Your down payment isn’t the only money you’ll need to buy a home.
Closing costs can add thousands of dollars to the amount due at closing, covering expenses such as lender fees, an appraisal, title services, prepaid interest, homeowners insurance and initial escrow deposits.
For a more detailed estimate, use this closing cost calculator to compare estimated buyer costs for conventional, FHA, VA and USDA loans.
If you’re still early in the homebuying process, you can also use a percentage of the home’s purchase price to create a rough planning range. The Consumer Financial Protection Bureau says closing costs typically run about 2% to 5% of the purchase price, excluding the down payment.
Key Takeaways
- Closing costs are commonly estimated at 2% to 5% of the purchase price, excluding your down payment.
- Your actual costs depend on the loan, lender, location, property, closing date and services used.
- Closing costs and cash to close aren’t the same: cash to close also accounts for your down payment, deposits and credits.
How to Estimate Your Closing Costs
A simple early estimate uses the purchase price of the home:
Estimated closing costs = Home price × Estimated closing cost percentage
For example, closing costs on a $400,000 home might fall somewhere around:
| Planning estimate | Calculation | Estimated closing costs |
|---|---|---|
| 2% | $400,000 × 0.02 | $8,000 |
| 3% | $400,000 × 0.03 | $12,000 |
| 4% | $400,000 × 0.04 | $16,000 |
| 5% | $400,000 × 0.05 | $20,000 |
That doesn’t mean every buyer of a $400,000 home will pay between $8,000 and $20,000.
The percentage method is useful before you have an actual mortgage quote. Once you apply, your Loan Estimate provides a much more useful transaction-specific estimate.
Estimated Closing Costs by Home Price
Here’s what the CFPB’s 2% to 5% planning range looks like at several purchase prices:
| Home price | 2% estimate | 3% estimate | 5% estimate |
|---|---|---|---|
| $200,000 | $4,000 | $6,000 | $10,000 |
| $300,000 | $6,000 | $9,000 | $15,000 |
| $400,000 | $8,000 | $12,000 | $20,000 |
| $500,000 | $10,000 | $15,000 | $25,000 |
| $600,000 | $12,000 | $18,000 | $30,000 |
| $750,000 | $15,000 | $22,500 | $37,500 |
| $1,000,000 | $20,000 | $30,000 | $50,000 |
These figures are planning estimates rather than quotes.
Two people buying homes for the same price can have substantially different closing costs because their loan programs, lenders, insurance costs, taxes, title charges and closing dates are different.
What Are Closing Costs?
Closing costs are the expenses associated with getting a mortgage and completing the purchase of a home.
They commonly fall into several categories:
- Lender and loan charges
- Appraisal and other required third-party services
- Title and settlement services
- Government recording and transfer charges
- Prepaid expenses
- Initial escrow deposits
- Loan-program-specific charges when applicable
Closing costs are separate from your down payment.
What’s Included in Buyer Closing Costs?
Your exact costs depend on the transaction, but these are some of the expenses buyers commonly encounter.
Loan Origination Charges
Mortgage lenders can charge fees associated with originating the loan.
These charges appear in Section A of the Loan Costs table on your Loan Estimate.
The exact structure varies by lender, which is one reason it’s useful to compare Loan Estimates rather than looking only at advertised mortgage rates.
Mortgage Points
Discount points are upfront charges paid in exchange for a lower mortgage interest rate.
One point equals 1% of the loan amount.
For example, one point on a $300,000 mortgage would cost $3,000.
There is no fixed amount by which one point lowers your rate. Pricing depends on the lender and current mortgage market.
Home Appraisal
A lender may require an appraisal or another type of property valuation before approving the mortgage.
The appraisal helps determine the value of the property being used as collateral.
Learn more about how a home appraisal works and what can happen if the appraised value differs from the purchase price.
Title Search and Settlement Services
Title professionals examine property records to identify ownership and claims that could affect the transaction.
Title-related charges can include:
- Title search or examination
- Closing or settlement services
- Lender’s title insurance
- Owner’s title insurance if purchased
- Title endorsements
Some of these services may be shoppable.
If you’re choosing a provider, compare the complete cost and service package when selecting a title company.
Title Insurance
Lender’s title insurance protects the mortgage lender against covered title problems and is commonly required with a mortgage.
An owner’s title policy protects the buyer’s insured ownership interest and is generally optional from the lender’s perspective.
See how owner’s and lender’s title insurance differ before deciding what coverage you’re purchasing.
Recording Fees and Transfer Taxes
State and local governments can charge fees to record the deed, mortgage and other documents.
Some jurisdictions also impose transfer taxes or similar charges when real estate changes ownership.
Which party pays particular charges can depend on state law, local practice and the purchase agreement.
Homeowners Insurance
Your mortgage lender will generally require homeowners insurance.
You may need to pay an insurance premium before or at closing so coverage is in place when you take ownership.
Prepaid Interest
Mortgage interest begins accruing when the loan is funded.
You may pay interest at closing for the days between your closing date and the beginning of your first full mortgage-payment period.
That means the amount of prepaid interest can change depending on what day of the month you close.
Property Taxes
Property taxes can affect closing in several ways.
You could have:
- Tax adjustments between buyer and seller
- Taxes due around the time of closing
- Money collected to fund an escrow account
The treatment varies by location and transaction.
Initial Escrow Deposit
If your mortgage uses an escrow account, your lender may collect money at closing to establish that account.
The lender will later use escrow funds to pay eligible recurring expenses such as property taxes and homeowners insurance when they’re due.
That initial escrow deposit affects how much money you need at closing, but it isn’t the same thing as a lender fee.
Closing Costs vs. Down Payment
Your down payment and closing costs are two separate upfront expenses.
Suppose you’re buying a $400,000 home and putting 10% down.
Your down payment would be:
$400,000 × 10% = $40,000
If your closing costs came to $12,000, you’d initially be accounting for $52,000 between the two before considering earnest money, seller credits, lender credits and other adjustments.
| Expense | Example amount |
|---|---|
| Home price | $400,000 |
| 10% down payment | $40,000 |
| Closing costs | $12,000 |
| Combined amount | $52,000 |
This is why buyers need to consider more than the minimum down payment when deciding how much cash they can afford to put toward a purchase.
Closing Costs vs. Cash to Close
Closing costs and cash to close are related, but they aren’t interchangeable.
| Term | What it means |
|---|---|
| Closing costs | The lender charges, third-party expenses, government charges, prepaids, escrow deposits and other applicable costs associated with closing |
| Cash to close | The final amount you need to provide after the down payment, closing costs, deposits, credits and other transaction adjustments are accounted for |
A simplified purchase example might look like:
Down payment + closing costs − earnest money − applicable credits ± other adjustments = estimated cash to close
Your actual mortgage disclosure calculates this for you, so you won’t have to reconstruct the final number yourself.
Example: Closing Costs on a $400,000 Home
Consider a hypothetical $400,000 purchase with a $40,000 down payment.
| Item | Example amount |
|---|---|
| Purchase price | $400,000 |
| Down payment | $40,000 |
| Lender and loan costs | $3,000 |
| Appraisal, title and other services | $4,000 |
| Prepaids and initial escrow | $5,000 |
| Total closing costs | $12,000 |
| Down payment + closing costs | $52,000 |
| Earnest money already deposited | −$5,000 |
| Seller credit | −$3,000 |
| Illustrative remaining cash to close | $44,000 |
This is only an example.
Your actual costs could look very different based on your loan program, lender, property, state, insurance, taxes and closing date.
How Loan Type Can Affect Closing Costs
Many costs apply across multiple mortgage programs, but the loan you choose can change the overall cost structure.
| Loan type | Potential program-specific cost |
|---|---|
| Conventional | Private mortgage insurance may apply depending on the loan and down payment |
| FHA | Upfront and annual mortgage insurance |
| VA | VA funding fee unless an exemption applies |
| USDA | Upfront and annual guarantee fees |
The closing cost estimator separates conventional, FHA, VA and USDA financing so you can see how the estimated cost structure changes by loan type.
Conventional Loan Closing Costs
A conventional mortgage can include lender charges, appraisal costs, title expenses, government fees, prepaids and escrow funding.
Private mortgage insurance may also apply depending on the loan structure and down payment.
There is no standard upfront government mortgage-insurance or guarantee fee applied to every conventional loan.
FHA Loan Closing Costs
FHA financing can include many of the same closing costs as conventional financing plus FHA mortgage insurance.
FHA loans include an upfront mortgage insurance premium in addition to ongoing mortgage insurance.
The upfront charge can generally be financed into the mortgage rather than paid entirely in cash at closing, although doing so increases the loan balance.
VA Loan Closing Costs
VA loans can include lender charges, appraisal and title costs, prepaids and other transaction expenses.
Many VA borrowers also pay a VA funding fee, although exemptions apply to some borrowers.
The funding fee can generally be financed into the loan rather than paid entirely in cash at closing.
USDA Loan Closing Costs
USDA mortgages can include typical mortgage closing expenses plus program-specific guarantee fees.
The upfront USDA guarantee fee can generally be financed when applicable, preserving cash at closing but increasing the mortgage balance.
Why Do Closing Costs Vary by State?
Not every closing expense is controlled by the mortgage lender.
Your location can affect:
- Property taxes
- Transfer taxes
- Recording fees
- Title insurance rates
- Settlement practices
- Homeowners insurance costs
- Other state or local requirements
That’s why a national percentage should be treated as a budgeting tool rather than a prediction of your final costs.
Can the Seller Pay Your Closing Costs?
A seller can sometimes provide a credit toward eligible buyer closing costs.
For example, a negotiated $5,000 seller credit could reduce the buyer’s eligible out-of-pocket closing expenses by up to $5,000 if the transaction has enough qualifying costs.
But seller concessions are subject to mortgage-program requirements and other transaction rules.
A seller credit is also part of the overall purchase negotiation rather than free money in isolation.
What Are Lender Credits?
Lender credits can reduce the amount you pay upfront.
In exchange, you will generally accept different mortgage pricing, commonly including a higher interest rate than you could receive without the credit.
That creates a trade-off:
- Less cash needed upfront
- Potentially higher monthly payments and borrowing costs over time
Compare both the upfront savings and the resulting mortgage rate before choosing a lender-credit option.
Can You Roll Closing Costs Into Your Mortgage?
Not all purchase closing costs can simply be added to a mortgage.
Some program-specific upfront charges, including certain FHA, VA and USDA fees, can generally be financed according to the applicable program’s rules.
Seller credits and lender credits can also reduce the amount a buyer needs to pay out of pocket.
Refinancing works differently because some costs may be incorporated into the new loan balance when the transaction and loan program permit it.
How Can You Reduce Closing Costs?
You may have more control over some expenses than others.
Compare Multiple Lenders
Lender charges, mortgage rates, points and credits can vary.
Compare similar loan scenarios rather than choosing based only on the advertised interest rate.
Shop for Eligible Closing Services
Section C of the Loan Estimate identifies required services you are allowed to shop for.
These can include certain title and settlement services.
Shopping around can reduce costs without changing the underlying mortgage itself.
Negotiate Seller Credits
A seller may agree to contribute toward eligible buyer costs as part of the purchase agreement.
Availability and limits depend on the loan and transaction.
Compare Lender Credits
If minimizing upfront cash is a priority, ask lenders to show what your mortgage would look like with a lender credit.
Then compare the higher rate or other pricing difference with the amount you save at closing.
Compare Options With and Without Points
Discount points increase your upfront costs in exchange for a lower rate.
If conserving cash matters more than lowering the interest rate, ask to see a loan option with fewer or no discount points.
What Is a Loan Estimate?
A Loan Estimate is a three-page disclosure showing important information about the mortgage you’ve requested.
For mortgages covered by the federal Loan Estimate rules, the lender generally must provide the form within three business days after receiving a complete mortgage application.
The Loan Estimate includes:
- Loan amount
- Interest rate
- Projected mortgage payment
- Estimated closing costs
- Estimated cash to close
- Estimated taxes and insurance
Once you have Loan Estimates, they become much more useful than a generic percentage for comparing actual mortgage offers.
Where Are Closing Costs on the Loan Estimate?
Page 2 breaks costs into categories.
| Section | Examples |
|---|---|
| A: Origination Charges | Lender charges and applicable discount points |
| B: Services You Cannot Shop For | Required third-party services for which you don’t select the provider |
| C: Services You Can Shop For | Eligible title, settlement and other required services |
| E: Taxes and Other Government Fees | Applicable recording and transfer charges |
| F: Prepaids | Homeowners insurance, prepaid interest and applicable taxes |
| G: Initial Escrow Payment at Closing | Initial deposits for applicable escrow expenses |
Review these sections individually instead of focusing only on the total at the bottom.
What Closing Costs Can You Shop For?
Look at Section C of page 2 of your Loan Estimate.
The CFPB identifies this section as Services You Can Shop For.
Depending on the transaction, that may include services such as:
- Title services
- Settlement services
- Surveys
- Certain inspections
Your lender must also provide a written list of providers for applicable shoppable services.
You may be able to choose a different provider if your lender will work with that company.
What Is a Closing Disclosure?
The Closing Disclosure is a five-page form showing the final details of most covered mortgage transactions.
It includes your final:
- Loan terms
- Projected payments
- Closing costs
- Cash to close
For mortgages subject to the federal rule, you must receive the Closing Disclosure at least three business days before closing.
Use those three days to compare it with your most recent Loan Estimate.
If a cost or loan term isn’t what you expected, ask the lender or settlement professional about it before signing.
Can Closing Costs Change Before Closing?
Yes.
Your Loan Estimate is an estimate, and some costs can change as the transaction progresses.
Final expenses can be affected by:
- Closing date
- Insurance premiums
- Property-tax adjustments
- Services you select
- Seller credits
- Lender credits
- Changes to the loan
Federal mortgage rules restrict how certain estimated charges can change in covered transactions, while other costs can vary when permitted.
Your Closing Disclosure is where you should review the final numbers.
Buyer vs. Seller Closing Costs
The buyer isn’t responsible for every expense in a real estate transaction.
Sellers can also have costs involving:
- Existing mortgage and lien payoffs
- Real estate professional compensation under applicable agreements
- Transfer-related expenses
- Title expenses where applicable
- Seller credits negotiated with the buyer
Who pays an individual charge depends on the purchase contract, jurisdiction and applicable requirements.
How Much Cash Should You Keep After Closing?
Your closing budget shouldn’t leave you without savings the day you get the keys.
New homeowners can immediately face expenses involving:
- Moving
- Repairs
- Furniture
- Utility setup
- Maintenance
- Insurance deductibles
- Unexpected home expenses
Your lender may also require reserves for some transactions.
When deciding how much to put down, consider what you’ll have left after the purchase rather than automatically directing all available savings toward the down payment.
How to Budget for Closing Costs Before You Apply
- Choose a realistic target purchase price.
- Use 2% to 5% of that price as an initial closing-cost range.
- Use a closing cost calculator for a more detailed estimate based on loan type.
- Estimate your down payment separately.
- Account for earnest money you’ve already paid.
- Leave room for moving expenses and savings after closing.
Once you apply for a mortgage, replace these early estimates with the numbers shown on your Loan Estimate.
How to Compare Closing Costs Between Mortgage Offers
Don’t compare only the headline closing-cost total.
Look at what is causing the difference.
One lender could show lower upfront costs because you’re receiving a lender credit in exchange for a higher interest rate.
Another could show higher costs because you’re paying discount points for a lower rate.
Compare:
- Interest rate
- Origination charges
- Discount points
- Lender credits
- Required services
- Estimated cash to close
Prepaid taxes and insurance can also make two estimates look different even when the underlying lender costs are similar.
Closing Cost Planning Checklist
- Estimate closing costs before setting your down payment budget.
- Compare conventional, FHA, VA and USDA costs if more than one program fits your situation.
- Request Loan Estimates from lenders you’re seriously considering.
- Separate lender charges from third-party costs and prepaids.
- Check which services you’re allowed to shop for.
- Review seller and lender credits carefully.
- Keep money available for moving and post-closing expenses.
- Compare your Closing Disclosure with your latest Loan Estimate.
- Confirm the final cash-to-close amount before transferring funds.
Bottom Line
Closing costs are an important part of your homebuying budget, but you won’t know the exact amount when you first start shopping.
A 2% to 5% estimate can give you an early range. A loan-specific closing cost calculator can provide a more detailed estimate before you apply.
Once you have a mortgage application underway, rely on your Loan Estimate instead. It itemizes the expected costs of your actual loan and shows your estimated cash to close.
Then review the Closing Disclosure before closing to make sure the final charges and loan terms are what you expected.
FAQ
How much are closing costs on a house?
The CFPB says closing costs typically range from about 2% to 5% of the purchase price, excluding the down payment. Actual costs depend on the lender, loan type, location, property and transaction.
How much are closing costs on a $300,000 house?
Using a 2% to 5% planning range, closing costs on a $300,000 purchase would be roughly $6,000 to $15,000. Your actual costs can be higher or lower.
How much are closing costs on a $400,000 house?
A 2% to 5% estimate would put closing costs at roughly $8,000 to $20,000.
How much are closing costs on a $500,000 house?
Using the same range, estimated closing costs would be about $10,000 to $25,000.
Are closing costs included in the down payment?
No. Closing costs and your down payment are separate expenses.
Are closing costs the same as cash to close?
No. Closing costs are one part of cash to close. Cash to close also accounts for your down payment, deposits, credits and other transaction adjustments.
Can a seller pay your closing costs?
Sellers can sometimes provide credits toward eligible buyer closing costs. The amount and permitted uses depend on the mortgage program and transaction.
Can a lender pay your closing costs?
Lender credits can offset some upfront costs, commonly in exchange for different mortgage pricing such as a higher interest rate.
Can closing costs be added to the mortgage?
Some program-specific charges can be financed when permitted, but buyers generally shouldn’t assume every purchase closing cost can simply be rolled into the mortgage.
What closing costs can I shop for?
Check Section C of your Loan Estimate. It identifies required services you’re allowed to shop for, which can include certain title, settlement and other third-party services.
When do I know my actual closing costs?
Your Loan Estimate provides transaction-specific estimated costs after you apply. Your Closing Disclosure provides the final details and generally must be delivered at least three business days before closing.
Why are my closing costs different from someone else’s?
Closing costs depend on the home price, loan amount, mortgage program, lender, property location, title services, taxes, insurance, closing date and credits involved in the transaction.
Do closing costs vary by loan type?
Yes. Conventional, FHA, VA and USDA mortgages can have different insurance, guarantee or funding-fee structures in addition to the standard lender and third-party costs involved in a home purchase.
