How Much Are Closing Costs?
Closing costs typically run between 2% and 5% of the home's purchase price. On a $350,000 home, that's $7,000 to $17,500 — paid in addition to your down payment. The exact amount depends on your location, loan type, lender, and the specific services required in your transaction.
In general, buyers in northeastern states (New York, Pennsylvania, Maryland) tend to pay higher closing costs, while buyers in states like Missouri, Indiana, and South Dakota pay less. Your lender is required to give you a Loan Estimate within three business days of applying, which shows an itemized breakdown of expected costs.
Lender Fees
These are fees charged directly by your mortgage lender for processing and underwriting your loan:
- Origination fee — typically 0.5%–1% of the loan amount. Covers the lender's cost of creating the loan.
- Underwriting fee — usually $300–$900. Covers the cost of reviewing your application, income, and credit.
- Application fee — some lenders charge $100–$500 just to apply, though many waive this.
- Rate lock fee — if you lock your interest rate for an extended period, some lenders charge a fee for this.
- Points (discount points) — optional. Paying one point (1% of loan amount) upfront typically lowers your rate by 0.25%. This only makes sense if you plan to stay in the home long-term.
Title and Escrow Fees
These protect you and the lender by confirming the seller actually owns the property free and clear of liens or disputes:
- Title search — $200–$400. A title company searches public records to verify the seller's ownership and uncover any claims against the property.
- Title insurance (lender's policy) — $500–$1,500. Required by the lender. Protects the lender if a title problem surfaces after closing.
- Title insurance (owner's policy) — $700–$2,000. Optional but strongly recommended. Protects you if someone later claims ownership of the property.
- Escrow/settlement fee — $500–$1,500. Paid to the escrow company or attorney who manages the closing process and ensures all money and documents are handled correctly.
- Recording fee — $100–$250. Paid to the county to officially record the new deed in public records.
Third-Party Fees
These cover services performed by outside parties:
- Home appraisal — $300–$600. Required by the lender. A licensed appraiser determines the home's market value to confirm the purchase price is reasonable.
- Home inspection — $300–$500. Not technically a closing cost but typically paid during the inspection period. Highly recommended even if not required.
- Survey — $400–$700 (if required). A licensed surveyor confirms the property boundaries. Some lenders require this; others accept an existing survey.
- Pest inspection — $75–$150. Required in some states and for some loan types (FHA, VA). Checks for termites and other wood-destroying insects.
Prepaid Items and Escrow Reserves
These aren't really fees — they're payments you'd have to make anyway, just collected upfront at closing:
- Prepaid interest — covers the interest from your closing date to the end of the month. If you close on the 15th, you prepay 15 days of interest.
- Homeowner's insurance premium — your first year's insurance policy is typically paid in full at closing.
- Property tax reserves — 2–6 months of property taxes are collected upfront to fund your escrow account.
- Insurance reserves — 2–3 months of insurance payments are also deposited into escrow.
These prepaid items can add $3,000–$7,000 to your closing costs but they're not lost money — they fund your escrow account and reduce your first few monthly payments.
Who Pays Closing Costs — Buyer or Seller?
In most US transactions, buyers pay the majority of closing costs. However, sellers typically pay:
- Real estate agent commissions (both buyer's and seller's agents), typically 5%–6% of the sale price
- Transfer taxes in some states
- Their share of prorated property taxes
In buyer's markets, it's common to negotiate for the seller to pay some or all of the buyer's closing costs as a "seller concession." This is harder to get in competitive markets but always worth asking for.
How to Reduce Your Closing Costs
There are legitimate ways to reduce what you pay at closing:
- Shop lender fees — lender fees vary significantly. Get Loan Estimates from at least 3 lenders and compare the fees side by side, not just the rate.
- Shop title and escrow — in most states you can choose your own title company. Get quotes from 2–3 companies.
- Ask for seller concessions — especially useful in a buyer's market or when the home has been sitting on the market.
- Look for assistance programs — many states, counties, and cities offer closing cost assistance for first-time buyers, low-income buyers, or buyers in specific areas.
- Negotiate lender credits — you can accept a slightly higher interest rate in exchange for lender credits that reduce your closing costs. This makes sense if you're short on cash but plan to refinance later.
Estimate Your Closing Costs Before You Make an Offer
Knowing your expected closing costs before you go under contract is critical for financial planning. Our free Closing Costs Calculator gives you an itemized estimate based on your purchase price, loan amount, and location — so you're not caught off guard at the closing table.
Key Takeaways
- Closing costs typically run 2%–5% of the purchase price
- They include lender fees, title fees, third-party fees, and prepaid items
- Always compare Loan Estimates from multiple lenders — fees vary widely
- Ask about seller concessions, especially in a buyer's market
- Calculate your closing costs before making an offer so you know your true out-of-pocket costs