Key takeaways
- Closing costs typically total about 2% to 5% of the purchase price and are separate from the down payment.
- In our hypothetical $350,000 purchase, closing costs come to about $11,991, including prepaids and escrow deposits.
- You get a Loan Estimate within 3 business days of applying and a Closing Disclosure at least 3 business days before closing.
- A new 3-day wait applies if the APR rises beyond tolerance, the loan product changes, or a prepayment penalty is added.
- Shop lenders and title services, negotiate seller credits, and weigh lender credits against a higher rate.
Closing costs are the fees and prepaid expenses you pay to finalize a mortgage and transfer ownership of a home. They are separate from your down payment, and they often surprise first-time buyers. A common planning range is about 2% to 5% of the purchase price, which on a $350,000 home is $7,000 to $17,500. This guide explains what typically goes into that total, how the Loan Estimate and Closing Disclosure work together, what the three-day rule protects, and practical ways to bring the number down.
What closing costs typically include
Closing costs fall into a few broad groups. Your exact list depends on the loan type, the lender, and state and local rules.
Lender charges
- Origination or underwriting fees: what the lender charges to process and approve the loan. Some quote a flat fee; others charge a percentage of the loan amount. Our explainer on origination fees covers how these work.
- Discount points: optional upfront payments to lower your interest rate. One point equals 1% of the loan amount.
- Credit report and verification fees.
Third-party services
- Appraisal: an independent estimate of the home's value required by the lender.
- Title search and lender's title insurance: protects the lender against ownership claims. Owner's title insurance, which protects you, is optional in many areas but often recommended.
- Settlement or escrow fee: paid to the title company, escrow company, or attorney who handles the closing.
- Survey, pest inspection, or flood certification, depending on the property and location.
Government fees
- Recording fees to register the deed and mortgage with the county.
- Transfer taxes, which range from nothing in some states to substantial amounts in others. Who pays them (buyer or seller) depends on local custom and your contract.
Prepaids and escrow deposits
- Prepaid interest from your closing date to the end of that month.
- Homeowners insurance, usually the first full year's premium.
- Initial escrow deposit for future property tax and insurance bills.
FHA loans add an upfront mortgage insurance premium, which is usually financed into the loan rather than paid in cash. Our comparison of FHA vs. conventional loans explains how that premium works.
A sample closing cost breakdown
Here is a hypothetical example for a $350,000 purchase with 10% down and a $315,000 loan. Every figure is illustrative; actual fees vary by lender, state, and property.
| Item | Estimated cost |
|---|---|
| Origination / underwriting fee (1% of loan) | $3,150 |
| Appraisal | $650 |
| Credit report and flood certification | $75 |
| Lender's title insurance | $1,350 |
| Owner's title insurance (optional in many areas) | $1,100 |
| Settlement or escrow fee | $800 |
| Recording fees | $175 |
| Transfer taxes (vary widely by state and locality) | $1,050 |
| Loan and settlement costs subtotal | $8,350 |
| Prepaid interest (15 days at a hypothetical 6.5%) | $841 |
| First-year homeowners insurance premium | $1,500 |
| Initial escrow deposit (3 months taxes, 2 months insurance) | $1,300 |
| Estimated total closing costs | $11,991 |
In this example, total closing costs come to about $11,991, or roughly 3.4% of the purchase price. Add the $35,000 down payment and the buyer needs about $46,991 in cash to close, before any seller credits. Note that prepaids and escrow deposits are not really fees; they are your own future tax, insurance, and interest bills paid in advance. Still, you need the cash on closing day.
Loan Estimate vs. Closing Disclosure
Federal rules from the Consumer Financial Protection Bureau (CFPB), known as the TILA-RESPA Integrated Disclosure rule, require two standardized forms for most mortgages:
| Feature | Loan Estimate | Closing Disclosure |
|---|---|---|
| When you get it | Within 3 business days after you apply | At least 3 business days before closing |
| Length | 3 pages | 5 pages |
| Purpose | Estimate of rate, payment, and costs for comparison shopping | Final terms, costs, and cash to close |
| Best use | Comparing lenders side by side | Checking final numbers against your Loan Estimate |
Because every lender uses the same Loan Estimate format, you can line up offers and compare Section A (origination charges), the rate, points, and total closing costs directly. For more on reading loan paperwork, see our guide on how to read a loan agreement.
Tolerances: how much fees can change
The rules limit how much certain charges can rise between the Loan Estimate and closing. Lender fees and transfer taxes generally have zero tolerance, meaning they cannot increase unless there is a valid change in circumstances. Recording fees and third-party services you pick from the lender's list can rise by no more than 10% in total. Prepaid interest, insurance, escrow deposits, and services you shop for yourself can change without a limit.
The three-day rule
You must receive your Closing Disclosure at least three business days before you sign. That window gives you time to compare it to your Loan Estimate, ask questions, and challenge errors without pressure at the closing table. A new three-day waiting period is required if one of three things changes after you receive the Closing Disclosure:
- The APR increases beyond a small tolerance (generally more than one-eighth of a percentage point for a fixed-rate loan).
- The loan product changes, for example from a fixed rate to an adjustable rate.
- A prepayment penalty is added.
Other changes, such as a small fee adjustment, can be corrected with a revised disclosure without restarting the clock.
Ways to lower your closing costs
- Compare Loan Estimates from several lenders. Origination charges and points vary widely, and the standardized form makes them easy to compare.
- Shop for the services you are allowed to shop for. Your Loan Estimate lists services you can choose yourself, such as title and settlement providers. Getting quotes can save hundreds of dollars.
- Negotiate seller concessions. In some markets, sellers agree to pay part of the buyer's closing costs. A $5,000 seller credit in our example would cut cash to close from about $46,991 to about $41,991. Loan programs cap how much the seller can contribute.
- Consider lender credits carefully. A lender may cover some costs in exchange for a higher rate. Hypothetically, taking a 6.75% rate instead of 6.5% on a $315,000 loan might earn a $3,150 credit but raise the payment by about $52 a month. The break-even point is about 60 months, so the credit makes the most sense if you expect to sell or refinance before then.
- Look into down payment and closing cost assistance. Many state housing finance agencies and local programs offer grants or forgivable loans, especially for first-time buyers. Our first-time homebuyer loans page has more on these options.
- Ask about fee waivers. Some lenders discount fees for existing customers or veterans, and some will match a competitor's lower fee.
Closing costs on a refinance
Refinancing also comes with closing costs, often in a similar percentage range, though there are no transfer taxes or owner's title policy in many cases and no seller to negotiate credits from. Because refinance costs can usually be rolled into the new balance or offset with lender credits, it is easy to overlook them. Calculate a break-even point the same way as in the lender-credit example above: divide total closing costs by the monthly savings to see how many months it takes to come out ahead. If you expect to move before then, the refinance may not pay off. Our mortgage refinance page covers this decision in more detail.
Getting connected with mortgage partners
Lending Buddy is a free connection service, not a mortgage lender. It does not set rates, charge closing costs, or make credit decisions. It can connect you with licensed mortgage partners so you can request Loan Estimates and compare them. Submitting a request through Lending Buddy is free, with no obligation to accept any offer. Learn more on our home loans page, and always verify a lender's license through NMLS Consumer Access.
The bottom line
Closing costs typically run about 2% to 5% of the purchase price and include lender fees, third-party services, government fees, and prepaid taxes, insurance, and interest. Use the Loan Estimate to compare lenders, use the three-day Closing Disclosure window to check every number, and lower your costs by shopping services, negotiating seller credits, and weighing lender credits against a higher rate. If you would like to be connected with mortgage partners in the Lending Buddy network, you can Apply Now.
Frequently Asked Questions
Can I roll closing costs into my mortgage?
Sometimes. On a purchase loan, you usually cannot add closing costs to the loan balance directly, but you can reduce cash needed through seller concessions or lender credits in exchange for a higher rate. On a refinance, many lenders let you finance closing costs into the new loan. Financing them means paying interest on those costs over time.
Who pays closing costs, the buyer or the seller?
Both parties typically pay some closing costs. Buyers usually cover lender fees, the appraisal, lender's title insurance, and prepaids. Sellers often pay real estate commissions and sometimes owner's title insurance or transfer taxes, depending on local custom. Your purchase contract controls the final split, and buyers can negotiate for the seller to contribute toward their costs.
What should I do if my Closing Disclosure doesn't match my Loan Estimate?
Compare the two forms line by line and ask your loan officer to explain every difference. Some fees cannot increase at all and others are limited to a 10% combined increase, unless there was a valid change in circumstances. If a fee rose beyond those limits, the lender generally must refund the excess. You can also submit a complaint to the CFPB.
