What are closing costs?
Closing costs are the fees and prepaid items you pay when a home purchase is finalized, on top of your down payment. Buyers often pay 2% to 5% of the loan amount. The calculator groups them into five parts:
- Lender fees – origination or underwriting fees, often 0.5% to 1% of the loan, plus any discount points you buy.
- Appraisal and inspection – the lender's appraisal and your own home inspection.
- Title and settlement – title search, lender's and owner's title insurance, and the closing or escrow agent's fee.
- Recording and transfer taxes – government fees to record the deed and mortgage. Transfer taxes range from nothing in some states to more than 1% of the price in others, and who pays depends on local custom.
- Prepaids and escrow – homeowners insurance for the first year, a few months of property tax for your escrow account and interest from closing day to the end of the month.
How to lower closing costs
- Compare the Loan Estimate from at least three lenders; lenders must send it within three business days of your application.
- Ask the seller for a credit toward closing costs (a seller concession), especially in a slow market.
- Shop for title insurance and settlement services where your state allows it.
- Look for state and local down payment and closing cost assistance programs.
Frequently asked questions
When will I know my exact closing costs?
Your lender must give you a Closing Disclosure at least three business days before closing. Compare it with your Loan Estimate and ask about any changes.
Can closing costs be added to the mortgage?
On a purchase they usually cannot be added to the loan, but you can ask for seller credits or a "lender credit" in exchange for a slightly higher rate. On a refinance they can often be rolled into the new loan.
What is cash to close?
Cash to close is the total you bring on closing day: down payment plus closing costs, minus your earnest money deposit and any credits.