The national average closing cost ranges between 2% and 6% of your loan amount in upfront closing costs but varies by state and lender. On a $400,000 mortgage, for example, your expense to close the loan could run $8,000 to $24,000. Your closing disclosure will break down individual fees and their amounts, but you’ll likely pay appraisal, origination and title fees, plus taxes, commissions and more.
We’ll break down the fees you’ll pay at closing, how much you can expect them to be — and whether you can roll them into your loan to pay at a later date (short answer: yes, but it will be costly in the long run).
What are closing costs?
Closing costs are fees paid to the lender on the day you close (or finalize) your mortgage. Many of these costs are related to the creation and underwriting of your mortgage loan; others cover items like your home appraisal or initial mortgage insurance payment. Some fees are required by law, while others can be negotiated with your lender.
Which closing costs are negotiable? The origination fee is typically negotiable, and if you have strong credit and a large down payment, you may be able to talk your lender into waiving it altogether. Real estate commissions and rate lock fees are also negotiable. Other charges, like the inspection or title search fee, are not negotiable but you can shop around for your own service provider to find one with lower costs. Talk to lenders about their willingness to discount or discharge these fees.
Buyers and sellers both pay closing costs, but the seller’s costs are typically deducted from their proceeds while buyers pay out of pocket. In a buyer’s market (or when there are more available homes than potential buyers), the seller may be willing to pay some of the buyer’s closing costs as an incentive.
How much are closing costs?
Closing costs vary widely, depending on your state, lender, loan amount and mortgage type. For homebuyers, closing costs typically range from 2% to 6% of the loan amount.
The highest closing costs occur in areas with high taxes, property values or insurance premiums. In early 2024, the states with the highest average closing costs were New York ($8,039), California ($8,028) and New Jersey ($7,702). The states with the lowest average closing costs in the same period were West Virginia ($2,124), Alabama ($2,400) and South Carolina ($2,473), according to Assurance IQ.
Some closing costs are based on a percentage of your loan amount, while others are assessed as a flat fee. While they add up to a big amount, some individual fees may be $100 or less.
13 closing costs for the buyer
At least three days before your closing date, you’ll receive a copy of your closing disclosure that breaks down each fee and includes the finalized details of your mortgage, like your rate and monthly payment. Review this document carefully and ask your lender about any unexpected fees.
Source: Consumer Financial Protection Bureau
Here’s a look at some of the common fees associated with closing a mortgage loan:
1. Appraisal fee
Cost estimate: $300 to $450
Lenders require a home appraisal to get an independent, professional assessment of the home’s value. The appraiser will visit the home to assess its qualities and compare it to other recently sold homes. The home’s size and unusual features may result in a higher appraisal fee — for example, a luxury home that requires a jumbo loan may require a more expensive appraisal, perhaps as high as $1,200.
Although the appraisal fee is typically considered a “closing cost,” you’ll typically pay it when the appraisal is performed, well ahead of closing. Appraisals are almost always required, but if the home was very recently appraised, you may be able to skip this step with an appraisal waiver.
2. Credit report fee
Cost estimate: $15 to $30
As part of the underwriting process, your lender will pull your credit reports from all three bureaus to review your history and assess your creditworthiness. If your financial situation changes significantly during the review process, you may incur this charge more than once.
3. Discount points
Cost estimate: Each point is 1% of the loan amount
Discount points are a form of prepaid interest. You can choose to pay for mortgage points upfront to lower the interest rate on your mortgage. One discount point costs 1% of the loan amount and typically reduces your mortgage rate by 0.25%. For example, if you qualify for a $300,000 mortgage at 7.25%, you could buy one discount point from your lender for $3,000 (due at closing) to drop your rate to 7.00%.
Buying points is completely optional and only makes sense if you plan to stay in the home past the break-even point, or the amount of time it takes for your savings to outweigh the cost of points. Sarah Alvarez, a New York-based lending executive, said that she currently advises against paying points because she believes borrowers will want to refinance when rates fall, and they won’t recoup the amount paid on points before refinancing.
4. Escrow deposit
Cost estimate: Varies widely, often two months’ worth of tax and insurance payments
Your lender may require you to put money into an escrow account to pay your property taxes and insurance fees. You’ll make an initial payment at closing — the amount will appear on your Closing Disclosure.
After closing, you’ll pay one-twelfth of your annual property taxes and homeowners insurance premium each month as part of your mortgage payment. Your loan servicer will hold the money in the escrow account until the taxes or insurance premiums are due.
If you prefer to pay your taxes and insurance premiums directly to your local government and insurance provider, respectively, you can ask your lender about skipping the escrow step — but not all loan types allow this.
5. Home inspection fee
Cost estimate: $200 to $500
Although most lenders don’t require a home inspection, it’s always a good idea to have the property inspected by a professional to be sure the home and its major systems are in good condition. The inspection is performed before the sales contract is finalized, and the buyer pays the inspector directly. If problems are revealed during the inspection, the buyer can negotiate with the seller to resolve the issues or drop the price to accommodate needed repairs.
Depending on where you live, your lender may require a nonstandard inspection, like a termite or pest inspection, which can cost between $75 and $325.
6. FHA mortgage insurance premiums
Cost estimate: 1.75% of the loan amount
If you’re using an FHA loan to purchase a home, you must pay mortgage insurance premiums (MIPs). Conventional loans only require mortgage insurance if you’re making a down payment smaller than 20%, but all FHA loans require you to pay MIPs. You’ll pay 1.75% of the loan amount upfront as part of closing, then annual MIPs for 11 years or the entire loan term, depending on the size of your down payment.
7. Origination or underwriting fee
Cost estimate: 0.5% to 1% of the loan amount
Lenders charge an origination fee to cover the administrative costs of the loan underwriting process. This fee may be negotiable, depending on your lender.
8. Survey fee
Cost estimate: $375 to $750
The survey determines the property’s legal boundaries, including any easem*nts or encroachments. It will also show the location of the house and other structures on the land, plus any underground structures, like a septic tank.
If the property has been recently surveyed and the lender believes nothing has changed, a new survey may not be required.
9. Title search fee
Cost estimate: $150 to $450
The title search involves reviewing ownership records to ensure no one else has a claim to the property you’re buying. This process also looks for any outstanding liens against (or debts secured by) the property. If ownership or lien issues are discovered, the seller must resolve them before the home can legally be sold.
10. Title insurance
Cost estimate: 0.5% to 1% of the loan amount
This type of insurance covers the lender in case any ownership claims arise that weren’t found during the title search. You must buy a lender’s policy, and you can also buy a policy for yourself. You may receive a discount if you buy both policies.
Even new-build homes typically require a title search and insurance.
11. Transfer fee
Cost estimate: Varies widely
Some states charge a real estate transfer fee to record the new ownership of the property. Not all states require this fee, and the cost can vary widely among the states that do. In Delaware, for example, you’ll pay up to 2% of the sale price, while the cost is just 0.1% in Georgia. So, the transfer tax on a $500,000 home in Delaware could be as much as $10,000, while the tax on the same home would be $500 in Georgia.
Depending on the state, the buyer, the seller or both may be responsible for this charge. You may be able to negotiate who pays the fee.
12. VA funding fee
Cost estimate: 1.25% to 3.3% of the loan amount
If you’re using a VA loan to purchase a home, you’ll have to pay a funding fee at closing. The fee amount depends on the size of your down payment and whether you’ve borrowed a VA loan before. VA loans don’t require a down payment, but if you choose to put no money down, you’ll pay a higher funding fee. Here’s what you can expect:
| Down payment amount | VA funding fee |
|---|---|
10% or more | 1.25% |
5% to 9.99% | 1.50% |
Less than 5% (first VA loan) | 2.15% |
Less than 5% (subsequent VA loans) | 3.30% |
Funding fee rates may be as low as 0.5% for other VA loan types, including a VA Interest Rate Reduction Refinancing Loan.
13. USDA guarantee fee
Cost estimate: 1% of the loan amount
Backed by the U.S. Department of Agriculture, USDA loans help low- to moderate-income borrowers purchase homes in eligible rural areas. Although there’s no down payment requirement, you’ll have to pay a guarantee fee at closing, worth 1% of your loan amount. USDA loans are also assessed an annual fee of 0.35% of the loan amount, which is typically rolled into your monthly dues.
Example: If you’re using a USDA loan to buy a $200,000 home, you’ll pay a guarantee fee of $2,000 at closing ($200,000 x 0.01 = $2,000). You’ll also fork over an annual fee of $700 for the first year of repayment ($200,000 x .0035 = $700).
Other fees
The fees outlined above are the most commonly assessed costs you’ll see on your Closing Disclosure, but there can be other fees charged depending on your lender, location and property that may include:
- Attorney fee
- Flood determination and monitoring fees
- HOA transfer fee
- Rate lock fee
- Tax monitoring fee
3 closing costs for the seller
1. Real estate commissions
Cost estimate: About 6% of the sale price
The seller pays the real estate commission for their own agent and the buyer’s agent. This fee is typically about 6% of the sales price, and the two agents split the commission evenly.
On a $400,000 home, for example, the seller can expect to pay about $24,000 in agent commissions.
However, real estate commissions can be negotiated. Although the agent has to pay a certain percentage of the commission to their broker, there is flexibility in the amount you pay them for their service. Interview agents before you begin the selling (or homebuying) process to find a realtor who is willing to negotiate their fees. If you’re selling during a seller’s market (homes are selling quickly), you’re more likely to negotiate a lower fee since there will be less work involved for the realtor.
Good to know: A November 2023 lawsuit may signal a change in how real estate commissions are paid. A jury found that the National Association of Realtors has kept commissions artificially high by not allowing the seller’s and buyer’s agent commissions to be split. This issue won’t be resolved for years, but it may result in buyers paying their own agent’s commission fee, rather than the seller covering both costs.
2. Property taxes
Cost estimate: Prorated, varies by municipality
Sellers are responsible for paying the property taxes owed for the part of the year they owned the home. For example, if your annual property taxes are due on December 1 and you closed the sale on June 30, you would owe property taxes for the six months (January through June) you owned the home that year.
3. Transfer fee
Cost estimate: Varies by location
In some states, the buyer has to pay the transfer fee — or the charge the state imposes for transferring ownership records. In other states, the seller pays it. Some states don’t charge a transfer fee, but most charge 1% of the loan amount or less. You may be able to negotiate that the buyer pays the fee, if your state allows it.
8 ways to reduce your closing costs
Some closing costs are non-negotiable and required by law, while others are set by the lender. If you want to reduce out-of-pocket costs at closing, consider the following strategies:
- Shop around. In addition to comparing mortgage rates among lenders, look for a lender that offers the lowest costs by comparing fees on your Loan Estimate form.
Additionally, you may be able to shop around for some of the services included in closing, such as the surveyor or home inspector.
- Negotiate costs with your lender. If you have high credit scores and a large down payment, your lender is more likely to waive some fees. They don’t have to agree, but it doesn’t hurt to ask.
- Consider skipping discount points. Ask lenders for a mortgage rate that doesn’t require paying points, and compare the no-points rate for all the lenders you consider. While discount points can reduce your overall interest charges, they may not be worthwhile if market rates are already low or you don’t plan to stay in the home long term.
- Avoid mortgage insurance. For a conventional loan, you can bypass mortgage insurance by making a down payment of at least 20%. It’s not possible to fully avoid MIPs on an FHA loan, but you can reduce their cost by putting down at least 10%.
- Roll closing costs into your loan. A “no-closing-cost mortgage” involves no upfront costs at closing. Instead, you finance those costs by rolling them into your loan amount to avoid bringing cash to closing. Bear in mind that this option may come with a higher interest rate, and increasing the amount you borrow will also increase your overall costs.
- Ask the seller to cover some costs. The seller is more likely to agree if the home has been on the market for a while, they need to sell quickly or if the inspection revealed property damage. For conventional loans, sellers may pay up to 9% of the purchase price in concessions. Seller concessions are limited to 6% for FHA or USDA loans and 4% for VA loans.
- Get help from family. If a family member is willing to give you money for closing costs, they must provide a gift letter specifying the amount they’re giving and certifying that the funds aren’t a loan.
- Look into homebuyer assistance programs. Some government agencies and nonprofits offer first-time homebuyer grants to help cover closing costs and the down payment. (You might qualify as a first-time homebuyer even if you’ve owned a home before — you may be eligible as long as you haven’t owned a home in the past three years.)
Frequently asked questions (FAQs)
For buyers, mortgage closing costs are typically between 2% and 6% of the loan amount. Keep in mind that costs can vary dramatically depending on your state, the price of your home and your lender.
Some of the costs associated with the loan are negotiable, like origination fees. You can also shop around for services to find a lower fee — for example, you don’t have to use the title company your lender suggests (or the home inspector your realtor recommends). Other costs, including taxes, aren’t negotiable.
Yes, closing costs can be included in the loan. However, rolling closing costs into the mortgage increases your monthly payment and will result in higher interest costs over the life of the loan.
Like when buying a home, you can roll closing costs into your refinance loan. The upfront cost to refinance a mortgage is similar to the cost of closing a purchase loan — you can expect to pay between 2% and 6% of the loan amount in closing costs. A no-closing-cost mortgage will save you money upfront but will cost more in the long run.
