Homebuying Closing Costs Explained
Closing costs typically run 2 to 5 percent of the purchase price. Here is what each line item actually pays for, and which ones you can shop or negotiate away.
Fact-checked and reviewed for financial accuracy by Priya Kannan, CFP®. Read our content review process.
Closing costs are the fees required to originate your loan and transfer the property, and they are separate from your down payment. On a $400,000 purchase, expect roughly $8,000 to $20,000 depending on your state, your lender, and whether you buy points.
The three groups of costs
1. Lender fees
Origination charges, underwriting, processing, and any discount points. These appear in Section A of your Loan Estimate and are the most negotiable category — they vary widely between lenders for identical loans.
2. Third-party services
Appraisal, credit report, flood certification, title search, title insurance, settlement or attorney fees, survey where required. Some you must use the lender's provider for; others appear under "services you can shop for" and genuinely can be shopped, particularly title and settlement.
3. Prepaids and escrow
Not fees at all — money you would owe anyway, collected early. A full year of homeowners insurance, several months of property taxes to seed the escrow account, and interest from your closing date to the end of that month. Closing late in the month reduces prepaid interest, which is why some buyers target a month-end closing.
| Item | Typical range | Negotiable? |
|---|---|---|
| Loan origination | $0 – $3,600 | Yes — shop lenders |
| Discount points (optional) | $0 – $7,200 | Yes — your choice |
| Appraisal | $500 – $800 | No |
| Credit report and verifications | $50 – $150 | No |
| Title search and lender's title insurance | $700 – $2,400 | Yes — shop title companies |
| Owner's title insurance (optional but advised) | $800 – $2,000 | Yes |
| Settlement or attorney fee | $400 – $1,200 | Yes |
| Recording and transfer taxes | $150 – $6,000+ | No — set by jurisdiction |
| Prepaid insurance and tax escrow | $2,000 – $5,000 | No — but timing shifts it |
Who can pay them besides you
Seller concessions are the most common lever: the seller agrees to credit a portion of your closing costs, usually in exchange for a slightly higher price. Loan programs cap concessions — commonly 3 percent for a conventional loan with less than 10 percent down, 6 percent for FHA — so ask your lender before negotiating.
Lender credits are the other route. You accept a slightly higher interest rate and the lender pays a portion of your costs. This is the reverse of buying points and can make sense if you are short on cash or plan to sell or refinance within a few years.
The two documents to compare
You receive a Loan Estimate within three business days of applying, and a Closing Disclosure at least three business days before closing. Put them side by side. Certain fees cannot legally increase at all, others only within a 10 percent tolerance, and the rest can change. Question every line that moved.
Estimating your cash to close
Cash to close equals your down payment, plus closing costs and prepaids, minus your earnest money deposit and any seller or lender credits. Our closing cost estimator will produce a working figure; your lender's Loan Estimate will produce the real one.
Frequently asked questions
Can closing costs be rolled into the mortgage?
Generally not on a purchase, though you can offset them with lender credits or a higher purchase price paired with seller concessions. On a refinance, rolling costs into the loan balance is routine.
Are closing costs tax deductible?
Most are not. Points paid to reduce your rate on a primary residence purchase are often deductible in the year paid, and prepaid property taxes may be deductible. Consult a tax professional.
How much are closing costs on a $300,000 house?
Commonly $6,000 to $15,000 for a buyer, depending on your state's transfer taxes and whether you buy points. States with high transfer taxes sit at the top of that range.
Do cash buyers pay closing costs?
Yes, but much less — no lender fees, no points, no prepaid interest. Title, settlement, recording, and transfer taxes still apply.
Editorial note. This article is educational and is not financial, tax, or legal advice. Loan terms, rates, insurance costs, and tax rules vary by lender, state, and individual circumstance. Figures shown are illustrative. Confirm details with a licensed lender, tax professional, or attorney before making a decision.
