Quick Answer
Quick Answer: Closing costs typically range from 2% to 5% of a home's purchase price. On a $400,000 home, expect to pay $8,000 to $20,000 in closing costs on top of your down payment. Major fees include loan origination (0.5-1% of loan amount), appraisal ($300-$600), title insurance ($500-$3,500), escrow deposits, recording fees, and attorney fees. Many of these costs are negotiable.
On a $400,000 home with 20% down: closing costs of $8,000-$16,000 + down payment of $80,000 = total cash needed of $88,000-$96,000
Estimate Your Total Home Buying CostsWhat Are Closing Costs?
Closing costs are the fees and expenses you pay when finalizing a real estate transaction -- beyond the property's purchase price and your down payment. These costs cover services provided by lenders, attorneys, title companies, government agencies, and insurers to complete the sale.
The Consumer Financial Protection Bureau (CFPB) notes that closing costs vary widely by location, loan type, and lender. While the national average for buyer closing costs is approximately $6,905 (excluding transfer taxes), according to CoreLogic/ClosingCorp data, the total can be significantly higher in states with high transfer taxes or attorney requirements.
Closing costs generally fall into three categories:
- Lender fees: Charges for originating, processing, and underwriting your loan
- Third-party fees: Costs for services like appraisals, title searches, and inspections
- Prepaid items and escrow deposits: Advance payments for property taxes, homeowner's insurance, and prepaid interest
Understanding what each fee covers helps you identify which costs are negotiable and where you can save money. Your lender is required to provide a Loan Estimate within three business days of your application, itemizing all expected closing costs under the TILA-RESPA Integrated Disclosure (TRID) rule.
Complete Closing Cost Breakdown for Buyers
Here is every fee you may encounter at closing, organized by category. Not all fees apply to every transaction -- your actual costs depend on your loan type, location, and the services required.
Lender Fees
| Fee | Typical Cost | What It Covers | Negotiable? |
|---|---|---|---|
| Origination Fee | 0.5-1% of loan | Lender's charge for processing your loan application | Yes |
| Discount Points | 0-2% of loan (optional) | Prepaid interest to lower your rate; 1 point = 0.25% rate reduction | Optional |
| Application Fee | $0-$500 | Administrative cost to process your application | Yes |
| Underwriting Fee | $400-$900 | Cost for the lender to evaluate your loan eligibility | Yes |
| Credit Report Fee | $25-$100 | Pulling your credit reports from the three bureaus | No |
Sources: CFPB, Freddie Mac. Ranges reflect typical costs as of early 2026; actual fees vary by lender and market.
On a $320,000 loan (80% of a $400,000 home), a 0.75% origination fee would cost $2,400. This is often the single largest lender fee and one of the most negotiable. Some lenders advertise "no origination fee" loans but compensate with a slightly higher interest rate.
Third-Party Service Fees
| Fee | Typical Cost | What It Covers | Negotiable? |
|---|---|---|---|
| Appraisal Fee | $300-$600 | Independent assessment of the property's market value | No |
| Home Inspection | $300-$500 | Professional evaluation of the home's condition (optional but recommended) | Shop around |
| Title Search | $200-$400 | Checking public records for liens, encumbrances, or ownership disputes | Shop around |
| Lender's Title Insurance | $500-$1,500 | Protects the lender against title defects (required by lender) | Shop around |
| Owner's Title Insurance | $500-$2,000 | Protects you against title defects (optional but strongly recommended) | Shop around |
| Survey Fee | $300-$800 | Verifies property boundaries (not required in all states) | Shop around |
| Attorney/Settlement Fee | $500-$1,500 | Legal review of documents (required in some states; optional in others) | Shop around |
| Pest Inspection | $75-$150 | Termite and pest inspection (required in some states) | Shop around |
Sources: CFPB, American Land Title Association (ALTA). Title insurance costs vary significantly by state. Attorney requirements vary by state -- required in approximately 20 states.
The lender requires a lender's title insurance policy to protect their investment. The owner's title insurance policy, which protects you, is technically optional but strongly recommended. In many states, the seller traditionally pays for the owner's policy. When both policies are purchased from the same title company, you can often get a "simultaneous issue" discount that reduces the combined cost by 20-40%.
Government and Recording Fees
| Fee | Typical Cost | What It Covers | Negotiable? |
|---|---|---|---|
| Recording Fees | $50-$250 | Filing the deed and mortgage with county records | No |
| Transfer Taxes | Varies widely | State/local tax on property transfers (0% to 2%+ of sale price) | No |
Sources: National Conference of State Legislatures. Transfer tax rates vary dramatically -- some states charge nothing (e.g., Texas, Montana) while others charge 1-2% or more (e.g., New York, Delaware). Who pays transfer taxes (buyer vs. seller) also varies by state and local custom.
Prepaids and Escrow Deposits
Prepaids are not fees for the closing transaction itself -- they are advance payments for recurring homeownership costs that your lender collects upfront to establish your escrow account.
| Item | Typical Amount | Details |
|---|---|---|
| Homeowner's Insurance | $1,000-$3,000 (first year) | Full first year premium paid upfront, plus 2-3 months escrow reserve |
| Property Tax Escrow | 2-6 months' worth | Advance deposit to ensure taxes are paid when due; amount depends on closing date and local tax schedule |
| Prepaid Interest | $500-$2,500 | Daily interest from your closing date through the end of that month; closing earlier in the month increases this cost |
| Flood Insurance | $400-$2,000+ (if required) | Required if the property is in a FEMA-designated flood zone |
Homeowner's insurance varies significantly by location, property value, and coverage level. Property tax rates range from approximately 0.3% to 2.5% of assessed value depending on state and locality.
If you close on March 5, you will owe prepaid interest for 26 days (March 5-31). If you close on March 25, you only owe 6 days. Closing later in the month can reduce your prepaid interest cost by $500 to $1,500 depending on your loan amount and rate. However, your first mortgage payment will then be due the following month.
How to Estimate Your Total Closing Costs
Use the 2-5% range as a starting point, then refine based on your specific situation. Here is a detailed example for a $400,000 home purchase with 20% down ($320,000 loan).
Example: Closing Costs on a $400,000 Home
| Category | Fee | Estimated Cost |
|---|---|---|
| Lender Fees | Origination fee (0.75%) | $2,400 |
| Underwriting fee | $600 | |
| Credit report | $50 | |
| Application fee | $300 | |
| Third-Party Fees | Appraisal | $450 |
| Title search + lender's title insurance | $1,200 | |
| Owner's title insurance | $1,000 | |
| Attorney/settlement fee | $800 | |
| Government Fees | Recording fees | $150 |
| Transfer taxes (varies by state) | $0-$8,000 | |
| Prepaids/Escrow | Homeowner's insurance (first year) | $1,800 |
| Property tax escrow (3 months) | $1,500 | |
| Prepaid interest (15 days) | $880 | |
| Estimated Total (excluding transfer taxes) | $11,130 | |
This estimate uses median costs. Transfer taxes vary from $0 to 2%+ depending on state. Actual costs depend on your lender, location, and services required. Use our Mortgage Calculator to see how your total monthly payment breaks down.
In this example, $11,130 in closing costs equals approximately 2.8% of the $400,000 purchase price. Add transfer taxes, and the total could reach 3-5% in higher-tax states.
Closing Costs by Home Price
Here is a quick reference for estimated closing costs at different price points, assuming 3% of the purchase price as a mid-range estimate.
| Home Price | Low Estimate (2%) | Mid Estimate (3%) | High Estimate (5%) |
|---|---|---|---|
| $250,000 | $5,000 | $7,500 | $12,500 |
| $350,000 | $7,000 | $10,500 | $17,500 |
| $400,000 | $8,000 | $12,000 | $20,000 |
| $500,000 | $10,000 | $15,000 | $25,000 |
| $750,000 | $15,000 | $22,500 | $37,500 |
These are estimates only. Actual closing costs depend on your location, loan type, and lender. Budget toward the higher end if you are in a state with transfer taxes or attorney requirements.
Check How Much You Can Afford Including Closing CostsBuyer vs. Seller Closing Costs
Both sides of a real estate transaction pay closing costs, but the fees are different. Understanding who traditionally pays which costs helps you negotiate effectively.
| Cost | Buyer Pays | Seller Pays | Notes |
|---|---|---|---|
| Loan origination fee | Yes | No | Tied to buyer's mortgage |
| Appraisal | Yes | No | Required by buyer's lender |
| Home inspection | Yes | No | Protects the buyer |
| Lender's title insurance | Yes | No | Required by buyer's lender |
| Owner's title insurance | Varies | Varies | Seller pays in many states; negotiable |
| Real estate commissions | No | Yes | Typically 5-6% of sale price |
| Transfer taxes | Varies | Varies | Split varies by state and custom |
| Escrow/prepaid items | Yes | No | Insurance, taxes, interest advances |
| Prorated property taxes | Varies | Varies | Prorated based on closing date |
Sources: CFPB, National Association of Realtors. Local customs determine many fee splits. Your purchase contract should specify who pays each cost.
Buyer closing costs typically total 2-5% of the purchase price. Seller closing costs -- driven mainly by real estate commissions -- typically total 6-10% of the sale price. For example, on a $400,000 home, the seller may pay $24,000-$40,000 in total closing costs, while the buyer pays $8,000-$20,000.
In a buyer's market, you can negotiate for the seller to pay a portion of your closing costs through seller concessions. Most loan programs cap seller concessions: conventional loans allow up to 3% of the sale price (with less than 10% down), 6% (with 10-25% down), or 9% (with 25%+ down). FHA loans allow up to 6%, and VA loans allow up to 4%. If the seller agrees to contribute $10,000 toward your closing costs, your out-of-pocket expense drops by that amount.
How Loan Type Affects Closing Costs
Your mortgage type influences both the fees you pay and your options for managing them. Here is how closing costs differ across major loan programs.
Conventional Loans
- Standard closing costs with no additional government fees
- PMI may be paid upfront as a lump sum at closing or monthly
- Seller concessions capped at 3% (less than 10% down), 6% (10-25% down), or 9% (25%+ down)
- No upfront mortgage insurance premium -- PMI is typically monthly
FHA Loans
- Includes an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount ($5,600 on a $320,000 loan) -- this can be financed into the loan
- Seller concessions allowed up to 6% of the sale price
- Certain closing costs cannot be charged to FHA borrowers (like preparation of truth-in-lending statements)
- Total closing costs may be higher due to UFMIP, but FHA is more flexible about who pays
For complete FHA qualification details, see our FHA Loan Requirements 2026 guide.
VA Loans
- Includes a VA funding fee of 1.25-3.3% depending on down payment and whether it is your first use (waived for veterans with service-connected disabilities)
- The VA funding fee can be financed into the loan
- The VA limits certain fees lenders can charge (the "1% rule" caps origination fees at 1%)
- Seller concessions allowed up to 4% of the sale price
- No PMI or mortgage insurance required
USDA Loans
- Includes an upfront guarantee fee of 1.0% of the loan amount
- The guarantee fee can be financed into the loan
- Annual guarantee fee of 0.35% of the remaining balance (paid monthly)
- Seller concessions allowed up to 6%
To see how different loan types affect your monthly payment, use our Mortgage Payment Calculator for a detailed PITI breakdown.
7 Strategies to Reduce Your Closing Costs
Many closing costs are negotiable or avoidable. Here are seven proven strategies that can save you hundreds to thousands of dollars.
1. Compare Loan Estimates From Multiple Lenders
This is the single most effective way to reduce closing costs. Get Loan Estimates from at least three lenders and compare them line by line. The CFPB recommends shopping for a mortgage because fees can vary by thousands of dollars between lenders for the same loan amount. Pay particular attention to origination fees, underwriting fees, and the interest rate offered.
2. Negotiate the Origination Fee
The origination fee (0.5-1% of the loan amount) is one of the largest -- and most negotiable -- closing costs. Ask lenders to reduce or waive it, especially if you have strong credit and are bringing a competitive offer. On a $320,000 loan, reducing the origination fee from 1% to 0.5% saves $1,600.
3. Ask for Seller Concessions
In a buyer-friendly market, request that the seller contribute toward your closing costs. Seller concessions are written into the purchase agreement. For example, if the seller agrees to pay 3% of the sale price on a $400,000 home, that is $12,000 toward your closing costs. This is especially useful for buyers who have enough for a down payment but limited additional cash.
4. Choose Your Own Title Company
You have the right to shop for title insurance. The American Land Title Association (ALTA) recommends comparing quotes from at least two title companies, as rates can vary by $500 to $1,500+ for the same coverage. Ask about simultaneous issue discounts if you are purchasing both a lender's and owner's policy.
5. Consider a No-Closing-Cost Mortgage
Some lenders offer to waive closing costs in exchange for a higher interest rate (typically 0.125-0.25% higher). This can make sense if you plan to sell or refinance within 5-7 years, since you may not stay long enough for the higher rate to exceed what you would have paid in upfront closing costs. However, if you keep the loan for 30 years, you will likely pay more in total interest.
A "no-closing-cost" mortgage does not eliminate fees -- it rolls them into a higher interest rate or adds them to the loan balance. On a $320,000 loan, a 0.25% higher rate costs approximately $47 extra per month or $16,920 over 30 years. Compare this to paying $10,000-$12,000 in closing costs upfront to decide which option saves more over your expected ownership period.
6. Close at the End of the Month
Prepaid interest is calculated from your closing date through the end of the month. Closing on March 28 instead of March 5 reduces your prepaid interest from approximately 26 days to 3 days -- a savings of $500 to $1,500 depending on your loan amount and rate.
7. Look Into Closing Cost Assistance Programs
Many state and local housing agencies offer grants or low-interest loans to help cover closing costs, particularly for first-time buyers and low-to-moderate income households. These programs work similarly to down payment assistance programs. Visit HUD.gov(opens in new tab) to find programs in your area.
Compare Mortgage Scenarios With Our CalculatorClosing Cost Assistance Programs
Several types of assistance programs can help reduce your out-of-pocket closing costs, especially if you are a first-time homebuyer or meet income requirements.
State Housing Finance Agency (HFA) Programs
Every state has a housing finance agency that offers programs for homebuyers. Many provide grants or forgivable loans specifically for closing costs, sometimes bundled with down payment assistance. Typical assistance ranges from $2,000 to $10,000. Eligibility usually requires meeting income limits and purchasing a home within certain price thresholds.
Employer-Assisted Housing
Some employers -- particularly hospitals, universities, and large corporations -- offer housing assistance as an employee benefit. These programs may provide direct grants, forgivable loans, or interest-free loans for closing costs. Ask your HR department if your employer offers any housing benefits.
Lender Credits
Your lender may offer credits toward closing costs in exchange for accepting a slightly higher interest rate. This is the mechanism behind "no-closing-cost" mortgages. A lender credit of $5,000 might come with a rate increase of 0.125-0.25%, depending on the amount. This is separate from seller concessions and can be combined with them.
For a comprehensive overview of first-time buyer programs and benefits, see our First-Time Home Buyer Guide 2026.
The Closing Process: What to Expect
Understanding the timeline and documents involved in closing helps you prepare and catch errors before they become costly.
Key Documents and Timeline
- Loan Estimate (within 3 business days of application): Your first detailed breakdown of expected closing costs. Compare Loan Estimates from multiple lenders to find the best deal.
- Home inspection (after offer accepted): Optional but strongly recommended. Usually costs $300-$500 and may reveal issues that affect your negotiating position.
- Appraisal (ordered by lender): The lender's independent assessment that the home is worth the purchase price. Takes 1-2 weeks.
- Title search and insurance (during underwriting): The title company verifies clear ownership and prepares title insurance policies.
- Closing Disclosure (at least 3 business days before closing): Final, detailed statement of all costs. Compare this carefully against your original Loan Estimate -- any significant changes must be justified by the lender.
- Final walk-through (day before or day of closing): Verify the property condition matches what you agreed to purchase.
- Closing day: Sign documents, pay closing costs (typically via wire transfer or cashier's check), and receive the keys.
Federal law requires you to receive the Closing Disclosure at least three business days before closing. Use this time to compare it line-by-line with your Loan Estimate. The CFPB provides a Closing Disclosure explainer(opens in new tab) that walks through each section. Certain fees have tolerance limits -- your lender cannot increase some fees by more than 10% from the Loan Estimate without cause.
Closing Costs and Your Total Home Buying Budget
Closing costs are one piece of the total cash you need at closing. Here is how to calculate your complete budget.
Total Cash Needed at Closing
| Down Payment | Down Payment Amount | Est. Closing Costs (3%) | Total Cash Needed |
|---|---|---|---|
| 3% | $12,000 | $12,000 | $24,000 |
| 5% | $20,000 | $12,000 | $32,000 |
| 10% | $40,000 | $12,000 | $52,000 |
| 20% | $80,000 | $12,000 | $92,000 |
Based on a $400,000 home purchase. Closing costs estimated at 3% of purchase price. Actual total cash needed also includes moving costs and any immediate home maintenance. See our Down Payment Guide for detailed down payment comparisons by loan type.
Many first-time buyers focus exclusively on the down payment and are surprised by closing costs. A buyer putting 3% down on a $400,000 home needs $12,000 for the down payment plus $8,000-$20,000 in closing costs -- meaning total cash needed could be double the down payment alone.
To understand whether your income supports a particular home price (including all costs), use our Mortgage Affordability Calculator or explore our Rent vs. Buy Calculator to compare the total cost of ownership against renting.
Frequently Asked Questions
How much are closing costs on a house?
Closing costs typically range from 2% to 5% of the home's purchase price. On a $400,000 home, expect to pay between $8,000 and $20,000 in closing costs. The exact amount depends on your location, loan type, lender fees, and whether you negotiate seller concessions. According to CoreLogic/ClosingCorp data, the national average for closing costs is approximately $6,905 excluding transfer taxes.
Who pays closing costs -- the buyer or the seller?
Both buyers and sellers pay closing costs, but they cover different fees. Buyers typically pay lender fees (origination, appraisal, credit report), title insurance (lender's policy), prepaid items (insurance, property taxes, prepaid interest), and escrow deposits. Sellers typically pay real estate agent commissions (5-6% of sale price), owner's title insurance policy, and transfer taxes. In some markets, buyers can negotiate for the seller to cover a portion of buyer closing costs through seller concessions.
Can closing costs be rolled into the mortgage?
In some cases, yes. FHA and VA loans allow certain closing costs to be financed into the loan. Some lenders offer a no-closing-cost mortgage where the fees are added to the loan balance or offset by a higher interest rate. However, rolling closing costs into the mortgage increases your loan amount and total interest paid. On a 30-year loan at 6.75%, adding $10,000 in closing costs to your balance adds approximately $23,300 in total interest. It is generally better to pay closing costs upfront if you have the funds.
What is a Loan Estimate and when do I get one?
A Loan Estimate is a standardized three-page form that lenders must provide within three business days of receiving your mortgage application, per the TILA-RESPA Integrated Disclosure (TRID) rule. It itemizes your estimated closing costs, interest rate, monthly payment, and total loan cost. Compare Loan Estimates from multiple lenders to find the best deal. The final Closing Disclosure, received at least three business days before closing, should closely match the Loan Estimate.
Are closing costs tax deductible?
Most closing costs are not tax deductible. However, there are exceptions: mortgage interest paid at closing (prepaid interest or points) is generally deductible if you itemize, and property taxes paid at closing are deductible up to the $10,000 SALT cap. Origination fees (points) paid to lower your interest rate are also deductible, either in the year paid or amortized over the loan term. Consult a tax professional for guidance specific to your situation.
What are origination fees and discount points?
Origination fees are charges from your lender for processing your loan application, typically 0.5% to 1% of the loan amount. Discount points are optional upfront fees you pay to reduce your interest rate -- each point costs 1% of the loan amount and typically lowers your rate by about 0.25%. For example, on a $320,000 loan, one point costs $3,200. Points make sense if you plan to keep the loan long enough for the monthly savings to exceed the upfront cost (typically 4-7 years to break even).
Can I negotiate closing costs?
Yes, many closing costs are negotiable. Effective strategies include: comparing Loan Estimates from at least three lenders, negotiating the origination fee, choosing your own title company, asking the seller for concessions, and requesting lender credits. Third-party fees like appraisals and government recording fees are generally not negotiable, but lender fees, title insurance, and attorney fees often are.
What is the difference between prepaids and closing costs?
Closing costs are one-time fees for services related to the transaction (appraisal, title search, origination fee). Prepaids are advance payments for recurring costs you will continue paying as a homeowner -- typically homeowner's insurance premiums, property taxes, and prepaid mortgage interest. Prepaids establish your escrow account and ensure these bills are covered before your first mortgage payment is due. While they appear on your Closing Disclosure, prepaids are not fees you are "losing" -- they are payments you would owe regardless.
Key Takeaways and Next Steps
- Budget 2-5% of the purchase price for closing costs in addition to your down payment. On a $400,000 home, that means $8,000-$20,000.
- Closing costs are largely negotiable. Compare Loan Estimates from multiple lenders, shop for title insurance, and ask for seller concessions.
- Your Loan Estimate is your roadmap. Request one from every lender you are considering and compare fees line by line.
- Prepaids are not wasted money. They fund your escrow account for taxes and insurance you would pay regardless of the transaction.
- Assistance programs exist. First-time buyers and moderate-income households may qualify for grants or forgivable loans to cover closing costs.
- Timing your closing date at the end of the month can save $500-$1,500 in prepaid interest.
The best way to prepare for closing costs is to understand what you will owe before you start house hunting. Use our calculator to model different scenarios and see how your total monthly payment -- including principal, interest, taxes, insurance, and PMI -- fits your budget.
Model Your Mortgage Payment and Closing CostsFor more home buying guidance, explore our Down Payment Guide, learn about PMI costs and removal strategies, understand your PITI breakdown, or compare the full cost of renting versus buying with our Rent vs. Buy Decision Guide.
Sources
- Consumer Financial Protection Bureau -- Closing on a Mortgage (opens in new tab)
- Consumer Financial Protection Bureau -- Loan Estimate Explainer (opens in new tab)
- Freddie Mac -- Understanding Closing Costs (opens in new tab)
- National Association of REALTORS -- Profile of Home Buyers and Sellers (opens in new tab)
- American Land Title Association -- Title Insurance Consumer Resources (opens in new tab)
- U.S. Department of Housing and Urban Development -- Buying a Home (opens in new tab)
- U.S. Department of Veterans Affairs -- VA Loan Costs (opens in new tab)
- Fannie Mae -- Mortgage Products and Seller Concession Limits (opens in new tab)