Closing costs on a home purchase typically run 2 to 5 percent of the loan amount, according to Freddie Mac -- meaning a $350,000 purchase carries $7,000 to $17,500 at closing beyond the down payment. Most first-time buyers underestimate this figure. Knowing what sits inside that total, line by line, is the most practical preparation before making an offer.
What Closing Costs Actually Are
Closing costs are the fees and prepaid expenses required to finalize a real estate transaction -- not a single charge but a collection of line items paid to your lender, third-party service providers, government agencies, and escrow. They appear on two standardized federal documents: the Loan Estimate (delivered within three business days of your application) and the Closing Disclosure (delivered at least three business days before closing). The Consumer Financial Protection Bureau publishes both forms with field-by-field explanations at consumerfinance.gov/owning-a-home.
What matters to a buyer is understanding which costs are fixed, which vary by lender, and which you can shop.
Key takeaway
Your lender must deliver a Loan Estimate within three business days of application. The same services -- title search, settlement, even appraisal in some states -- can be priced differently by different providers. Review every line item and compare quotes.
Lender Fees: What You Pay for the Loan Itself
Lender fees cover the cost of originating, underwriting, and processing your mortgage. They appear on Section A and B of your Loan Estimate.
Origination fee. The lender's main revenue line, expressed as a percentage of the loan -- commonly 0.5 to 1 percent. A $300,000 loan at 1 percent adds $3,000 at closing. Some lenders advertise no origination fee but recover it through a higher rate.
Discount points. Optional. One point equals 1 percent of the loan amount and buys a lower rate -- typically 0.125 to 0.25 percentage points per point. Calculate your break-even before agreeing.
Underwriting fee. Covers the lender's credit evaluation; often $400 to $900, according to Bankrate's 2024 survey of lender fees.
Application and credit report fees. Some lenders charge $300 to $500 upfront; a credit report pull adds $15 to $30. Ask whether the application fee is refundable on denial.
Shopping lenders is the most effective way to cut this category. According to Freddie Mac research, borrowers who obtained five or more quotes saved an average of $1,500 compared with those who received only one.
Third-Party Fees: Services Required to Close
Beyond lender fees, buyers pay third-party charges for services that protect both parties. You cannot skip them, but in many states you can shop for your own providers rather than accepting whoever the lender recommends.
Appraisal fee. An independent appraisal confirms the home is worth what you are paying. Fees typically run $300 to $600 for a standard single-family home. You pay this before closing. If the appraisal comes in below the purchase price, you must renegotiate, cover the gap in cash, or exit under an appraisal contingency.
Title search and title insurance. The title search confirms clean ownership and no unpaid liens. Title insurance protects the lender (lender's policy, which you pay for) and optionally you (owner's policy) against defects that surface after closing -- a forged deed, an unknown heir. According to the American Land Title Association, it is a one-time premium at closing. Lender's coverage typically runs 0.5 to 1 percent of the loan amount; an owner's policy adds a smaller additional premium. In rate-filed states, all title companies charge the same; in others, you can shop.
Settlement or closing fee. The closing agent -- a title company, escrow company, or attorney depending on your state -- coordinates the transaction and records the deed. Fees typically run $500 to $1,500.
Home inspection. Paid before closing, not at the table. A general inspection runs $300 to $500, according to the American Society of Home Inspectors. Specialized inspections (sewer, radon, mold) are additional. Waiving inspection to win a bid is a real risk; a seller's disclosure tells you what they know, not what they have missed.
Survey and attorney fees. A property survey -- required by some lenders -- runs $400 to $700. In attorney-closing states (New York, Massachusetts, South Carolina, and others), legal representation typically adds $500 to $1,500.
Tip
Page 2 of your Loan Estimate lists which settlement services you may shop for independently under the "Shoppable" column. CFPB rules at consumerfinance.gov require lenders to identify these. If a service is on the lender's required provider list, your shopping ability is more limited -- but services in the shoppable column are fair game for competing quotes.
Prepaid Items and Escrow Deposits: Money You Owe Before Day One
A significant portion of what buyers pay at closing is not fees -- it is money collected in advance for ongoing homeownership expenses. These include:
Homeowners insurance premium. Lenders require the first year's premium at or before closing. Get your quote early -- in high-risk markets, insurance availability can affect your ability to close.
Prepaid mortgage interest. You pay interest from closing through month-end. Close on the 5th and you owe roughly 25 days; close on the 28th and you owe two or three.
Escrow account setup. Most lenders require an escrow account for property taxes and homeowners insurance. At closing, you fund the initial cushion -- typically two to three months of tax estimates and two months of insurance. This can add several thousand dollars; these are not fees, they are your own money held to pay future bills.
PMI prepaid. Down payments under 20 percent on a conventional loan trigger PMI; some loan structures collect the first month at closing. According to Freddie Mac, PMI typically costs 0.1 to 2 percent of the loan amount annually, depending on credit score and down payment.
See Down Payment Requirements by Loan Type (2026) for a breakdown of how your down payment affects PMI requirements and loan costs across conventional, FHA, VA, and USDA programs.
Who Pays What: Buyer vs. Seller
Closing costs are not solely a buyer's burden. The table below summarizes the typical split.
| Fee or Cost | Typically Paid By | Notes |
|---|---|---|
| Loan origination fee | Buyer | Part of lender fees; negotiable |
| Appraisal | Buyer | Paid before or at closing |
| Lender's title insurance | Buyer | Required by lender |
| Owner's title insurance | Buyer (optional) | Highly recommended |
| Property survey | Buyer | Required by some lenders/states |
| Settlement/closing fee | Varies by state | Split or buyer-paid depending on region |
| Home inspection | Buyer | Paid before closing |
| Real estate agent commission | Seller | Paid from sale proceeds; subject to change post-NAR settlement |
| Transfer taxes | Varies by state | Often split; some states assign to seller |
| Recording fees | Buyer | Government fee to record the deed |
| Property taxes (arrears) | Seller | Seller pays taxes through closing date |
| Prepaid escrow/insurance | Buyer | Not fees -- your own future expense collected at close |
| Seller concessions | Seller | Agreed in contract; offsets buyer's costs |
Agent commissions. The National Association of Realtors settlement in 2024 changed how buyer agent compensation is disclosed. Buyers may now be directly responsible for their own agent's fee. Confirm how your agent's compensation is structured before signing a buyer representation agreement.
Seller concessions credit the buyer toward closing costs. A $5,000 concession reduces what you bring to the table by $5,000. Concessions must be lender-approved and cannot exceed program caps.
How to Reduce What You Pay at Closing
Closing costs are not entirely fixed. Several strategies can reduce what you bring to the table.
Shop at least three lenders. Origination fees, underwriting charges, and rates vary enough that comparing Loan Estimates can save several thousand dollars. Get all quotes within a short window -- rate shopping within 14 to 45 days typically counts as a single hard inquiry, according to CFPB guidance.
Shop title and settlement services. In states where you choose your own title company, get two or three quotes. In non-rate-filed states, premiums vary by provider; the difference can reach several hundred dollars.
Ask for seller concessions. In markets where homes are sitting longer, sellers may agree to cover part of closing costs while keeping the price intact. It is a negotiating point, not a standard arrangement.
Consider a lender credit. A lender may cover costs in exchange for a slightly higher rate. It reduces upfront expense but raises your monthly payment permanently. If you plan to sell or refinance within five to seven years, run the break-even before deciding.
Close later in the month. Prepaid interest runs from closing through month-end. Closing on the 28th instead of the 5th cuts roughly three weeks of interest to two or three days -- on a $300,000 loan at 7 percent, approximately $375 in savings.
Look for assistance programs. According to HUD, many state and local programs offer grants or forgivable second loans for closing costs targeted at first-time and income-qualified buyers. The HUD counselor finder at hud.gov/counsel lists options by county.
Warning
Some lenders advertise "no-closing-cost" mortgages prominently in their marketing. Read the Loan Estimate carefully. Costs do not disappear -- they are either rolled into a higher interest rate (lender credit) or added to the loan balance. A higher rate compounds over decades. Calculate the break-even and total cost before choosing this option.
For a full picture of how your financing choices affect total purchase cost, see How to Buy Your First Home: A Step-by-Step Guide and Down Payment Requirements by Loan Type (2026).
State Variation: Why Your Number May Differ
National averages are a starting point, not a budget. Closing costs vary substantially by state based on transfer tax rates, attorney requirements, and local title insurance practices.
According to ClosingCorp's annual Smart Closing Cost Report, the highest-cost states include New York, Delaware, and Washington D.C. -- largely due to transfer taxes and, in New York, mortgage recording taxes. Lower-cost states include Missouri, South Dakota, and Iowa. On a $300,000 purchase, the gap between a low-cost and high-cost state can exceed $5,000.
Transfer taxes alone range from zero in Texas, Montana, and Idaho to more than 2 percent of the sale price in parts of Pennsylvania and Delaware. In New York City, the combined city and state transfer taxes plus mortgage recording tax can add 2 to 2.5 percent of the purchase price.
For a state-level breakdown, see Closing Costs by State.
Tip
Ask your agent early for a rough closing cost estimate in your specific county. Experienced local agents see enough transactions to give you a realistic range well before you get a Loan Estimate -- which helps you plan your cash position before you start making offers.
The Closing Disclosure: What to Check Before You Sign
The Closing Disclosure is the final accounting of every fee. Federal law -- specifically the Real Estate Settlement Procedures Act, enforced by the CFPB -- requires lenders to deliver it at least three business days before closing. Compare it line by line against your Loan Estimate.
The CFPB's "Know Before You Owe" rule sets tolerance tiers: origination fees must stay identical; most third-party fees can increase by no more than 10 percent; prepaid items tied to actual insurance quotes can change more. If a fee has increased and your lender cannot explain why, raise it before you are at the table with no leverage.
You have the legal right to delay closing if the Closing Disclosure arrives late or contains errors.
Knowing what is inside your closing costs -- lender fees, third-party services, prepaids, and the buyer-seller split -- lets you question what does not look right, shop where you have options, and plan your cash position accurately.
Frequently asked questions
What are closing costs when buying a house?
Closing costs are the fees and prepaid expenses a buyer must pay to finalize a home purchase, separate from the down payment. They typically include lender fees, title insurance, appraisal, government recording charges, and prepaid items like homeowners insurance and property tax escrow. According to Freddie Mac, buyers typically pay 2 to 5 percent of the loan amount.
How much are closing costs for a buyer?
Closing costs for buyers typically range from 2 to 5 percent of the loan amount, according to Freddie Mac. On a $350,000 purchase, that is $7,000 to $17,500 due at closing in addition to your down payment. ClosingCorp data shows the national average was around $6,800 in lender and third-party fees in recent years, though totals vary significantly by state and loan type.
Who pays closing costs -- the buyer or the seller?
Both parties typically pay closing costs, but they cover different fees. Buyers pay lender fees, title insurance, appraisal, and prepaid escrow items. Sellers generally pay real estate agent commissions and transfer taxes. In some transactions, sellers agree to pay a portion of the buyer's closing costs -- called seller concessions -- as part of the negotiated offer terms.
Can closing costs be rolled into the mortgage?
In most cases, closing costs cannot be rolled directly into a conventional purchase mortgage. Some loan programs, like VA loans, allow certain fees to be financed. Alternatively, a lender may offer a higher interest rate in exchange for a lender credit that offsets closing costs -- a no-closing-cost mortgage. The credit reduces upfront expense but increases what you pay over the life of the loan.
What closing costs are negotiable?
Several closing costs are negotiable or avoidable. Loan origination fees, discount points, and some lender service fees can sometimes be reduced by shopping multiple lenders. You can also choose your own title company in most states, which allows comparison shopping. Government recording fees and transfer taxes are set by law and are not negotiable. Prepaid items like insurance and escrow deposits are determined by your property tax rate and insurance premiums.