Closing costs are the "surprise" part of buying a home. They typically run 2-5% of the loan amount, split into lender fees (you can shop), third-party fees (fixed by the market), and prepaids (your money going into escrow). On a $400K loan, expect $9,000-$14,000 in closing costs on top of your down payment.
Worked example: $400,000 purchase, $80,000 down, $320,000 loan. Typical closing costs: $3,200 origination + $800 appraisal + $2,400 title insurance + $1,500 escrow setup + $2,200 prepaid property tax + $1,400 prepaid insurance + $900 recording and transfer tax = $12,400. Plus down payment, cash needed at closing = $92,400.
Lender fees (shoppable)
- Origination — 0.5-1.0% of loan amount at most lenders. Negotiable.
- Underwriting fee — $500-$1,000 flat.
- Processing fee — $300-$600 flat.
- Application fee — $0 at most lenders; $350-$500 at a few.
Third-party fees (partially shoppable)
- Appraisal — $550-$800, ordered by lender, you pay up front.
- Title insurance — 0.5-1.0% of purchase price. Shop title companies in states where you can.
- Credit report — $50-$100.
- Flood certification — $10-$25.
- Tax service fee — $75-$100.
- Pest inspection — $150-$300, required on VA and some FHA.
Government and prepaids (non-negotiable)
- Recording fees — $100-$400 depending on county.
- Transfer tax — 0-3% of purchase price depending on state. Delaware, New York, and Pennsylvania are the worst.
- Prepaid property tax — 2-14 months of tax escrow deposited at closing depending on closing month.
- Prepaid homeowners insurance — 12 months up front (or 14 with escrow cushion).
- Per-diem interest — interest from closing date to end of month.
How to reduce closing costs
- Shop 3+ lenders. Origination differences alone can be $2,000+.
- Ask for lender credit. In exchange for a slightly higher rate, lender covers $3,000-$5,000 of costs.
- Seller concessions. Ask seller to cover 2-3% of closing costs. See our seller concessions calculator for caps by loan type.
- Close near end of month. Minimizes per-diem interest prepaid.
- Reissue title insurance rate (refinances) — can be 30-60% off regular title insurance.