Last updated: October 5, 2026
Your down payment is not the only cash you need to buy a home. Closing costs, the fees and prepaid expenses due when your loan is finalized, often add thousands of dollars more. Knowing what they include and which ones you can shop for or negotiate can save you real money.
How much are closing costs?
According to Freddie Mac, closing costs typically run 2% to 5% of the loan amount. They vary with your state and county, the lender, the loan type and the price of the home.
| Loan amount | 2% | 5% |
|---|---|---|
| $200,000 | $4,000 | $10,000 |
| $300,000 | $6,000 | $15,000 |
| $360,000 | $7,200 | $18,000 |
| $500,000 | $10,000 | $25,000 |
What closing costs include
Lender charges
- Origination or underwriting fees for processing and approving the loan.
- Discount points, optional upfront payments to lower your interest rate. One point equals 1% of the loan amount.
- Credit report fee.
Third-party services
- Appraisal, required by the lender to confirm the home’s value.
- Title search and title insurance, which protect the lender (and, with an owner’s policy, you) against ownership claims.
- Settlement or escrow agent fees for handling the closing.
- Survey and pest inspection, in some areas or for some loans.
Government fees and taxes
- Recording fees to register the deed and mortgage with the county.
- Transfer taxes, which depend on your state and locality and may be paid by the buyer, the seller or both.
Prepaid items and escrow deposits
- Prepaid interest from your closing date to the end of that month.
- Homeowners insurance, often the first year’s premium.
- Initial escrow deposit, a cushion of several months of property tax and insurance so your escrow account can pay those bills.
Prepaid items are not really fees; they are costs you would pay anyway. They still have to be covered in cash at closing.
Your Loan Estimate and Closing Disclosure
Federal rules give you two standardized forms that make costs easy to compare:
- Loan Estimate: the lender must provide it within three business days of receiving your application. Getting Loan Estimates from several lenders is the simplest way to compare offers line by line.
- Closing Disclosure: you must receive it at least three business days before closing. Compare it with your Loan Estimate and ask about any differences.
Not every number can change freely. Fees paid to the lender generally cannot increase from the Loan Estimate; certain third-party and recording fees can increase by no more than 10% in total; and items such as prepaid interest, insurance and escrow deposits can change. A changed circumstance, such as a different loan amount or a rate lock expiring, can justify a revised estimate.
How to lower your closing costs
- Compare at least three Loan Estimates. Lender fees and rates differ, and the forms make it easy to compare.
- Shop for services the lender lets you choose, such as title and settlement services. Your Loan Estimate lists which ones you can shop for.
- Ask the seller for concessions. In some markets, sellers agree to pay part of the buyer’s closing costs. Loan programs limit how much they can contribute.
- Consider lender credits. A lender may cover part of your costs in exchange for a slightly higher rate. That lowers cash at closing but costs more over time if you keep the loan for many years.
- Look into down payment and closing cost assistance from state and local housing finance agencies, especially if you are a first-time buyer.
- Time your closing. Closing near the end of the month reduces prepaid interest, though it does not change your total cost of borrowing.
How closing costs fit your budget
Cash to close equals your down payment plus closing costs, minus any credits or deposits already paid. On a $400,000 home with 10% down and a $360,000 loan, that could be $40,000 plus roughly $7,200 to $18,000. Make sure you plan for this before deciding how much house you can afford, and remember that a smaller down payment usually means PMI.
To estimate the monthly payment on your loan, use our mortgage calculator.
Frequently asked questions
How much are closing costs on a mortgage?
Freddie Mac says to expect roughly 2% to 5% of the loan amount. On a $360,000 loan, that is about $7,200 to $18,000, depending on your location, lender and loan type.
When will I know my exact closing costs?
Your lender must send a Loan Estimate within three business days of receiving your application and a Closing Disclosure at least three business days before closing. The Closing Disclosure shows your final costs.
Can closing costs go up after my Loan Estimate?
Some can and some cannot. Lender fees and certain other charges generally cannot increase, a group of third-party fees can rise by up to 10% in total, and items like prepaid interest and escrow deposits can change. Changed circumstances, such as a new loan amount, can allow a revised estimate.
Can I roll closing costs into my mortgage?
On a purchase, you usually cannot add them to the loan balance, but you can reduce cash at closing with seller concessions or lender credits in exchange for a higher rate. On a refinance, closing costs can often be added to the new loan.
Sources: Freddie Mac: What are closing costs and how much will I pay?; CFPB: Buying a House.
This article is for educational purposes only and is not financial advice. Loan programs, rates and rules change; confirm details with your lender or a HUD-approved housing counselor.