The usual range
Freddie Mac tells buyers to be prepared to pay between 2% and 5% of the purchase price in closing costs. On a $400,000 home, that's $8,000 to $20,000, due at closing on top of your down payment.
The range is wide for three reasons. Transfer and recording taxes are set by states and counties, and in some places the buyer pays them. Title insurance is priced differently from state to state. And the property tax and insurance you prepay depend on the home and the month you close. Discount points, which you can choose to buy, add more.
Every cost on a typical purchase
Here is a $400,000 purchase with 10% down ($40,000), a $360,000 loan at 6.25%, a 1% origination fee, title insurance at 0.5% of the price, no buyer-paid transfer tax, and a $3,600 yearly property tax bill. These are the Closing Cost Calculator's starting values, and the totals come from the same math.
| Cost | Amount |
|---|---|
| Lender fees | $5,400 |
| Origination fee | $3,600 |
| Appraisal, credit, underwriting | $1,800 |
| Title and settlement | $3,200 |
| Title insurance | $2,000 |
| Settlement and attorney | $1,200 |
| Recording and transfer taxes | $250 |
| Recording fees | $250 |
| Prepaids and escrow | $3,925 |
| First-year homeowners insurance | $2,100 |
| Property tax escrow, 3 months | $900 |
| Prepaid interest, 15 days | $925 |
| Total closing costs | $12,775 (3.2%) |
Add the $40,000 down payment and the cash you need at closing is $52,775. Earnest money you deposited with your offer counts toward that amount.
Change these numbers in the Closing Cost Calculator
Fees vs. prepaids
Not all of that money is a cost of buying. In the example, $8,850 is fees you never get back: the lender, title, settlement, and recording charges. The other $3,925 is prepaid: your first year of homeowners insurance, 3 months of property tax held in escrow, and 15 days of interest. You would pay those as an owner anyway; closing just collects them early.
That split matters when you compare lenders. Two Loan Estimates can show different totals only because one assumed more months of escrow. The fees are what differ from lender to lender.
Why yours may be higher
- Transfer taxes. If the buyer paid a transfer tax of 1% of the price, this example would rise by $4,000 to $16,775 (4.2% of the price). Rates, and who pays them, depend on the state, the county, and local custom.
- Discount points. Buying one point to lower the rate costs 1% of the loan, or $3,600 here.
- Higher property taxes or insurance. Escrow deposits and the first-year premium scale with the bills, so a high-tax county or an expensive insurance market raises the prepaids.
How to lower them
- Compare lenders. Ask more than one lender for a Loan Estimate and compare the lender fees and points line by line. That's the part of the bill a different lender can change.
- Ask the seller for a credit. Loan programs cap how much a seller can pay toward your costs. Fannie Mae allows 3% of the price (or the appraised value, if lower) when you borrow more than 90% of the value, 6% between 75% and 90%, and 9% at 75% or less (2% on an investment property). FHA allows 6% of the sales price. In this example a 6% credit would be $24,000, which is more than the closing costs, so a credit could cover all of them. With a $12,775 credit, the cash to close drops to $40,000. A credit is negotiated as part of your offer.
- Close later in the month. Prepaid interest runs from closing day to the end of the month. On this loan each day costs about $62.
- Take a lender credit. Some lenders will pay part of your costs in exchange for a slightly higher rate. It lowers the cash you need now and raises the payment for the life of the loan.
When you'll know the real number
The lender must give you a Loan Estimate within three business days of receiving your application. It lists every expected cost. Before closing, you must receive a Closing Disclosure at least three business days ahead, showing the final figures. Compare the two, and ask about any fee that went up.
Questions
- Is the down payment part of closing costs?
- No. The down payment is your equity in the home; closing costs are the fees and prepaid items due at closing. You need both in cash: $40,000 plus $12,775 in this example, before any credits.
- Do closing costs depend on the state?
- Yes. Transfer and recording taxes, title insurance pricing, and property tax escrow all differ by state and county, and in some places local custom decides whether the buyer or the seller pays the transfer tax.
- Can I avoid paying closing costs?
- You can shift them, not erase them. A seller credit (within the loan program's limit) moves them to the seller's side, and a lender credit or a no-closing-cost loan moves them into a higher rate. Someone still pays them.
Sources
- What Are Closing Costs and How Much Will I Pay?, Freddie Mac, My Home, last reviewed February 26, 2026.
- What is a Loan Estimate?, Consumer Financial Protection Bureau, last reviewed August 9, 2024.
- What should I do if I do not get a Closing Disclosure three days before my mortgage closing?, Consumer Financial Protection Bureau, last reviewed August 9, 2024.
- B3-4.1-02, Interested Party Contributions (IPCs), Fannie Mae Selling Guide, May 7, 2025 version.
- What costs can a seller or other interested party pay on behalf of the Borrower?, HUD, FHA Resource Center, published July 11, 2019.
Worked figures come from Keystone's calculators at today's default inputs, so they match the tools. They're educational estimates, not financial, tax, or lending advice. How we source and check them: editorial policy.