Are My Closing Costs Too High?

Most borrowers have no baseline for what closing costs should be — which is exactly how lenders prefer it. Here's how to tell if yours are inflated, which fees to challenge, and what to say.

What average closing costs look like

Closing costs on a US mortgage typically range from 2% to 5% of the loan amount. On a $400,000 loan, that's $8,000 to $20,000. The national average is approximately $6,200 in lender and title fees, excluding prepaid interest, escrow reserves, and government transfer taxes.

State matters. New York averages $8,200, New Jersey $7,100, and Hawaii $7,500. Iowa, Missouri, and South Dakota average under $3,500. If your quote significantly exceeds the state average for a standard purchase, that's worth investigating.

The three sections of your Loan Estimate

Section A — Lender fees (fully negotiable)

Origination fee, underwriting fee, processing fee, application fee, rate lock fee. These go directly to the lender. Normal total: $1,000–$2,500. Above $3,000 on a $400K loan warrants negotiation.

Section B — Third-party fees you can't shop

Appraisal, credit report, flood certification. Paid to outside vendors selected by the lender. Non-negotiable with the lender, though you can request a different appraiser in some cases.

Section C — Third-party fees you can shop

Title insurance, settlement fee, title search. You can use your own title company in most states. Shopping Section C fees can save $500–$1,500.

Red flags that signal inflated fees

  • • Origination fee above $2,000 on a $400K loan without discount points purchased
  • • Underwriting fee above $1,000 — most automated underwriting costs lenders under $200
  • • Processing fee above $800 charged on top of origination
  • • Vague line items: "administrative fee," "document prep fee," "application fee" as separate charges
  • • Section A total above $3,500 on a standard conventional purchase

Frequently asked questions

What are average closing costs in the US?▾

Average closing costs in the US range from $3,000 to $8,000 on a median-priced home, representing 2–5% of the loan amount. High-cost states like New York ($8,200), New Jersey ($7,100), and Hawaii ($7,500) are significantly above the national average of roughly $6,200.

Which closing cost fees are negotiable?▾

Section A fees — origination, underwriting, processing, and application fees — are set directly by the lender and are negotiable. Third-party fees (appraisal, title insurance, recording) are paid to outside vendors and are harder to negotiate, though you can shop for your own settlement agent in most states.

How do I know if my origination fee is too high?▾

Origination fees typically range from $500 to $1,500 on a $400,000 loan. If your origination fee exceeds $2,000 without any discount points being purchased, it is above market for most borrowers. Compare Section A totals across at least two competing Loan Estimates.

Can I negotiate my closing costs after receiving a Loan Estimate?▾

Yes. You have until the loan is locked to negotiate Section A lender fees. Request competing Loan Estimates from at least one other lender, then bring both to your preferred lender and ask them to match or beat the total Section A charges.

What is a junk fee on a mortgage?▾

Junk fees are vaguely-named charges that lack a clear service counterpart — "administrative fee," "document prep fee," or "processing fee" charged on top of an existing origination fee. They exist primarily to add lender margin. They are negotiable and often waived when challenged directly.

Get a line-by-line fee analysis — $29

Upload your Loan Estimate. We extract every Section A fee, benchmark it against state averages, and give you exact negotiation language for each inflated line item.

Analyze My Loan Estimate — $29