services You Cannot Shop For

These are required services selected by the lender.

💵 Example from LE / CD:

⭐ 3️⃣ Services You Can Shop For

These are fees you can shop, including title services and inspections.

💵 Example from LE / CD:

📌 Owner’s Title Insurance protects YOU, ensuring no one can claim ownership later. It appears on both LE and CD under “Services You Can Shop For.”

⭐ 4️⃣ Government Taxes & Recording Fees

These fees come from state and county offices.

💵 Example from LE / CD:

Georgia, like many states, charges transfer tax and intangible tax on the loan amount.

⭐ 5️⃣ Prepaid Items (Your Expenses Paid in Advance)

These are your future costs collected upfront, not lender fees.

💵 Example from LE / CD:

Prepaid interest changes based on the closing date — closing at end of month reduces this amount.

⭐ 6️⃣ Initial Escrow Deposit (Reserves Held by Lender)

Lenders collect reserves to ensure tax and insurance bills are paid on time.

💵 Example from LE / CD:

⭐ 7️⃣ HOA Fees (If Applicable)

If the property is in an HOA, you may see:

💵 Example from LE / CD:

These are paid at closing and depend on the HOA.

⭐ 8️⃣ Total Closing Costs Summary

All categories combined:

💵 Example from LE / CD:

⭐ 9️⃣ Cash to Close Calculation

What the buyer actually brings to closing:

💵 Example from LE / CD:

This is the number shown on the CD under “Cash to Close.”

🎯 Why This Matters

Understanding closing costs helps buyers:

• Budget accurately

• Avoid surprises

• Compare lenders

• Negotiate seller concessions

• Understand their LE vs CD differences

When buyers understand how the money flows, they feel empowered and confident.

📘 Final Thoughts

Closing costs shouldn’t be a mystery. With clear explanations and real examples from the LE and CD, every buyer can walk into closing fully prepared and stress-free.

If you'd like a personalized closing cost worksheet for your buyers, I can create one based on their price range and loan type.

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