What are closing costs and how much will you pay?

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When you’re buying a home, preparing for closing costs is just as important as saving for your down payment. These necessary fees cover everything from lender origination charges to the cost of legally transferring home ownership.

Understanding what closing costs are, how much they typically run, who pays them, and when they’re due can help you approach the closing table with confidence. We'll break down exactly how to estimate your costs and share strategies for keeping them as low as possible.

Key takeaways:

• Closing costs are the necessary fees required to process your mortgage and transfer legal property ownership.
• Borrowers typically pay 3% – 6% of the total loan amount or purchase price in closing costs.
• You can lower your out-of-pocket expenses by comparing lender fees, negotiating seller concessions, or exploring down payment assistance programs.

What are closing costs on a house?

Closing costs are the fees and expenses required to fund your mortgage and transfer legal ownership of the home from the seller to you. While these are paid at the same time as your down payment, the down payment itself isn’t considered a closing cost.

While they might not be the first thing you think about when you start looking at houses, closing costs are an important early expense to save for. They cover everything from origination fees and discount points paid to your lender to homeowners insurance, property taxes, and the cost of legally updating the property's title.

How much are closing costs?

For mortgage clients, closing costs typically range from 3% – 6% of the loan amount or purchase price. Depending on your home’s value and how much you borrow, that can be a significant amount, so budgeting early is the best way to prepare.

Keep in mind that your actual costs will vary by loan amount or purchase price, location, lender, loan type, and individual financial situation.

Closing cost examples by home price

To give you a clearer idea of what to expect, we calculated the 3% – 6% estimated range for a few common loan amounts.

Closing costs on a $100,000 loan

If you take out a mortgage for $100,000, you can expect your closing costs to fall around $3,000 – $6,000.

Closing costs on a $300,000 loan

For a $300,000 loan amount, your estimated closing costs will range from $9,000 – $18,000.

Closing costs on a $400,000 loan

If you borrow $400,000, you should budget for closing costs of $12,000 – $24,000.

Who pays closing costs?

Both buyers and sellers can have closing costs. The exact responsibility depends heavily on your local market conditions, your contract terms, your loan type, and how you negotiate the sale.

Closing costs buyers may pay

Buyers typically cover the fees associated with getting a mortgage and assessing the property. These commonly include lender fees, third-party fees (like appraisals and inspections), title costs, prepaid expenses, homeowners insurance, property taxes, and any loan-specific costs.

Closing costs sellers may pay

Seller-side costs often include agent commissions, transfer taxes, and any seller concessions they agreed to provide to the buyer. While sellers may end up paying commission costs, a buyer has a separate negotiation to determine the fee for their representation. To the extent that a seller may pay that fee for the buyer, that’s negotiated between buyer and seller.

Average closing costs by state

Below is a state-by-state breakdown of average closing costs, based on the average home price for each state. Purchase closing costs tend to be higher than those for a refinance because there are more of them. Closing costs are based on Rocket Mortgage data for the full year 2025.

How to estimate closing costs

Because these costs make up a significant portion of your home buying budget, knowing what to expect is important. Here are the main ways to estimate your expenses before and during the mortgage process.

Use a closing cost calculator

You can easily estimate your upfront costs using a down payment and closing cost calculator. Simply enter your loan amount or purchase price, down payment, and other available inputs to see your estimated costs.

Keep in mind that while your down payment is not officially considered a closing cost, you should budget for it because you pay it at closing. It’s listed as part of your overall cash-to-close.

Review your Loan Estimate

When you apply for a mortgage, your lender will provide a standardized document called a Loan Estimate within 3 business days. This document details all your estimated closing costs so you know what to expect early in the process.

Review your Closing Disclosure

At least 3 business days before you close, your lender will send you a Closing Disclosure. This document provides an itemized list of your final costs, allowing you to review your final numbers before you sit down to sign.

What’s included in closing costs for a buyer?

Your exact closing costs depend on your location, lender, loan amount, and loan type. Here is a breakdown of the most common fees, organized by category, to help you understand what you’re paying for.

Lender fees

• Application fee: This fee covers the lender's cost to process your initial mortgage application.
• Loan origination fee: This fee pays for the lender's services in processing and underwriting your loan.
• Discount points: Buying mortgage discount points is an optional way to reduce your loan's interest rate by paying a fee upfront.
• Credit reporting fee: This fee covers the cost of pulling your credit report and credit score from the major bureaus.
• Rate-lock fee: Paying a mortgage rate-lock fee protects you from paying more interest by freezing your offered interest rate until closing.

Third-party fees

• Appraisal fee: Your lender orders a professional home appraisal to confirm the home's exact market value.
• Attorney fees: In states where a real estate attorney is required to close a sale, this fee covers their cost to coordinate the closing and draw up title transfer paperwork.
• Courier fee: A courier fee covers the cost of transporting your physical mortgage documents if your lender requires it.
• Flood certification: If you buy a house in a potential flood zone, you will pay a fee for a flood certification from the Federal Emergency Management Agency.
• Lead-based paint inspection: If you buy a home built before 1978, this inspection checks the property for hazardous lead-based paint.
• Pest inspection fee: This inspection checks for termites and other pests and is required in some states for VA loans, or if an appraiser spots a potential issue.¹
• Survey fee: This fee goes to a land survey company that verifies and confirms your exact property lines.

Title and escrow fees

• Closing fee: This fee goes to the escrow company or attorney who legally conducts the closing process for your mortgage.
• Escrow funds: Also known as reserve fees or prepaids, these are advance deposits placed into an escrow account so your lender can pay your property taxes and insurance premiums on your behalf.
• HOA transfer fee: If you move into a community with a homeowners association, this fee covers the administrative cost to transfer the HOA records from the seller to you.
• Lender’s title insurance: Lender’s title insurance protects the lender if you lose your home to a title claim.
• Owner’s title insurance: Owner’s title insurance is an optional policy that protects you against previously unknown claims to ownership or property liens, making you whole if you have to find a new home due to something missed in the title search.
• Title search fee: A title search looks for claims, liens, bankruptcies, or unpaid back taxes that might block the sale. It’s the last of the major title fees.

Prepaid expenses

• Homeowners insurance: Lenders require you to have homeowners insurance to protect your property, and they usually require you to pay for your first year upfront at closing.
• Prepaid daily interest charges: You will pay upfront for any interest that accrues on your loan between your closing date and the date of your first scheduled mortgage payment.
• Property tax: Depending on your location, your lender may require you to pay a portion of your state and local property taxes at closing.
• Mortgage insurance prepaids: Your escrow funds will also include a deposit for any mortgage insurance premiums required by your loan type.

Government fees

• Recording fee: This fee is paid to your local city or county government to officially update the land ownership records.
• Tax monitoring and tax status research fees: This fee pays a third-party company to verify your property taxes are correct and alert your lender if you miss any payments during the life of your loan.
• Transfer tax: This tax is paid to your local government to update your home’s title and legally transfer it from the seller to you.

Loan-specific fees

Different types of loans also determine the closing costs you pay.

With an FHA loan, you pay both an upfront and an annual mortgage insurance premium (MIP).² The upfront MIP is paid at closing, and the annual MIP fee is added to your monthly payment. This is one of a few unique FHA loan closing costs.

If you take out a conventional loan and put down less than 20%, your lender requires you to pay for private mortgage insurance (PMI). PMI protects the lender if you default on your loan. This can be a closing cost because you can reduce your monthly payment by paying for some or all of the mortgage insurance cost upfront.

USDA loans require an upfront guarantee fee as well as an annual fee. While Rocket Mortgage doesn’t offer USDA loans, it helps to know that these fees fund the rural development program. Learn more about USDA loan closing costs.

If you buy a home using a VA loan, there are also VA-specific closing costs. You may need to pay a VA funding fee at closing to cover administrative costs for the program. The exact cost varies based on your down payment and whether it’s your first time using your VA benefits.

Keep in mind that your upfront mortgage insurance, USDA guarantee fees, and VA funding fees may be tax-deductible closing costs.

When are closing costs due?

Closing costs are typically paid on closing day. After reviewing your Closing Disclosure, you’ll know exactly how much you need to bring to the closing table.

How to reduce closing costs

While closing costs are an unavoidable part of getting a mortgage, there are a few simple strategies you can use to keep your out-of-pocket expenses as low as possible.

Compare Loan Estimates

Shopping around helps you find the best deal. When you compare Loan Estimates from different lenders, look closely at the annual percentage rate (APR), lender fees, lender credits, and your total upfront costs to choose the better offer.

Ask about lender credits

Lender credits directly offset your closing costs, which means less cash out of your pocket. A no-closing-cost mortgage often involves lender credits toward closing costs. In exchange, the client gets a higher interest rate. Always compare the total loan cost to ensure this strategy makes sense for your financial goals.

Negotiate seller concessions

Seller concessions may reduce your out-of-pocket costs without changing your loan terms. You can negotiate with the seller to have them help cover typical buyer expenses like title, escrow, or lender fees. Keep in mind that loan programs limit how much a seller can contribute.

Look for closing-cost assistance programs

You can look for state or local closing-cost assistance programs to help pay your upfront fees. These programs provide grants or forgivable loans to first-time or low-to-moderate-income buyers, so it is always worth researching options in your area. These are usually the same programs that offer down payment assistance.

FAQ

Here are a few quick answers to other common questions about closing costs.

How long does closing take?

On average, closing takes about 43 days from the time you submit your mortgage application, according to Freddie Mac. The timeline varies depending on document processing, required inspections, and how quickly the seller wants to close.

What if I can’t afford closing costs?

If saving for upfront fees feels overwhelming, look into down payment assistance. Many of these programs will also allow the funds to be used for closing costs. You can also try to negotiate seller concessions with a motivated seller to ask them to cover a portion of your costs, ask about lender credits or pushing some costs into the mortgage balance.

Can my closing costs be wrapped into my mortgage loan?

Depending on your lender, your loan type, and your financial situation, you may be able to roll your closing costs directly into your loan balance. While this saves you cash upfront, it will likely cost you more in interest over time.

Can closing costs be negotiated?

Closing costs may be negotiable depending on the specific fee. While you cannot negotiate government taxes or appraisal fees, you can often negotiate lender fees, shop around for your own title insurance provider, or ask for seller concessions.

How do you estimate closing costs when paying cash?

If you buy a house with cash, you avoid all lender fees and mortgage insurance. However, cash buyers should still estimate and budget for title insurance, property taxes, homeowners insurance, home inspections, and local recording costs.

How can you get closing costs waived?

While some mortgage fees are avoidable, closing costs are paid one way or the other. You can reduce your immediate out-of-pocket burden through lender credits or seller concessions, but entirely avoiding closing costs is generally not possible.

The bottom line: Prepare to pay for closing costs before shopping for a house

Closing costs are a required part of transferring property, so budgeting for them early makes buying a home much less stressful. With tools like online calculators and Loan Estimates, you can prepare for costs that typically equal 3% – 6% of your loan amount. By comparing lenders, exploring assistance programs, and negotiating seller concessions, you take control of your expenses.

When you’re ready to take the next step, you can confidently apply online with Rocket Mortgage.

¹Rocket Mortgage is not acting on behalf of FHA or HUD

²Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

Rocket Mortgage is a trademark or service mark of Rocket Mortgage LLC, or its affiliates.