What do closing costs actually cover?

Short answer

Closing costs are your "in the door" costs, the taxes and tags of buying a home.

Full answer

Closing costs are sort of like the taxes and tags when you buy a car. It's what your "out the door" costs would be, or maybe the better way to put it would be your "in the door" costs. They cover lender fees, title work, appraisal, settlement, and prepaid items like taxes and insurance.

This is another good reason to talk to a qualified local lender. They're familiar with the market and what closing costs you can expect, and they'll generate an estimate for you so you'll have a good idea of what your actual costs are going to be before you even start shopping. For a buyer in the DC area, plan on around 3% for a conventional loan, a little higher for FHA and VA.

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