Closing Costs Explained: How Much Does It Cost to Buy a House?
What closing costs are, typical amounts, a line-by-line breakdown for a $400,000 purchase, who pays what, the rules that limit surprises between the Loan Estimate and closing, and ways to lower the bill.
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Key takeaways
- Closing costs are the fees and prepaid items due when your mortgage closes, typically about 2% to 5% of the loan amount according to the CFPB.
- On a $320,000 loan, that range is roughly $6,400 to $16,000, in addition to the down payment.
- Your Loan Estimate arrives within three business days of applying; the Closing Disclosure at least three business days before closing. Many lender fees cannot rise between the two.
- Seller credits, lender credits, shopping for title services and comparing Loan Estimates can lower what you pay at the table.
The down payment is the cost buyers plan for. Closing costs are the one that surprises them. They cover the lender's charges, third-party services such as the appraisal and title insurance, government fees and taxes, and the first deposits into your escrow account. Because the total varies with the loan, the state and the lender, the best tool is your Loan Estimate, but knowing the typical items helps you budget and spot fees worth negotiating.
How much are closing costs?
The Consumer Financial Protection Bureau puts typical closing costs at 2% to 5% of the loan amount. Where you land depends mostly on three things: whether you pay points to lower the rate, your state's transfer and recording taxes, and how much must be prepaid into escrow for property taxes and insurance.
| Loan amount | At 2% | At 3.5% | At 5% |
|---|---|---|---|
| $200,000 | $4,000 | $7,000 | $10,000 |
| $320,000 | $6,400 | $11,200 | $16,000 |
| $500,000 | $10,000 | $17,500 | $25,000 |
What closing costs include
| Category | Typical items |
|---|---|
| Lender charges | Origination or underwriting fee, application fee, discount points (optional, 1% of the loan per point) |
| Services you cannot shop for | Appraisal, credit report, flood certification, tax service |
| Services you can often shop for | Title search, lender's title insurance, settlement or escrow fee, survey, pest inspection |
| Taxes and government fees | Recording fees, state and local transfer taxes (where they apply) |
| Prepaids | Interest from closing to the end of the month, the first year of homeowners insurance |
| Initial escrow deposit | A cushion of property tax and insurance payments held by the servicer |
| Other | Owner's title insurance (optional but recommended), HOA transfer fees, attorney fees in some states |
FHA loans add an upfront mortgage insurance premium of 1.75% of the base loan, usually financed into the loan rather than paid in cash; details in FHA loan requirements. VA loans charge a funding fee unless you are exempt.
Prepaids and escrow: the part that is not really a fee
Part of the closing bill is money you would pay anyway, just in advance: the first year of homeowners insurance, interest for the rest of the closing month, and a starting balance for your escrow account. Federal rules allow the servicer to hold a cushion of up to one-sixth of the year's escrowed bills. These items can add several thousand dollars in high-tax areas. How escrow accounts are recalculated later is explained in escrow shortages.
Loan Estimate, Closing Disclosure and fee tolerances
- Loan Estimate: the lender must send it within three business days after you apply. It lists every expected cost and the cash you will need.
- Closing Disclosure: you must receive it at least three business days before closing, which gives you time to compare and ask questions.
- Tolerances: the lender's own charges and fees for services it requires you to use from its chosen provider generally cannot increase. Certain other third-party fees and recording fees can rise by no more than 10% in total. Prepaids, escrow deposits and services you shop for yourself can change. Valid changed circumstances, such as a lower appraisal or a change in the loan amount, allow a revised estimate.
Comparing Loan Estimates from at least three lenders on the same day is the single best way to cut both the rate and the fees.
Who pays: buyer vs. seller
Customs differ by state, but buyers usually pay the lender's charges, appraisal, lender's title insurance and prepaids, while sellers usually pay real estate commissions and often the owner's title policy and some transfer taxes. Many costs are negotiable. Sellers can also give the buyer a credit toward closing costs, within limits set by the loan program:
| Loan program | Maximum seller contribution |
|---|---|
| Conventional (Fannie Mae), primary home, less than 10% down | 3% of the price |
| Conventional, 10% to 25% down | 6% |
| Conventional, more than 25% down | 9% |
| FHA | 6% |
| VA | 4% in concessions, not counting normal closing costs |
Cash to close
The amount you bring to closing is the down payment plus closing costs, minus seller credits, lender credits and the earnest money you already deposited. Wire the funds only after confirming instructions by phone with your title or escrow company using a number you looked up yourself; wire fraud targeting home buyers is common.
How to lower closing costs
- Compare Loan Estimates line by line, especially origination charges and points.
- Shop for title and settlement services where your Loan Estimate allows it.
- Ask for seller credits, especially in a slower market or after an inspection finding.
- Consider lender credits: a slightly higher rate in exchange for the lender paying part of the costs. This suits buyers who may sell or refinance within a few years.
- Look for down payment and closing cost assistance from state housing finance agencies; see the first-time home buyer guide.
- Close near the end of the month to reduce prepaid interest. Your first payment date shifts, but the total interest is the same.
Closing costs in your budget
Lenders verify that you have the down payment and closing costs, sometimes plus reserves, before they approve the loan. When you work out a price range with the home affordability calculator, subtract closing costs and an emergency cushion from your savings first and use the rest as the down payment. The mortgage calculator then shows the monthly payment.
Frequently asked questions
How much are closing costs on a $300,000 house?
With 10% down, the loan is $270,000, so 2% to 5% means roughly $5,400 to $13,500. Your Loan Estimate gives the actual figure for your lender and state.
Can closing costs be rolled into the mortgage?
On a purchase, usually not directly, except financed items such as the FHA upfront premium or VA funding fee. You can instead negotiate seller credits or accept lender credits for a higher rate. On a refinance, costs are often added to the loan.
Are closing costs tax deductible?
Most are not. Points paid to buy a main home and prepaid mortgage interest can be deductible if you itemize, and property taxes paid at closing count toward the state and local tax deduction. See the 2026 mortgage deduction rules.
Do sellers pay closing costs?
Sellers pay their own costs, mainly agent commissions and some taxes, and can agree to cover part of the buyer's costs as a credit, within the limits of the loan program.
What is a no-closing-cost mortgage?
A loan where the lender covers some or all closing costs in exchange for a higher interest rate. You pay less up front and more over time.
