What closing costs cover
Closing costs are everything due at the closing table besides the down payment. They fall into four groups. Lender fees pay for making the loan: origination, underwriting, the appraisal, and any discount points you buy. Title and settlement costs pay the title company or attorney to search the title, insure it, and run the closing. Recording and transfer taxes go to the county and state. Prepaids and escrow are your own future bills paid early: the first year of homeowners insurance, a few months of property tax held in escrow, and interest from closing to the end of the month.
The first three groups are fees you don't get back. The fourth is money you'd spend anyway, collected up front. Lenders and listings often quote one total for all four, which is why buyers are surprised by the number on their Closing Disclosure. This calculator keeps them apart.
To see how closing costs fit the bigger picture, the home affordability calculator works out the price your income supports, and the rent vs. buy calculator counts closing costs among the costs of buying.
How to use this calculator
- Enter the price, down payment, and rate. The loan amount drives the lender fees and prepaid interest.
- Fill in lender fees from a Loan Estimate. Origination and points are percentages of the loan; the appraisal and underwriting charges are flat.
- Set title, settlement, and taxes. Title insurance is set as a share of the price. Enter your state's transfer or mortgage tax only if the buyer pays it where you live.
- Set prepaids. Use the annual property tax from the listing, an insurance quote, and the number of escrow months your lender collects.
- Add any seller credit from your purchase contract, then read the cash to close.
Formulas & methodology
Lender = Loan × (Origination % + Points %) + Flat lender fees
- Loan
- Price − down payment
Title = Price × Title insurance % + Settlement fees
Government = Recording fees + Price × Transfer tax %
Prepaids = Insurance (first year) + Tax ÷ 12 × Escrow months + Loan × Rate ÷ 365 × Days
Cash = Down payment + Closing costs − Seller credit
Prepaid interest uses a 365-day year, the convention on most Loan Estimates. A seller credit can't exceed the closing costs it pays for, so the calculator caps it there. Earnest money is left out because you pay it before closing; subtract it from the cash to close.
Worked example
On a $400,000 home with 10% down, the loan is $360,000. A 1% origination fee and $1,800 of appraisal and underwriting charges add up to $5,400 of lender fees. Title insurance and settlement add $3,200, and recording $250. Prepaids come to $3,925: a year of insurance, 3 months of property tax, and 15 days of interest.
Closing costs total $12,775, 3.2% of the price, and the cash to close is $52,775.
| Scenario | Closing costs | Cash to close |
|---|---|---|
| As above | $12,775 | $52,775 |
| Buying one discount point | $16,375 | $56,375 |
| In a state with a 1% buyer transfer tax | $16,775 | $56,775 |
Fees vs. prepaids
Of the $12,775 in the example, $8,850 is fees and $3,925 is prepaid. The distinction matters when you compare offers. Two lenders can quote different "closing costs" simply because one estimated more escrow months; compare the fees in sections A and B of the Loan Estimate, which are the ones that differ by lender. Prepaids depend on your tax bill, your insurance premium, and your closing date, not on who makes the loan.
How to lower them
- Shop the lender fees. Get Loan Estimates from at least three lenders on the same day and compare origination and points line by line.
- Shop title and settlement. The Loan Estimate lists the services you can shop for. In states that don't set title rates, quotes can differ by hundreds of dollars.
- Ask for a seller credit. In a slower market, a credit toward closing costs can be worth more than a price cut of the same size, because it reduces cash to close directly.
- Close later in the month. Fewer days of prepaid interest lower cash to close, though your first payment then comes sooner.
- Weigh lender credits. A slightly higher rate in exchange for a credit can make sense if you expect to refinance or sell within a few years.
Closing cost FAQ
- How much are closing costs for a buyer?
- Usually 2% to 5% of the purchase price, on top of the down payment. On a $400,000 home that's roughly $8,000 to $20,000. The range is wide because transfer taxes, title insurance pricing, and property tax escrow vary so much by state and county, and because discount points are optional.
- What is the difference between closing costs and cash to close?
- Closing costs are the fees and prepaid items due at closing. Cash to close is everything you bring: the down payment plus closing costs, minus any seller credits, lender credits, and the earnest money you already deposited. Your Closing Disclosure shows both on page three.
- When will I know my exact closing costs?
- Your lender must send a Loan Estimate within three business days of your application, and a Closing Disclosure at least three business days before closing. Some fees on the Loan Estimate can't rise at closing; others, like title services you shop for yourself and prepaid items, can change.
- Can the seller pay my closing costs?
- Yes, through seller concessions negotiated in your offer, within limits set by the loan program. Conventional loans allow 3% of the price with less than 10% down, 6% with 10% to 25% down, and 9% above that; FHA allows 6%. Concessions can't exceed your actual closing costs.
- Are closing costs tax deductible?
- Most are not. Discount points on a home purchase and the property tax you prepay can be deductible if you itemize, and your prepaid mortgage interest is deductible as mortgage interest. Title insurance, recording fees, and transfer taxes are added to your cost basis instead, which can lower the taxable gain when you sell; fees for getting the loan, such as the appraisal and credit report, are neither deductible nor added to basis.
Embed this calculator
Add the live Closing Cost Calculator to your own site or blog. It runs entirely in the reader's browser, needs no account, and links back to this guide for the formulas.
<iframe src="https://keystonecalculators.com/embed/closing-cost-calculator" title="Closing Cost Calculator by Keystone" width="100%" height="1100" style="border:1px solid #0a0a0b;max-width:100%" loading="lazy"></iframe>
Free to use with the credit link intact.