What is the Closing Costs?
Closing costs are the fees and prepaid items due when a home purchase completes, typically 2–5% of the purchase price on top of your down payment. They fall into three groups: lender fees, third-party services (title, appraisal, inspection), and prepaid escrow for taxes and insurance.
Buyers routinely budget the down payment and forget these — a $400,000 purchase can require $12,000–20,000 beyond the down payment.
Formula & worked example
Cash to close = Closing costs + down payment
Worked example: a $400,000 home with $80,000 down. Lender fees at 1% of the $320,000 loan are $3,200; title at 0.7% of price is $2,800; appraisal, inspection and recording add $1,300; six months of escrowed property tax is $2,200 and a year of insurance $1,700. Total closing costs are about $11,200, so cash to close is roughly $91,200.
How to use this closing costs calculator
- Enter the purchase price and your planned down payment.
- Lender fees typically run 0.5–1.5% of the loan.
- Title and escrow vary by state — from about 0.4% to 1.5% of price.
- Prepaid escrow depends on when in the tax year you close.
Smart tips
- Ask the seller to cover part of the closing costs — a seller concession is common in slower markets.
- Compare Loan Estimates from three lenders; origination fees vary far more than rates do.
- Some fees are shoppable — title, inspection and survey. The Loan Estimate marks which.
- Closing late in the month reduces the prepaid interest due at closing.
- Never skip the home inspection to save $450; it routinely uncovers issues worth many times that.
Frequently asked questions
How much are closing costs?
Typically 2–5% of the purchase price, on top of the down payment. On a $400,000 home that is roughly $8,000–20,000.
Can closing costs be rolled into the loan?
Sometimes on a refinance, and occasionally on a purchase via a lender credit in exchange for a higher rate.
Who pays closing costs, buyer or seller?
Both pay some. Buyers cover lender and prepaid items; sellers typically pay agent commissions and some transfer taxes, though this is negotiable.
What is a seller concession?
The seller agreeing to pay some of the buyer's closing costs, usually capped at 3–6% of the price depending on loan type.
Want the theory behind the numbers? Read our home buying guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 8 Sep 2026. How we check these numbers.