Closing costs are the fees and prepaid expenses you pay to finalize a mortgage, on top of your down payment. They usually add up to 2% to 5% of the home’s price. On a $400,000 home with 10% down, a realistic total is about $12,000, so you’d need roughly $52,000 in cash at closing.
About 60% of that goes to the lender, title company and local government. The rest is prepaid interest, insurance and the first deposit into your escrow account, money that would have to be paid soon anyway. This guide breaks down every line, shows which costs you can negotiate, and explains how much the seller can cover for each loan type.
Key takeaways
- Budget 2% to 5% of the purchase price. Taxes, title rates and transfer taxes make some states far more expensive than others.
- Your Loan Estimate lists closing costs within 3 business days of applying. Compare it line by line with at least two other lenders.
- Lender fees can’t rise between the Loan Estimate and closing. Most third-party fees can rise only 10% in total.
- Sellers can pay part of your costs: up to 3% to 9% on conventional loans, 6% on FHA and USDA, and 4% in concessions on VA loans.
In this guide: Example · What’s included · Loan Estimate · Who pays · How to pay less · FAQ
Closing costs example: $400,000 home
This example assumes a $360,000 conventional loan at 7.32%, property tax of 1% a year and $2,450 a year in homeowners insurance. Fees vary by lender and state, so treat these as typical figures, not quotes.
| Cost | Paid to | Example amount |
|---|---|---|
| Origination and underwriting (0.5% of the loan) | Lender | $1,800 |
| Appraisal | Appraiser | $650 |
| Credit report and flood certification | Third parties | $100 |
| Title search and title insurance (lender’s and owner’s) | Title company | $2,400 |
| Settlement or escrow fee | Title or escrow company | $900 |
| Recording fees | County | $200 |
| Transfer taxes (vary widely by state) | State or county | $1,000 |
| Lender, title and government fees | $7,050 | |
| Homeowners insurance, first year | Insurer | $2,450 |
| Prepaid interest, 15 days | Lender | $1,083 |
| Initial escrow deposit (3 months of taxes, 2 of insurance) | Your escrow account | $1,408 |
| Prepaids and escrow | $4,941 | |
| Total closing costs | $11,991 (3.0% of price) |
Add the $40,000 down payment and the cash due at closing is about $52,000, minus any earnest money you already put down and any credits from the seller or lender.
What’s included in closing costs
Lender fees
Origination, underwriting and processing fees pay the lender for making the loan. Some lenders charge a flat fee, others a percentage, usually 0.5% to 1% of the loan. Discount points, if you buy them to lower your rate, show up here too. Our guide to mortgage points shows how to tell if they pay off.
Third-party services
The appraisal, credit report, flood certification, title search and title insurance, settlement agent and, in some states, an attorney. Lender’s title insurance is required. Owner’s title insurance protects you and is optional in most states, but it’s a one-time cost that lasts as long as you own the home.
Government fees and taxes
Recording fees to put the deed and mortgage on public record, plus transfer taxes in many states and cities. Transfer taxes are the biggest swing factor: some states charge none, while others charge 1% or more of the price.
Prepaids and escrow
Your first year of homeowners insurance, interest from closing day to the end of the month, and a starting balance for your escrow account so the servicer can pay the first tax and insurance bills. FHA and USDA loans also have an upfront fee (1.75% and 1%), and VA loans have a funding fee, but these are usually rolled into the loan instead of paid in cash.
Your Loan Estimate and Closing Disclosure
Federal rules give you two standard forms that make lenders easy to compare:
- Loan Estimate: the lender must send it within 3 business days of your application. Page 2 lists every closing cost and marks which services you can shop for.
- Closing Disclosure: you must receive it at least 3 business days before closing. Compare it with your Loan Estimate.
Fees are grouped by how much they’re allowed to change. The lender’s own charges and transfer taxes can’t go up at all. Recording fees and third-party services you picked from the lender’s list can rise by no more than 10% in total. Prepaids, and services you chose on your own, can change. If a lender goes over these limits, it must refund the difference within 60 days of closing.
Can the seller pay your closing costs?
Yes, through seller concessions, also called seller credits. The seller agrees to pay part of your costs, often in exchange for a slightly higher price or instead of a price cut. Each loan program caps how much they can contribute:
| Loan type | Maximum seller contribution |
|---|---|
| Conventional, less than 10% down | 3% of the price |
| Conventional, 10% to 25% down | 6% |
| Conventional, more than 25% down | 9% |
| Conventional, investment property | 2% |
| FHA | 6% |
| USDA | 6% |
| VA | 4% in concessions, plus normal closing costs |
Seller credits can’t exceed your actual closing costs, and they can’t be used toward the down payment. They work best when the home has been on the market for a while or the inspection turned up repairs.
How to lower your closing costs
- Compare at least three Loan Estimates on the same day. Lender fees often differ by $1,000 or more for the same rate.
- Shop the services you’re allowed to shop for, like title insurance and the settlement agent in many states.
- Ask for a lender credit. You accept a slightly higher rate and the lender pays part of your costs. It makes sense if you expect to sell or refinance within a few years.
- Negotiate seller concessions in your offer, within the limits above.
- Close near the end of the month. Prepaid interest on this loan is about $72 a day, so closing on the 28th instead of the 13th saves about $1,000 in cash at closing. It doesn’t lower the loan’s total cost, it just moves the first payment.
- Look for down payment and closing cost assistance from your state housing finance agency. Many programs offer grants or forgivable loans for first-time buyers. Our first-time home buyer guide explains how they work.
- Ask about rate-lock and junk fees. Question any “processing,” “admin” or “document prep” fee that isn’t explained.
Closing costs don’t change your monthly payment unless you roll them into the loan. To see the payment on the loan itself, use our mortgage payment calculator.
Frequently asked questions
How much are closing costs on a $300,000 house?
At 2% to 5%, between $6,000 and $15,000. With typical fees and 10% down, about $9,000 is a reasonable starting estimate. Check your state’s transfer taxes, since they can add thousands.
Can I roll closing costs into my mortgage?
On a purchase, usually not directly, because the loan is limited by the home’s value. You can lower the cash you need with seller credits or a lender credit. On a refinance, closing costs are commonly added to the new loan balance.
Are closing costs tax deductible?
Most aren’t. Mortgage interest, including prepaid interest, and property taxes can be deductible if you itemize, and points may be deductible on a purchase loan. Ask a tax professional about your situation.
Do buyers or sellers pay more in closing costs?
Sellers usually pay more in total because they typically cover real estate commissions. Buyers pay most of the loan-related costs. Who pays title insurance and transfer taxes depends on local custom and your contract.
What’s a no-closing-cost mortgage?
A loan where the lender covers your closing costs in exchange for a higher interest rate. You save cash upfront but pay more each month, so it costs more if you keep the loan for many years.
The bottom line
Plan on 2% to 5% of the price, get your Loan Estimate early, and compare it with other lenders line by line. Between competing lenders, seller credits and assistance programs, most buyers can cut their cash at closing by thousands.
Estimates only. HomeAffordLab is not a lender and does not provide financial advice. This page may contain ads. See our Advertising Disclosure.
Sources: CFPB: Loan Estimate and Closing Disclosure (TILA-RESPA Integrated Disclosure rule, 12 CFR 1026.19) · Fannie Mae Selling Guide B3-4.1-02, Interested party contributions · HUD Handbook 4000.1 (FHA) · VA Lenders Handbook, chapter 8 · USDA HB-1-3555 · Freddie Mac: Closing costs