By the CalcLedger editorial team · Updated September 2026 · Examples use illustrative rates · How we calculate
Many first-time buyers save carefully for a down payment and then discover a second big bill: closing costs. These are the fees and prepaid expenses needed to finalize a mortgage and transfer the property. They typically add up to about 2% to 6% of the loan amount, paid at closing on top of your down payment.
On a $280,000 loan, that's roughly $5,600 to $14,000. Where you land in that range depends on your state, your lender, your loan type, and how much you shop around.
What closing costs include
Closing costs fall into three main groups.
1. Lender charges
- Origination or underwriting fee: the lender's charge for processing the loan, often around 0.5% to 1% of the loan.
- Discount points: optional fees you pay to lower your interest rate. One point equals 1% of the loan.
- Credit report and application fees.
2. Third-party services
- Appraisal: an independent estimate of the home's value, usually a few hundred dollars.
- Title search and title insurance: confirms the seller really owns the property and protects against ownership claims. Often one of the largest items.
- Settlement or escrow fee: paid to the company or attorney that handles the closing.
- Survey, pest inspection, and flood certification, depending on the property and state.
3. Government fees and prepaids
- Recording fees and transfer taxes: charged by the city, county, or state. Transfer taxes vary widely and are a big reason closing costs are much higher in some states.
- Prepaid interest: interest from your closing date to the end of that month.
- Escrow deposits: a starting balance for your property tax and homeowners insurance account, plus often the first year of insurance paid up front.
Loan type adds its own charges: FHA loans include a 1.75% upfront mortgage insurance premium, and VA loans include a funding fee, though both are usually added to the loan rather than paid in cash. See FHA vs. conventional and VA loan basics.
"Cash to close" is more than closing costs
The amount you actually bring to closing, called cash to close, is your down payment plus closing costs, minus any deposits and credits. On a $350,000 home with 20% down and 3% closing costs, that's about $70,000 + $8,400 = $78,400, minus your earnest money deposit. When you budget for a home, plan for the whole amount, and keep a cash cushion for moving costs and early repairs.
Where to see your costs: Loan Estimate and Closing Disclosure
Within three business days of applying, every lender must give you a standardized Loan Estimate. It lists closing costs in the same format for every lender, which makes shopping easy. At least three business days before closing, you'll get a Closing Disclosure with the final numbers. Compare the two. Some fees can't go up at all, and others can only rise by a limited amount, so ask your lender to explain any big change.
Six ways to lower closing costs
1. Compare lenders. Lender fees vary a lot. Get Loan Estimates from at least three lenders on the same day and compare Section A, the lender's own charges.
2. Shop for services you're allowed to choose. Section C of the Loan Estimate lists services you can shop for, such as title services in many states.
3. Ask for seller concessions. In a slower market, sellers may agree to pay part of your closing costs. Loan programs limit how much a seller can contribute, often between 3% and 9% of the price for conventional loans depending on your down payment.
4. Consider lender credits, carefully. A lender can cover some closing costs in exchange for a slightly higher rate. On a $280,000 loan, a $5,000 credit in exchange for 6.75% instead of 6.5% raises the payment by about $46 a month. It takes about 108 months, nine years, before the higher payments cost more than the credit. If you expect to move or refinance sooner, the credit is a good deal.
5. Close near the end of the month. This lowers prepaid interest. It doesn't change your total cost much over time, but it reduces the cash you need at closing.
6. Look for assistance programs. Many states, cities, and some employers offer grants or low-cost loans for down payments and closing costs, especially for first-time buyers. Your state housing finance agency is the best place to start.
Discount points: pay now to save later
Points are the opposite of lender credits. On the same $280,000 loan, paying one point ($2,800) to lower the rate from 6.5% to 6.25% saves about $46 a month, so it takes about 61 months to earn back the cost. Points make sense if you're confident you'll keep the loan for many years. The same break-even logic applies when refinancing. Try it with the refinance calculator.
Can you roll closing costs into the loan?
On a purchase, lenders generally don't let you add closing costs to the loan, though lender credits and seller concessions can cover some of them. On a refinance, rolling costs into the new balance is common. It saves cash now, but you pay interest on those costs for the life of the loan.
Plan your full budget
Use the home affordability calculator to find a price that fits your income, then the mortgage calculator to check the monthly payment. Add 2% to 6% of the loan for closing costs to the down payment, and you'll know how much cash you need.