How Much Are Closing Costs? What Buyers Pay and When

Closing costs typically run about 2% to 5% of a home’s purchase price, excluding the down payment.

That means a buyer purchasing a $350,000 home might use roughly $7,000 to $17,500 as an early planning range. The actual amount can be higher or lower depending on the mortgage, lender, property, location, closing date and services involved.

Buyers pay many of the costs associated with getting a mortgage and completing the purchase, but sellers have expenses of their own. Some costs can also be negotiated or covered through seller or lender credits.

If you’re still budgeting, a closing costs calculator can help turn the percentage estimate into a more useful dollar range.

Key Takeaways

1. Closing costs commonly run about 2% to 5% of the purchase price, excluding the down payment.
2. Buyers commonly pay mortgage-related costs, but who pays individual expenses can depend on the contract, location and loan.
3. Your Loan Estimate and Closing Disclosure provide much more accurate figures than a general percentage estimate.

How Much Are Closing Costs?

The Consumer Financial Protection Bureau recommends using about 2% to 5% of the purchase price as an early estimate for closing costs.

Using that range:

These numbers are budgeting estimates rather than quotes.

Closing costs can vary significantly even between two buyers purchasing homes for the same price.

What Are Closing Costs?

Closing costs are the upfront expenses associated with obtaining a mortgage and completing a real estate transaction.

They can include:

• Lender origination charges
• Discount points
• Appraisal and other required loan services
• Title and settlement services
• Title insurance
• Government taxes and recording fees
• Prepaid interest
• Homeowners insurance
• Initial escrow deposits
• Other transaction-specific costs

They are separate from your down payment.

Who Pays Closing Costs?

There isn’t a single rule assigning every closing cost to either the buyer or seller.

Buyers commonly pay many of the expenses associated with getting their mortgage. Sellers commonly have expenses associated with transferring the property and paying off existing obligations.

But the purchase contract, state law, local practice and negotiations can shift some expenses between the parties.

The Closing Disclosure ultimately shows which party is paying each applicable cost in your transaction.

What Closing Costs Does a Buyer Usually Pay?

Buyers with a mortgage commonly encounter costs associated with the loan, property valuation, title work and expenses that must be paid or funded around closing.

Loan Origination Charges

Mortgage lenders can charge fees associated with originating and processing the loan.

These appear in the Loan Costs section of your Loan Estimate and Closing Disclosure.

Different lenders structure their fees differently, which is why borrowers should compare complete Loan Estimates rather than looking only at the mortgage rate.

Discount Points

A discount point is an upfront charge equal to 1% of the mortgage amount.

For example, one point on a $300,000 loan costs $3,000.

Points can be used to obtain a lower interest rate, but there is no universal amount by which one point reduces the rate.

Appraisal

A lender may require an appraisal or another property valuation as part of the mortgage process.

The purpose is to evaluate the property being used as collateral.

An appraisal is different from a home inspection, which generally evaluates the home’s physical condition for the buyer.

Title Search and Settlement Services

Title professionals examine property records and coordinate parts of the closing process.

Charges can include:

• Title search or examination
• Settlement or closing services
• Document preparation
• Applicable title endorsements

Title Insurance

Lender’s title insurance protects the mortgage lender against covered title defects.

Owner’s title insurance protects the buyer’s insured ownership interest.

Mortgage lenders commonly require a lender’s policy, while owner’s coverage is generally optional from the lender’s perspective.

Who pays particular title charges varies considerably around the country, so don’t assume the seller always pays the owner’s policy or the buyer always pays every title fee.

Recording Fees

Local governments can charge fees to record documents such as the deed and mortgage.

The amount and allocation depend on the jurisdiction and document.

Transfer Taxes

Some states and local governments impose taxes when real estate changes ownership.

These may be called:

• Transfer taxes
• Conveyance taxes
• Documentary transfer taxes
• Other jurisdiction-specific names

Who pays them varies by location and contract.

Prepaid Interest

Mortgage interest begins accruing when the loan closes.

Buyers can therefore pay interest at closing covering the period between the closing date and the beginning of the normal mortgage-payment cycle.

Closing later or earlier in the month can change this amount.

Homeowners Insurance

Your lender will generally require homeowners insurance to be in place for the property.

You may pay an insurance premium before or at closing.

Initial Escrow Deposit

If your mortgage uses an escrow account, the lender may collect money at closing to establish it.

Those funds are later used for eligible expenses such as property taxes and homeowners insurance.

This is different from a lender fee. The money is being reserved for future property expenses.

Is a Home Inspection a Closing Cost?

Not necessarily.

A home inspection is commonly paid by the buyer, but it is often ordered and paid for before closing rather than treated as a mortgage closing cost.

A general home inspection also isn’t universally required by mortgage lenders.

Buyers typically use it to understand the property’s physical condition and make decisions under the terms of their purchase agreement.

What Closing Costs Does a Seller Pay?

Sellers can have substantial transaction costs of their own.

Depending on the transaction, these can include:

• Payoff of the seller’s existing mortgage
• Release or payoff of other liens
• Real estate professional compensation under applicable agreements
• Transfer-related taxes or fees where applicable
• Seller-paid title or settlement costs under the contract
• Prorated property expenses
• Seller credits negotiated with the buyer

These aren’t necessarily the same expenses that appear in a buyer’s 2% to 5% planning estimate.

Can the Seller Pay the Buyer’s Closing Costs?

Yes, sellers can sometimes provide credits toward eligible buyer closing costs.

Suppose a buyer expects $12,000 in eligible closing costs and negotiates a $5,000 seller credit.

The credit could reduce the buyer’s eligible out-of-pocket costs by up to $5,000 if the transaction and loan rules permit it.

Seller concessions are subject to mortgage-program limits and other requirements.

They also don’t necessarily make the transaction cheaper overall.

A seller may consider the requested credit when negotiating the purchase price or other terms of the deal.

What Closing Costs Are Negotiable?

There are several ways buyers can potentially reduce their upfront costs.

Shop Mortgage Lenders

Origination charges, discount points, lender credits and mortgage rates can vary between lenders.

Shop Eligible Third-Party Services

Your Loan Estimate identifies required services you’re allowed to shop for.

These can include certain title and settlement services.

Ask for a Seller Credit

The purchase offer can request a seller contribution toward eligible closing expenses.

Whether the seller accepts it depends on the negotiation and market.

Consider Lender Credits

A lender can also provide credits toward closing costs.

Those credits commonly come with different mortgage pricing, such as a higher interest rate.

Compare the upfront savings with the long-term borrowing cost rather than treating the credit as free money.

Closing Costs vs. Down Payment

The down payment is part of the purchase price.

Closing costs are the additional expenses associated with financing and completing the transaction.

For example, consider a $350,000 home with 20% down:

That doesn’t mean the buyer necessarily needs exactly $77,000 to $87,500 at closing.

Earnest money already deposited, seller credits, lender credits and other transaction adjustments can change the final amount due.

Closing Costs vs. Cash to Close

Closing costs are only one component of cash to close.

A simplified calculation might look like:

Down payment + closing costs − deposits − applicable credits ± other adjustments = cash to close

If you’ve already paid an earnest-money deposit, that money is generally accounted for when your final cash-to-close amount is calculated.

Don’t add the earnest-money deposit to your final amount a second time.

How Do You Estimate Closing Costs Before Applying?

Start with the purchase price rather than the mortgage balance.

If you expect to buy a $500,000 home:

• 2% = $10,000
• 3% = $15,000
• 4% = $20,000
• 5% = $25,000

Use that range when deciding how much cash you can comfortably allocate to a down payment.

Closing costs are one reason the maximum down payment you can mathematically make isn’t necessarily the amount you should make.

Your broader home affordability calculation should leave room for closing costs, moving expenses and savings after the purchase.

When Do You Find Out Your Actual Closing Costs?

You start getting transaction-specific numbers with your Loan Estimate.

For mortgages covered by federal disclosure rules, the lender generally must provide a Loan Estimate within three business days after receiving a mortgage application.

The form shows:

• Loan terms
• Projected payments
• Estimated closing costs
• Estimated cash to close

As you get closer to settlement, those figures are finalized on the Closing Disclosure.

What Is a Closing Disclosure?

The Closing Disclosure is a five-page form showing the final details of most covered mortgage transactions.

It includes:

• Final loan terms
• Projected payments
• Loan costs
• Other costs
• Seller and lender credits
• Cash to close

For most covered mortgages, you receive it at least three business days before closing.

Use that time to compare the final numbers with your Loan Estimate.

If you’re not sure where a particular charge appears, our Closing Disclosure guide walks through the form page by page.

Can Closing Costs Change Before Closing?

Yes.

Some costs are known early, while others depend on information that becomes final later.

Changes can involve:

• Closing date
• Prepaid interest
• Property taxes
• Insurance
• Services selected by the borrower
• Seller credits
• Lender credits
• Changes to the mortgage

Federal rules restrict how certain estimated charges can change in covered transactions, while other expenses can vary when permitted.

If a final figure differs from what you expected, ask why before signing.

Do Closing Costs Vary by State?

Yes.

Some costs are strongly affected by where the property is located.

Regional differences can include:

• Transfer taxes
• Recording charges
• Title insurance rates
• Settlement practices
• Property taxes
• Attorney involvement

For example, closing costs in California can include state and local practices that don’t apply the same way elsewhere.

Use national percentages for planning, but use local estimates and your mortgage disclosures for the actual transaction.

How Long Before Closing Do You Know What You’ll Pay?

Your estimates become more precise throughout the mortgage process.

The Loan Estimate gives you an early transaction-specific estimate.

The Closing Disclosure gives you the final mortgage figures and generally arrives at least three business days before closing.

The full period between contract and settlement can vary. See how long it takes to close on a house for the broader timeline.

When Do You Pay Closing Costs?

Many closing costs are reconciled as part of the final settlement.

But not every expense associated with buying a home is necessarily paid on the closing date.

You may have already paid for items such as:

• Earnest money
• Home inspection
• Appraisal in some transactions
• Homeowners insurance

Your Closing Disclosure accounts for costs and credits applicable to the closing transaction.

How Do You Pay Closing Costs?

Your settlement provider will tell you how to provide the funds needed to close.

Depending on the transaction, that might involve a wire transfer or another approved form of payment.

Real estate wire fraud is a serious risk.

If you receive wiring instructions, verify them directly with the title, escrow or settlement company using contact information you already know is legitimate.

Do not rely on a last-minute email telling you that the destination account has changed.

Can You Roll Closing Costs Into the Mortgage?

Sometimes certain costs can be financed, but buyers should not assume every purchase closing cost can simply be added to the mortgage.

Some loan-program charges can be financed when program rules allow.

Lender credits can also reduce upfront costs in exchange for different mortgage pricing.

Seller credits can cover eligible expenses subject to the mortgage program and transaction.

Refinances can work differently because some costs may be incorporated into the new mortgage balance when permitted.

How to Prepare for Closing Costs

1. Budget 2% to 5% of your target purchase price as an early estimate.
2. Keep your down payment calculation separate.
3. Leave money available for moving and post-closing expenses.
4. Compare Loan Estimates from lenders you’re considering.
5. Check which required services you’re allowed to shop for.
6. Understand any seller or lender credits.
7. Review your Closing Disclosure against your Loan Estimate.
8. Confirm the final cash-to-close amount.
9. Verify payment instructions independently before sending money.

These costs are part of the broader home closing process, so preparing for them before your closing date can prevent a late surprise from disrupting the transaction.

Bottom Line

Closing costs commonly run about 2% to 5% of the purchase price, but that percentage is only a starting point.

Your actual amount depends on your lender, mortgage, property, title services, taxes, insurance, location and closing date.

Buyers commonly pay mortgage-related costs, while sellers have their own transaction expenses. Some charges and credits can be negotiated, but who pays a particular item ultimately depends on the contract and applicable rules.

Use a percentage estimate when you’re budgeting. Then replace it with your Loan Estimate once you apply and your Closing Disclosure when you’re preparing to close.

FAQ

How much are closing costs?

The CFPB says closing costs typically range from about 2% to 5% of the home purchase price, excluding the down payment. Actual costs vary by loan, lender, property and location.

How much are closing costs on a $300,000 house?

A 2% to 5% planning range would be about $6,000 to $15,000.

How much are closing costs on a $350,000 house?

A rough 2% to 5% estimate would be about $7,000 to $17,500.

How much are closing costs on a $500,000 house?

A rough estimate would be about $10,000 to $25,000 using the 2% to 5% planning range.

Are closing costs based on the loan amount or home price?

For early budgeting, the CFPB’s commonly cited 2% to 5% range is based on the home’s purchase price, not simply the amount borrowed.

Does the buyer pay all closing costs?

No. Buyers commonly pay many mortgage-related costs, but sellers have expenses too, and the purchase contract or applicable law can assign some costs differently.

Can the seller pay the buyer’s closing costs?

Yes. A seller can sometimes provide credits toward eligible buyer expenses, subject to the purchase agreement and mortgage-program requirements.

Are closing costs included in the down payment?

No. Your down payment and closing costs are separate components of the transaction.

Are closing costs the same as cash to close?

No. Cash to close accounts for closing costs along with the down payment, deposits, credits and other transaction adjustments.

Is earnest money a closing cost?

No. Earnest money is a deposit made in connection with the purchase agreement. If the transaction closes, it is generally credited in the final calculation rather than charged again as a closing cost.

Is a home inspection a closing cost?

Not necessarily. Buyers commonly pay inspection expenses before closing, and a general home inspection is not universally required by mortgage lenders.

Can you negotiate closing costs?

Some costs can be reduced by shopping lenders or eligible service providers, negotiating seller credits or choosing different lender pricing. Taxes and government charges generally offer less room for negotiation.

When do you get the final closing-cost amount?

Your Loan Estimate provides estimated costs earlier in the mortgage process. Your Closing Disclosure provides the final mortgage and closing details and generally must arrive at least three business days before closing.