Are Online Mortgage Lenders Cheaper on Closing Costs? Here’s What’s Actually Comparable

Most of what shows up in your total closing costs, appraisal, title insurance, taxes, escrow, is priced by third parties or local government, not by whether you chose a bank or an online lender. The one line item a mortgage lender actually controls, and the one genuinely worth comparing between lenders, is the Section A fees that your lender sets directly: application fees, underwriting fees, processing fees, and the origination fee itself.

Quick Answer:

• Most closing cost categories are set by third parties or local government (appraisal, title, taxes, insurance, escrow), not by lender type, so they don’t meaningfully differ between a bank and an online lender in the first place.
• The one line item a lender fully controls is Section A, origination charges. That’s where lender differences actually show up, and where a $0 origination fee applies.
• No official dataset breaks out total closing costs by lender type (bank, nonbank, online-direct). CFPB’s own HMDA data doesn’t publish that split, and no credible third-party source does either.
• Total closing costs typically run 2% to 5% of your loan amount, according to Freddie Mac, regardless of lender type.
• You can compare the one part that does vary by lender yourself: pull Loan Estimates from a couple of lenders and compare Section A line by line.

Closing Costs Don’t Vary By Lender Type

Every cost on your Loan Estimate falls into a labeled section, and each section is controlled by a different party, not your lender across the board:

• Section A, Origination Charges. Fees your lender sets directly: application fees, underwriting fees, processing fees, and the origination fee itself. This is the only section a lender fully controls.
• Section B, Services You Cannot Shop For. Third-party services your lender requires and selects, most commonly the appraisal and credit report. The provider is chosen by the lender, but the pricing reflects the appraiser or credit bureau’s rates, not a lender markup you can shop away.
• Section C, Services You Can Shop For. Services like title insurance and a property survey. Your lender must give you a list of approved providers, but you can shop elsewhere, and the price is set by that provider, not your lender.
• Section D, Total Loan Costs. The sum of A, B, and C.
• Sections E, F, and G, Taxes, Prepaids, and Escrow. Government recording and transfer taxes (E), upfront costs like homeowners insurance and prepaid interest (F), and your initial escrow deposit (G). None of these are set by your lender; they’re set by local government, insurance companies, and your own tax and insurance schedule.
• Section H, Other, and Section I, Total Other Costs. Anything not covered above, plus the sum of E through H.
• Section J, Total Closing Costs. D plus I, the number most people mean when they say “closing costs.”

Sections B through J are effectively the same no matter which mortgage lender you choose for a given property and loan amount, since they’re priced by appraisers, title companies, insurers, and local government. That’s the real reason a “closing costs by lender type” dataset wouldn’t tell you much even if one existed: most of the number it would report has nothing to do with lender type in the first place. Section A is the exception, and it’s where the actual comparison lives.

How to Actually Compare Closing Costs Across Lenders

Since no dataset will do this comparison for you, here’s how to do it yourself in a few minutes:

1. Request Loan Estimates from two or three lenders for the same loan amount, property, and loan type. Lenders are required to provide one within three business days of a complete application.
2. Compare Section A, origination charges, line by line. This is the number that should actually differ by lender, since it’s the one section a lender sets directly.
3. Treat Sections B, C, E, F, and G as roughly consistent across your quotes. If they vary a lot for the same property and loan amount, that’s worth asking your lender about, but it’s more likely an estimation difference than a real lender-quality signal, since those sections reflect third-party and government pricing that shouldn’t change based on who’s originating your loan.

Typical Closing Costs: 2% to 5% of Your Loan Amount

According to Freddie Mac, total closing costs typically run 2% to 5% of your loan amount. On a $400,000 loan, that’s roughly $8,000 to $20,000*, though the actual figure depends heavily on your state (property taxes and transfer taxes vary widely), your loan type (government-backed loans carry different upfront fees), and how much of Section C you shop around on. This range holds regardless of lender type, for the same reason outlined above: most of what drives it isn’t set by your lender.

*Figures in this article are illustrative examples, not a quote. Confirm your actual costs with your lender.

The One Line Item That’s Actually Comparable: Origination Fees

Section A is where lender differences genuinely show up. The national median origination charge on 2025 HMDA-reported loans was approximately $1,495. Tomo Mortgage charges $0 in origination fees. For a full breakdown of what that difference means on a typical loan check out How Much Does a $0 Origination Fee Save You?.

But why do non-depository and online-direct lenders often have more room to cut origination fees? Independent mortgage companies typically have a lower average cost to originate a loan than depository banks in 2025, $12,209 versus $16,320, according to Mortgage Bankers Association data. That’s a lender’s cost to produce a loan, not a borrower’s closing cost, and a lower cost structure is part of why some lenders can offer $0 origination fees while others can’t.

Frequently Asked Questions (FAQs)

Do online mortgage lenders have lower closing costs than banks?

Most closing cost categories, appraisal, title, taxes, escrow, are set by third parties or local government, not by lender type, so they don’t meaningfully differ between a bank and an online lender. The one line item that does vary by lender is the origination fee, where some online lenders, including Tomo Mortgage, charge $0.

What’s included in mortgage closing costs?

Your Loan Estimate breaks closing costs into labeled sections: origination charges your lender sets (Section A), required third-party services (Section B), services you can shop for like title insurance (Section C), and taxes, prepaid costs, and escrow (Sections E through G). Most of these are set by third parties or local government, not by your lender.

How much are typical mortgage closing costs?

Typically 2% to 5% of your loan amount, according to Freddie Mac. On a $400,000 loan, that’s roughly $8,000 to $20,000, depending on your state, loan type, and how much you shop around on the services you’re allowed to shop for.