The complete guide to closing costs when buying a home
Closing costs are the fees and prepayments you settle at the end of a home purchase — typically 2% to 5% of the price. Here is every line item, what it covers, and how to bring the total down.
Get a closing cost estimate for your specific purchase — no obligation.
At a glance
- Typical range
- 2%–5% of the purchase price
- Biggest items
- Lender fees, title, escrow, prepaids
- Who can pay
- You, the seller, or a mix
- When you know
- 3 days before closing, in writing
The short answer
Closing costs typically run 2% to 5% of the purchase price — but the individual line items matter more than the percentage.
They're the fees and prepayments you settle at closing, separate from your down payment. Some are lender charges for making the loan, some go to third parties for title, settlement and recording, and some are prepaid amounts funded into escrow for taxes and insurance.
Three documents control the number: your Loan Estimate (within three business days of applying), the Closing Disclosure (at least three business days before closing), and the purchase contract's seller concessions. Every figure in this guide is a planning number — the estimate that applies to you comes from your lender.
You can reduce closing costs in several legitimate ways: shopping for title and settlement services, negotiating seller credits, choosing a loan structure with fewer fees, and timing the close. Each has trade-offs, covered below.
Estimate your costs
What will you actually pay?
Planning estimates based on common fee ranges — not quotes. Use this to budget, then compare it with your lender's Loan Estimate.
Estimated closing costs
$11,518
2.9% of the purchase price
Cash to close
$51,518
Costs + down payment
Where it goes
Monthly escrow add-on
Hazard insurance
$133
Property tax
$383
Total per month
$325
The escrow portion of closing costs funds these accounts so your first payments can include taxes and insurance.
Every cost explained
Line by line, what you're paying for
Closing costs fall into four groups. When you read your Loan Estimate, it will use similar groupings — match these to the page you're holding.
Lender charges
- Origination fee
- The lender's charge for making the loan, often a percentage of the loan amount. Shopping rates usually moves this more than anything else.
- Underwriting fee
- Covers the lender's review of your credit, income, assets and the property. Often fixed.
- Discount points
- Optional — an upfront fee to lower your rate. 1 point = 1% of the loan. Skip it if you don't need the lower payment.
- Credit report & flood certification
- Small third-party costs the lender passes through. Usually a few hundred dollars combined.
Title & settlement
- Lender's title insurance
- Protects the lender's interest in the property. Generally required, and often shoppable depending on your state.
- Owner's title insurance
- Protects you. Usually optional, sometimes paid by the seller depending on local custom — ask.
- Escrow / settlement fee
- Paid to the company that handles the closing process, holds funds and records documents.
- Recording & transfer taxes
- Government fees for recording the deed and, in many states, a transfer tax. Often paid by the seller — check your contract.
Prepaid & escrow
- Prepaid interest
- Interest from your closing date to the end of that month. Closing later in the month reduces it slightly.
- Homeowners insurance
- You generally pay the first year's premium at closing, plus reserves to start the escrow account.
- Property tax reserves
- Funds set aside in escrow so your servicer can pay taxes when they're due. Varies with local tax cycles.
- HOA dues
- If the home is in an HOA, expect prepaid dues or a capital contribution. Check with the HOA before closing.
Program-specific
- FHA upfront MIP
- 1.75% of the loan amount, financed or paid at closing, plus annual mortgage insurance premiums.
- VA funding fee
- Applies unless you're exempt. The percentage depends on down payment and prior VA use.
- PMI / mortgage insurance
- On conventional loans with less than 20% down — usually part of the monthly payment rather than closing, but affects the budget.
- Appraisal & inspection
- The appraisal is required. A home inspection is optional but strongly worth doing — often paid before closing.
Want us to read your Loan Estimate with you? We'll point out what's negotiable and what isn't.
Apply NowWhen you pay them
Not everything is paid on closing day
Some costs are collected when you apply, some during escrow, and the rest settle at closing. Knowing the sequence prevents surprises.
Day 0–3
Loan Estimate arrives
Within three business days of applying. It estimates closing costs and flags which services you can shop for.
During escrow
Appraisal & inspection paid
The appraisal is usually collected upfront by the lender; a home inspection is typically paid directly when it's done.
3 days before
Closing Disclosure
Final numbers. You're entitled to compare it with the Loan Estimate. Some fees can't increase; others can by limited amounts.
Closing day
Wire or cashier's check
The remaining cash to close is delivered at settlement. Verify wire instructions by phone using a number you looked up yourself.
Wire fraud is the single most dangerous moment in a home purchase.
Scammers impersonate title companies and send fake wiring instructions. Never trust an emailed or texted account number. Call the title company at a number you found yourself and confirm before you send any money.
Who can pay them
You're not always the one paying
Purchase contracts commonly shift some closing costs to the seller — and loan programs cap how much. This is a negotiation, not a fixed rule.
Buyer pays
- Lender fees and points
- Buyer's title policy (by custom)
- Prepaids and escrow reserves
- Their own inspections
Seller pays
- Real estate commissions
- Some transfer taxes
- Certain title fees (by custom)
- Agreed seller concessions toward buyer costs
What's negotiable
- Credit toward buyer's closing costs
- Title and escrow split
- Repair credits
- Who pays for the owner's title policy
Seller concession limits
Most programs cap seller credits as a percentage of the purchase price, and the cap usually depends on your down payment. Conventional loans often allow around 3%–6%; FHA and VA have their own limits. Ask your loan officer for the maximum in your specific scenario before you write an offer that relies on it.
How to reduce them
Six legitimate ways to lower your costs
No trick requires hiding anything or misrepresenting your situation. Each is a normal part of a well-run mortgage transaction.
Shop your rate and lender fees
A small difference in origination and rate can be thousands of dollars. Compare at least two or three Loan Estimates side by side.
Shop title and settlement services
Your Loan Estimate marks which services you can shop for. Comparing two title companies is often worth a few hundred dollars.
Negotiate seller concessions
Ask the seller to credit some closing costs. In a slower market this is common — and it costs you nothing but a conversation.
Choose the right loan structure
Larger down payments can remove mortgage insurance. Some programs have higher upfront fees. Model the trade-offs rather than defaulting.
Compare the lender's own alternatives
A slightly higher rate with far fewer fees can make sense if you plan to keep the loan a short time. The opposite is true for a long hold.
Ask about times and dates
Closing later in the month reduces prepaid interest slightly. Renegotiate fees as the process goes on — everything is negotiable until it's signed.
Get a real closing cost estimate
We'll give you a line-by-line estimate for your purchase and compare it against what you've been quoted elsewhere.
Frequently asked questions
What buyers ask us most about closing costs.
Written by
Saman KhanianMortgage professional at Equitable Lending, helping buyers across Los Angeles and nationwide understand exactly what they're paying for and why.
Know exactly what closing will cost before you make an offer
Send us the purchase price, down payment and loan type. We'll return a line-by-line estimate you can budget from — and show you where the number can come down.
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