Closing costs exist because several parties do real work to get a transaction closed and recorded, and they get paid for it. Title companies, escrow or settlement companies, and in some states an attorney all play a role, and their fees are what show up as closing costs. There are also lender charges tied to originating the loan. A useful feature of most of these costs: you only pay them if the transaction actually closes. Title and escrow fees are contingent on the deal completing. A few smaller items get paid up front regardless, like the appraisal and the credit report, because that work happens whether or not you reach the finish line. Closing costs also get confused with prepaid items, which are separate. Prepaids are things like property taxes and homeowners insurance funded in advance, plus the setup of your escrow account. That's your own money going toward your own future bills rather than a fee for services. In California specifically, escrow acts as a neutral third party representing both buyer and seller, making sure the transaction is handled correctly and money moves only when every condition is met. Your Loan Estimate breaks all of this out line by line. Read it closely.