Closing costs are the fees and prepaid items you pay to finalize a home purchase, and they typically run 2% to 5% of the purchase price — so a $400,000 home usually means $8,000 to $20,000 due at the closing table on top of your down payment. This guide breaks down every major line item, who typically pays what, what's negotiable, and how to compare your Loan Estimate against your final Closing Disclosure so nothing surprises you at the last step.

The typical range: 2% to 5% of the purchase price

On a $300,000 purchase, expect $6,000 to $15,000 in closing costs. On a $600,000 purchase, $12,000 to $30,000. The percentage varies with your loan type and state — government-backed loans (FHA, VA, USDA) add funding or guarantee fees, while some states levy transfer taxes that add thousands and others charge nearly none. Your down payment is separate; don't lump them together when budgeting. A buyer putting 5% down on a $400,000 home needs roughly $20,000 for the down payment plus $8,000–$20,000 more for closing costs.

Lender charges: origination and related fees

The largest single bucket is often what your lender charges to make the loan:

  • Loan origination fee — typically 0.5% to 1% of the loan amount. On a $380,000 loan, that's $1,900 to $3,800. This is negotiable; some lenders waive it entirely on competitive quotes.
  • Discount points — optional upfront payments to buy down your rate. One point equals 1% of the loan amount and generally lowers your rate by about 0.20–0.25%. Paying $3,800 for one point on a $380,000 loan saves roughly $50–$60 per month — it only pays off if you keep the loan long enough, usually 5–7 years, to break even.
  • Application, underwriting, and processing fees — often $300 to $600 each. These cover the administrative work of evaluating and funding your loan. Some lenders bundle them; all of them are worth comparing across quotes.
  • Credit report fee — roughly $30 to $100, charged to pull your credit reports and scores.
  • Flood determination and tax service fees — $15 to $25 each, minor but always present.

Get at least three Loan Estimates and compare the origination and underwriting lines side by side. Small differences compound over a 30-year loan.

Third-party fees: appraisal, title, and settlement

You pay several independent professionals to verify the home and the paperwork:

  • Home appraisal — $300 to $600 for a standard single-family home, more for multi-unit or rural properties. Your lender requires it to confirm the home is worth what you're paying. This is not the same as a home inspection; the appraiser works for the lender's benefit, not yours.
  • Home inspection — $300 to $500 for a general inspection, typically paid upfront out of pocket rather than at closing, but budget it here anyway. Radon, termite, and sewer-scope add-ons run $100–$250 each.
  • Title search — $200 to $400 to research the property's ownership history and confirm no liens, judgments, or claims against it.
  • Lender's title insurance — required by your lender, typically $500 to $1,500 depending on the loan amount and state. It protects the lender's interest if a title problem surfaces.
  • Owner's title insurance — optional but recommended, roughly $1,000 to $2,500. It protects you for as long as you own the home; in several states the seller customarily pays for it.
  • Attorney or settlement fees — $500 to $1,500 for the closing agent, escrow company, or attorney who conducts the closing. In attorney states (much of the Northeast), an attorney conducts the closing; elsewhere a title or escrow company does.

Government charges: recording fees and transfer taxes

These vary more by state than any other closing-cost category:

  • Recording fees — $50 to $250 to file the deed and mortgage with the county. Minor and non-negotiable.
  • Transfer taxes and stamp taxes — the big variable. Some states charge nothing; others levy over 1% of the sale price (for example, on a $400,000 sale, 1% is $4,000). Custom varies on who pays — in some states the seller pays by tradition, in others the buyer does, and in many it's negotiable.

When comparing homes across state lines, factor in transfer taxes: they can shift your total cash-to-close by several thousand dollars for the same-priced home.

Prepaid items and escrow: insurance, taxes, and interest

These aren't fees — they're money you pay early toward obligations you'd pay anyway:

  • Homeowner's insurance (prepaid) — lenders typically require the first year's premium paid at closing, roughly $1,500 to $3,000 per year depending on location and coverage, plus 2–3 months held in escrow.
  • Property taxes (prorated and prepaid) — you'll reimburse the seller for taxes already paid past the closing date, and often prepay 2–6 months into escrow. In high-tax states this can be $3,000 to $10,000+ at closing.
  • Prepaid interest — interest from the closing date through the end of the month, roughly $40 to $60 per day on a $380,000 loan. Closing late in the month means less prepaid interest; closing early means more.
  • Private mortgage insurance (PMI) — if your down payment is under 20% on a conventional loan, expect upfront and monthly PMI. FHA loans charge an upfront mortgage insurance premium of 1.75% of the loan amount (usually rolled into the loan) plus monthly premiums.

Because your escrow account is funded at closing, the month you close changes your cash-to-close by hundreds of dollars — ask your lender to model two different closing dates.

Who pays what — and what's negotiable

Custom varies by state and market, but the common split is:

  • Buyer typically pays: origination fees, discount points, appraisal, inspection, lender's title insurance, prepaid insurance and taxes, and most lender charges.
  • Seller typically pays: real estate commissions (5–6% of the sale price, split between listing and buyer's agents — though commission structures have been changing and are fully negotiable), and in many states the owner's title insurance policy and transfer taxes.
  • Negotiable tools: seller concessions — the seller agrees to contribute toward your closing costs, usually capped by loan type (conventional loans typically allow 3–9% of the price depending on down payment; FHA caps at 6%; VA at 4%). Lender credits — the lender covers some closing costs in exchange for a slightly higher interest rate. Both are standard negotiation levers, not favors.

How to read the Loan Estimate vs. the Closing Disclosure

You'll see these costs twice: the Loan Estimate (within three business days of applying) and the Closing Disclosure (at least three business days before closing). Your job: compare them line by line.

  1. Put both forms side by side and check every fee. Some fees (lender's origination, transfer taxes) have zero tolerance for increases; others (third-party services you didn't shop for) have a 10% tolerance; prepaid items and services you chose can change freely.
  2. Any increase beyond the allowed tolerance must be credited back to you by the lender at closing.
  3. If the Closing Disclosure shows a material change — interest rate, loan product, or prepayment penalty — the three-business-day clock restarts and closing is delayed.
  4. Check your cash-to-close number on page 1 of both forms. If it jumped, find exactly which line moved and ask why before you sign anything.

What this guide does not cover

This guide covers national norms; it is not a substitute for your lender's disclosures or a real estate attorney. It does not cover state-specific transfer taxes, which vary enormously and need to be confirmed for your state. It does not address commercial purchases, new-construction builder incentives (which have their own cost structures and pressure tactics), or tax implications of points and closing costs — for those, hire a CPA or tax advisor. If your Loan Estimate and Closing Disclosure diverge beyond tolerance and your lender can't explain it, consult a real estate attorney before closing.

Frequently asked questions

Can I roll closing costs into my mortgage?

Some costs can be financed — FHA's upfront mortgage insurance premium is commonly rolled into the loan — but most closing costs must be paid in cash at closing. Lender credits and seller concessions are the practical ways to reduce your out-of-pocket costs without increasing your loan balance.

Are closing costs tax deductible?

Some are. Mortgage interest (including prepaid interest and deductible points) and real estate taxes may be deductible if you itemize. Origination fees labeled as points, title insurance, appraisals, and inspection fees generally are not. Tax rules change, so confirm with a tax professional for your situation.

What's the difference between the appraisal and the inspection?

The appraisal estimates the home's market value for the lender; the inspection evaluates the home's physical condition for you. The appraisal costs $300–$600 and protects the lender. The inspection costs $300–$500, you order and pay for it yourself, and it's the document that protects you. You need both.

How can I lower my closing costs?

Shop at least three lenders and compare origination fees and lender credits; negotiate seller concessions (up to the cap your loan type allows); ask the seller to cover the owner's title policy where that's customary; and choose a later-in-the-month closing date to reduce prepaid interest. Small wins across five or six lines can save $2,000–$4,000.

What happens if I don't have enough cash at closing?

Closing can be delayed while you arrange funds, or the deal can fall through — and you may risk your earnest money depending on your contract. This is why lenders verify your assets before issuing a clear-to-close. Budget closing costs separately from your down payment from day one, and don't make large purchases or move money between accounts during underwriting.