You’ve saved for the down payment, gotten pre-approved, and found the house you want. Then your lender hands you a document showing you owe another $6,000 to $18,000 before you can pick up the keys. Welcome to closing costs — the collection of fees, taxes, and prepaid expenses that catch many homebuyers off guard.
According to LodeStar Software Solutions’ 2025 report, the national average closing cost for a purchase mortgage is $4,661 in lender and title fees alone. Add in transfer taxes, prepaid property taxes, and homeowners insurance, and the total climbs to 2% to 5% of your home’s purchase price. On a $400,000 home, that means $8,000 to $20,000 on top of your down payment.
The good news? Not every fee is set in stone, and there are real strategies to reduce what you pay. This guide breaks down every closing cost line by line, explains who pays what, and shows you how to negotiate thousands off your total bill.
Key Takeaways
- Closing costs typically range from 2% to 5% of your home’s purchase price, averaging $6,800 to $18,000 depending on your state and loan type.
- Costs vary dramatically by location — buyers in Washington, D.C. pay an average of $17,545, while buyers in South Dakota pay just $1,551 in lender and title fees.
- Seller concessions can cover some or all of your closing costs, with limits depending on your loan type: up to 6% for FHA, 4% for VA concessions, and 3% to 9% for conventional loans.
- You’ll receive a Loan Estimate within three business days of applying and a Closing Disclosure at least three days before closing — compare these documents line by line to catch errors.
- Shopping around for title insurance, home inspections, and lender fees can save you $1,000 to $3,000 or more.
Table of Contents
- What Are Closing Costs?
- How Much Are Closing Costs in 2026?
- Complete Breakdown of Every Closing Cost Fee
- Closing Costs by Loan Type
- Who Pays Closing Costs — Buyer vs. Seller
- How Seller Concessions Work
- 7 Ways to Reduce Your Closing Costs
- Your Loan Estimate and Closing Disclosure: What to Review
- Should You Get a No-Closing-Cost Mortgage?
- Frequently Asked Questions
What Are Closing Costs?
Closing costs are the fees and expenses you pay to finalize your mortgage and transfer ownership of the property. Think of them as the transaction costs of buying a home — they cover everything from the lender processing your loan to the government recording your new deed.
These costs go to multiple parties involved in the transaction: your lender collects origination and underwriting fees, a title company handles the title search and insurance, an appraiser confirms the home’s value, your local government collects recording fees and transfer taxes, and you’ll prepay several months of property taxes and homeowners insurance into an escrow account.
The reason closing costs feel overwhelming is that they’re not one fee — they’re dozens of smaller charges bundled together. Some are fixed regardless of your home price, some are calculated as a percentage of your loan amount, and some vary wildly depending on where you live.
How Much Are Closing Costs in 2026?
According to Bankrate’s analysis of LodeStar data, the national average closing cost for a home purchase is $4,661 in lender and title fees. However, that figure doesn’t include transfer taxes, prepaid expenses, or government recording fees, which can add thousands more depending on your location.
When you factor in everything, most buyers pay between 2% and 5% of the home’s purchase price. Here’s what that looks like at different price points:
- $250,000 home: $5,000 to $12,500 in total closing costs
- $400,000 home: $8,000 to $20,000 in total closing costs
- $600,000 home: $12,000 to $30,000 in total closing costs
Why Closing Costs Vary So Much by State
Where you buy matters enormously. States with high transfer taxes — like New York, Delaware, and Maryland — push closing costs significantly higher than states with no transfer taxes, like Texas, Arizona, and Indiana.
LodeStar’s data shows the extremes clearly. Buyers in Washington, D.C. paid the highest average closing costs at $17,545, followed by New York at over $13,000 and Delaware at more than $12,000. On the low end, Missouri averaged $1,740, Iowa averaged $1,640, and South Dakota came in at just $1,551.
These differences are primarily driven by state and local transfer tax laws. In states without transfer taxes, closing costs as a percentage of the sale price hover around 0.5% to 1%. In high-tax states, that percentage can jump to 3% or higher.
Complete Breakdown of Every Closing Cost Fee
Your closing costs fall into several categories. Here’s what you can expect to see on your Closing Disclosure, along with typical ranges for each fee.
Lender Fees
These are the charges your mortgage lender collects to process, underwrite, and fund your loan.
- Loan origination fee: 0.5% to 1% of the loan amount. On a $320,000 loan, expect $1,600 to $3,200. Some lenders bundle this into their interest rate instead.
- Underwriting fee: $300 to $900. Covers reviewing your financial documents and verifying your ability to repay. Some lenders include this in the origination fee.
- Credit report fee: $30 to $100. Covers pulling your credit report from all three bureaus.
- Discount points (optional): 1% of the loan amount per point, each lowering your rate by about 0.25%. Only worth it if you plan to stay long enough to recoup the upfront cost through lower monthly payments.
Third-Party Service Fees
These fees go to independent service providers that your lender requires as part of the loan process.
- Home appraisal: $400 to $900. A licensed appraiser determines the property’s fair market value for your lender.
- Home inspection: $300 to $800. Not always required by lenders but strongly recommended to identify problems before you close.
- Pest inspection: Around $100. Required in some states and for VA loans.
- Survey fee: $400 to $1,000+. Verifies property boundaries. Not always required.
- Flood certification: About $20. Determines whether the property is in a flood zone.
Title Fees
Title-related costs ensure the property has a clean ownership history and protect you against future claims.
- Title search: $75 to $200. Confirms the seller legally owns the property with no outstanding liens or judgments.
- Lender’s title insurance: $500 to $1,500. Protects your lender against title defects. Almost always required.
- Owner’s title insurance: $500 to $2,000. Protects you against title problems discovered after closing. Optional but highly recommended. In some states, the seller traditionally pays for this.
- Settlement or closing fee: $500 to $1,500. Paid to the title company or real estate attorney who coordinates the closing.
Government Fees and Taxes
These are the costs your state and local government charges to record the transaction.
- Recording fees: $50 to $250. Covers the cost of officially recording your new deed and mortgage with the county.
- Transfer taxes: Varies widely by state and locality. Transfer taxes are often the single biggest variable in closing costs. Some states charge nothing, while others charge 1% to 2% or more of the sale price. For example, New York charges a transfer tax of 0.4% for properties under $3 million, plus potential additional city taxes in New York City.
Prepaid Expenses and Escrow
These aren’t fees in the traditional sense — they’re advance payments for expenses you’ll continue paying as a homeowner.
- Prepaid interest: Varies. Covers daily interest from closing through month’s end. Closing later in the month reduces this cost.
- Homeowners insurance premium: Typically one year paid upfront, ranging from $1,000 to $4,000+ depending on location and coverage.
- Escrow deposits: Usually two to six months of property taxes plus two months of insurance premiums, held by your lender to pay these bills on your behalf.
You may also encounter attorney fees ($400 to $1,500+ in states that require them), HOA transfer fees, courier and document prep fees ($50 to $150), and notary fees (around $100).
Closing Costs by Loan Type
The type of mortgage you choose affects which fees you’ll pay and how much you’ll owe upfront.
Conventional Loans
Conventional loans have standard closing costs with no government-specific fees. However, if your down payment is less than 20%, you’ll pay private mortgage insurance (PMI), which may include an upfront premium at closing or be rolled into your monthly payment.
FHA Loans
FHA loans include all standard closing costs plus an upfront mortgage insurance premium (UFMIP) equal to 1.75% of the loan amount. On a $300,000 loan, that’s an additional $5,250 at closing. You can finance this into the loan, but it still increases your total borrowing cost.
VA Loans
VA loans don’t require PMI, but they do charge a VA funding fee ranging from 2.15% to 3.3% of the loan amount for first-time use, depending on your down payment. This fee can be financed into the loan. VA loans also limit what veterans can be charged for certain fees, and the origination fee is capped at 1% of the loan amount.
USDA Loans
USDA loans charge an upfront guarantee fee of 1% of the loan amount, plus an annual fee of 0.35% of the remaining balance. The upfront fee can be financed into the loan.
Who Pays Closing Costs — Buyer vs. Seller
Both buyers and sellers pay closing costs, but they’re responsible for different items.
Buyers typically pay: lender fees, appraisal and inspection fees, lender’s title insurance, prepaid expenses, recording fees, and discount points.
Sellers typically pay: real estate agent commissions (separate from closing costs), owner’s title insurance in many states, transfer taxes, and their share of prorated property taxes.
These customs vary by state and are always negotiable. In a buyer’s market, sellers may agree to cover more. In a seller’s market, buyers may need to shoulder additional costs.
How Seller Concessions Work
Seller concessions are one of the most powerful tools for reducing your out-of-pocket costs at closing — essentially the seller agreeing to pay some or all of the buyer’s closing costs as part of the purchase agreement. Each loan type limits how much the seller can contribute:
- Conventional loans: 3% of the sale price if your down payment is under 10%, 6% if your down payment is 10% to 25%, and 9% if your down payment exceeds 25%.
- FHA loans: Up to 6% of the sale price or appraised value, whichever is lower.
- VA loans: No limit on seller-paid closing costs, but seller concessions (extras beyond standard closing costs, such as paying off the buyer’s debts or funding fee) are capped at 4% of the home’s reasonable value.
- USDA loans: Up to 6% of the sale price.
Keep in mind that the seller’s contribution can never exceed your actual closing costs. If your closing costs total $8,000, the seller can’t give you $12,000 even if the percentage limit allows it — the excess would need to be applied to discount points or other allowable expenses.
The best time to negotiate seller concessions is in a buyer’s market, when homes sit longer and sellers are more motivated to make deals. Your real estate agent can advise on what’s realistic in your local market. If you’re exploring buying strategies in the current market, our guide on whether now is a good time to buy a house can help you assess your options.
7 Ways to Reduce Your Closing Costs
Closing costs are a significant expense, but you have more control over them than you might think. Here are seven strategies that can save you hundreds to thousands of dollars.
1. Compare Loan Estimates From Multiple Lenders
This is the single most effective way to save money. Lenders have different fee structures, and origination fees alone can vary by thousands of dollars. Get Loan Estimates from at least three lenders and compare them side by side. According to the CFPB, Loan Estimates use a standardized format that makes comparison straightforward. Focus on the “Loan Costs” section on page 2 — that’s where the biggest savings hide. Compare mortgage lenders here.
2. Shop for Third-Party Services
Your lender will designate certain services you’re allowed to shop for — typically title insurance, home inspections, and settlement services. The Loan Estimate clearly marks which services fall into this category. Getting quotes from two or three providers for each service can easily save you $500 to $1,500.
3. Negotiate With Your Lender
Once you have competing Loan Estimates, use them as leverage. Tell your preferred lender that a competitor offered lower origination fees and ask them to match. Many lenders will reduce their fees rather than lose your business. This is especially effective with fees that are clearly within the lender’s control, like origination and underwriting charges.
4. Ask for Seller Concessions
As outlined above, sellers can contribute toward your closing costs within the limits set by your loan type. Even in a competitive market, sellers may agree to concessions if it means avoiding a price reduction or closing the deal faster. Work with your real estate agent to structure your offer strategically.
5. Close at the End of the Month
Your prepaid interest charges cover from the closing date through the end of the month. If you close on the 28th, you only prepay two or three days of interest. Close on the 5th, and you’re prepaying 25 or 26 days. On a $400,000 loan at 6.5%, the difference is roughly $1,400.
6. Ask About Lender Credits
Some lenders offer credits toward closing costs in exchange for a slightly higher interest rate. This can make sense if you plan to sell or refinance within a few years and want to minimize upfront costs. Run the numbers carefully — the higher rate costs you more each month, so there’s a break-even point where the upfront savings stop being worth it.
7. Look Into First-Time Buyer and Down Payment Assistance Programs
Many state and local programs offer closing cost assistance for qualified buyers, especially first-time homebuyers and those with moderate incomes. Your lender or a local HUD-approved housing counselor can point you toward programs available in your area. If you’re buying with minimal savings, check out our guide on how to buy a house with no money down.
Your Loan Estimate and Closing Disclosure: What to Review
Federal law gives you two critical documents that protect you from closing cost surprises: the Loan Estimate and the Closing Disclosure.
The Loan Estimate
Your lender must provide a Loan Estimate within three business days of receiving your application. This three-page document shows your estimated interest rate, monthly payment, and total closing costs. Use it to compare lenders and to shop for third-party services. Focus on the “Loan Costs” section on page 2 — that’s where the biggest savings hide.
The Closing Disclosure
At least three business days before closing, you’ll receive the Closing Disclosure — a five-page document showing your final loan terms and every closing cost. Compare it to your Loan Estimate line by line. Verify your name, property address, loan amount, and locked interest rate. By law, many fees can’t increase from the Loan Estimate, and others are subject to a 10% cumulative tolerance. If you spot an error or unexpected increase, contact your lender immediately — don’t move forward until discrepancies are resolved.
Should You Get a No-Closing-Cost Mortgage?
Some lenders advertise no-closing-cost mortgages, but these loans aren’t truly free. The lender either rolls the closing costs into your loan balance (so you pay interest on them for the life of the loan) or charges a higher interest rate to cover the costs upfront.
This can make sense if you’re short on cash and plan to sell or refinance within three to five years. It’s generally not a good choice if you plan to stay 10 or more years, since the higher rate or larger balance costs you significantly more over time. Always ask the lender to show you both options so you can compare the total cost over your expected time in the home.
Frequently Asked Questions
Some closing costs are tax deductible, but not all. Mortgage discount points are generally deductible in the year you pay them, and prepaid property taxes are deductible (subject to the $10,000 SALT cap). Prepaid mortgage interest may also be deductible. However, most lender fees, title insurance, and recording fees are not deductible for a primary residence. Consult a tax professional for advice specific to your situation, and see our guide to 2026 tax changes for homeowners for the latest rules.
Refinance closing costs are typically lower than purchase closing costs because there’s no transfer tax, no owner’s title insurance, and no seller-related fees. According to LodeStar, the national average for refinance closing costs is about $2,403. You’ll still pay lender fees, an appraisal, title search, and title insurance. If you’re considering refinancing, check our mortgage rate forecast to see where rates are heading.
You have several options. Negotiate seller concessions to have the seller cover some or all of your costs. Apply for down payment and closing cost assistance programs offered by your state or local government. Ask your lender about no-closing-cost mortgage options. Or explore gift funds — most loan programs allow family members to gift money for closing costs with proper documentation.
Some can, and some can’t. Fees that the lender controls (like origination and underwriting) generally cannot increase from the estimate. Third-party fees for services you didn’t shop for can increase by up to 10% cumulatively. Fees for services you shopped for can increase without limit if you chose a different provider than the one on your estimate. Prepaid items like property taxes and insurance can change because they’re based on actual costs that aren’t finalized until closing.
Most closings require either a cashier’s check or a wire transfer for your closing costs and down payment. Personal checks are typically not accepted for large amounts. Your closing agent will provide the exact amount and payment instructions in advance. Be extremely careful with wire transfer instructions — verify them directly with your title company by phone to avoid wire fraud scams.
Start with the 2% to 5% rule of thumb based on your home’s purchase price for a ballpark figure. For a more precise estimate, Fannie Mae’s Closing Costs Calculator lets you enter your state, county, and purchase price to get a customized range. Once you apply for a mortgage, your Loan Estimate will provide the most accurate numbers.
Cash to close is the total amount you bring to closing, which includes your closing costs plus your down payment, minus any earnest money deposit you already paid. Your Closing Disclosure breaks this down in detail.
Generally yes. Lenders view investment properties as higher risk, which often means higher origination fees and interest rates. Seller concession limits are also lower — conventional loans only allow 2% seller concessions on investment properties, regardless of your down payment.
Some closing costs on investment properties, like origination fees and title insurance, must be added to your cost basis and depreciated over time rather than deducted immediately. However, mortgage interest and property taxes on rentals are deductible as business expenses without the SALT cap that applies to your primary residence. Work with a tax professional to maximize your deductions.
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