What are closing costs and how much, on the average?

Closing costs vary from state to state but I've always heard that a good rule of thumb is 1% to 3% of the purchase price. They can include loan fees (application, appraisal, points), title search and title insurance, survey, tax and hazard insurance payments and escrows, legal fees and document recording fees.

When you apply for a mortgage loan the lender must provide you with a document called the Good Faith Estimate. This gives a breakdown of your estimated closing costs and will give you a pretty good idea of what you'll end up spending.