The Three Buckets
Closing costs look chaotic because the Loan Estimate lists 20+ line items. But every single charge falls into one of three buckets:
- Lender fees — what your lender charges to originate and underwrite the loan. Somewhat negotiable.
- Third-party services — appraisal, title, escrow, inspection, recording. Regulated; shopping helps on some, not others.
- Prepaids & reserves — not really fees. You're pre-funding the first year of taxes, insurance, and interest. Same dollar either way.
The first two are what people mean by "closing costs." The third is money you'd owe anyway — just paid upfront into an escrow account.
Lender Fees
These go directly to your loan officer's company. On a Loan Estimate they appear in Section A ("Origination Charges").
| Fee | What It Is | Typical Range |
|---|---|---|
| Origination FeeSection A | The lender's base charge to create your loan. Often expressed as a percentage (e.g. 1% of loan amount) or a flat fee. Some "no-cost" lenders roll this into the rate instead. | 0–1% of loan $0–$8,000 |
| Processing FeeSection A | Paid to the loan processor who assembles your file. Sometimes bundled into the origination fee. | $400–$900 |
| Underwriting FeeSection A | The lender's cost to review your file and approve the loan. Flat fee, not tied to loan size. | $700–$1,500 |
| Discount PointsSection A · Optional | Cash paid upfront to buy the interest rate down. 1 point = 1% of loan amount, typically drops rate 0.25%. Skip unless staying 7+ years. | 0–3 points Varies wildly |
| Rate Lock ExtensionSection A · Only if needed | If your loan closes after the original lock expires, the lender charges to extend. Negotiate who pays when the delay isn't your fault. | $0–$500 |
Lender Credit (the opposite of points)
Instead of paying points to lower the rate, you can take a slightly higher rate and receive a lender credit that offsets closing costs. On a $700K loan, 0.25% more rate can generate $3,500–$5,000 in credit. This is how true "no-cost refinances" work — not a free lunch, but a trade. Great for shorter-horizon refis.
Third-Party Services
Services the lender requires but doesn't provide. You can shop some of these (marked below); others are fixed by the lender.
| Fee | What It Is | Typical Range |
|---|---|---|
| Services You CAN'T Shop For (Section B) | ||
| AppraisalRequired · purchase & most refis | Lender orders through an Appraisal Management Company (AMC). Higher in coastal/view markets and on complex properties. Waived on many streamline refis. | $650–$900 $1,200+ jumbo |
| Credit ReportPulled at application | Tri-merge credit pull. Lender fee pass-through. | $75–$200 |
| Flood CertificationRequired everywhere | Confirms whether property is in a FEMA flood zone. San Diego coastal properties, yes; most others, no. | $15–$25 |
| Tax Service FeeLender-selected vendor | Pays a service to monitor your property tax payments for the loan life, alerting the lender to delinquencies. | $70–$90 |
| Services You CAN Shop For (Section C) | ||
| Title Insurance — Lender's PolicyRequired | Protects the lender if a title defect surfaces after closing. One-time premium based on loan amount. You can (and should) shop title companies. | $700–$2,500 |
| Title Insurance — Owner's PolicyRecommended — purchase only | Protects you. In California it's typically the seller's cost in Northern CA and the buyer's in Southern CA — negotiable in San Diego. | $800–$2,800 |
| Escrow / Settlement FeeRequired | Paid to the escrow officer who handles the money and paperwork. Often split 50/50 with the seller on a purchase; 100% buyer on a refi. | $800–$1,800 |
| Notary / SigningRequired | Mobile notary comes to you for signing. Sometimes bundled into escrow fee. | $150–$300 |
| Pest / Termite InspectionPurchase · VA required | VA loans require a "Section 1" clearance. Other loans typically don't, but buyers often order anyway. | $100–$175 |
| Home InspectionPurchase · not lender-required | Independent of the loan. Paid directly to the inspector, not through escrow. Skip at your peril. | $500–$900 |
Why title insurance seems high in California
California title rates are regulated but not identical across companies. Shopping 2–3 title companies on a $900K San Diego loan can save $400–$800. Your loan officer has preferred vendors — ask for a second quote yourself.
Government & Recording Fees
Paid to San Diego County or the state. These are fixed — no shopping, no negotiation.
| Fee | What It Is | Typical Range |
|---|---|---|
| Recording FeeSan Diego County Recorder | Paid to record the deed and deed of trust with the county. Based on document pages. | $125–$225 |
| Documentary Transfer TaxPurchase only | $1.10 per $1,000 of purchase price. On a $950,000 San Diego home: $1,045. Typically paid by the seller in San Diego County, but negotiable. | $1.10 per $1K |
| City Transfer TaxSelect cities only | Most San Diego County cities have no city transfer tax. Unlike San Francisco or LA. Confirm with escrow. | Usually $0 |
Prepaids & Reserves
Not technically "fees" — you're pre-funding the first year of property ownership. These appear in Sections F and G of the Loan Estimate. Same money you'd pay later, just paid at closing.
| Item | What It Is | Typical Amount |
|---|---|---|
| Prepaid InterestClosing day → month-end | Daily interest from closing to the end of that month. Close earlier in the month = more days = more prepaid interest. | ~$30–$150/day of remaining month |
| Homeowners Insurance (1 year)Paid in full at closing | San Diego premiums depend heavily on wildfire zone. Coastal/urban: lower. Fire-adjacent (Valley Center, Ramona): much higher. | $1,200–$3,500/yr $6,000+ fire zone |
| Property Tax Impound2–6 months reserves | Lender collects 2–6 months of tax payments to seed the escrow account. Varies by closing date vs. the April/Dec installment cycle. | 0.19% of price per month held |
| Insurance Impound2–3 months reserves | Two to three months of homeowners insurance seeded into the escrow account alongside taxes. | ~$200–$600 |
| HOA Transfer / SetupCondos & PUDs only | One-time fee when a unit changes hands. Some HOAs also charge document/capital contribution fees. | $250–$800 |
The prepaid interest trick
If you close on the 28th of a month, you only prepay 2–3 days of interest. Close on the 3rd and you're prepaying 27+ days. On a $700K loan at 6.75%, that's a $3,400 swing between worst and best closing date. Not always controllable, but ask.
Sample San Diego Closings
Two realistic scenarios. Numbers are ballpark — your Loan Estimate will vary.
$950,000 Purchase · 20% Down · 30-Year Conventional
| Lender fees (origination + underwriting + processing) | Well-priced direct lender | $2,400 |
| Third-party services | Appraisal, title, escrow, inspection, pest | $4,200 |
| Government & recording | Transfer tax typically paid by seller in SD | $175 |
| Prepaids (insurance + prepaid interest) | Mid-month closing | $3,100 |
| Reserves (tax + insurance impounds) | Seeded into escrow account | $4,800 |
$620,000 Rate-and-Term Refinance · 30-Year Fixed
| Lender fees | Origination + underwriting | $2,200 |
| Third-party services | Appraisal, title, escrow, recording | $3,400 |
| Prepaid interest | Varies by closing date | $1,100 |
| Reserves (if new impound) | If switching from non-impound to impound | $2,800 |