How much are closing costs on average?

Closing costs typically range from 2 to 5 percent of the loan amount. On a $350,000 loan, that is approximately $7,000 to $17,500. The range varies based on state taxes, loan type, and lender fees.

Can closing costs be rolled into the mortgage?

Yes, in some cases. For refinances, closing costs can often be added to the new loan balance. For purchases, a no-closing-cost option is available from some lenders in exchange for a higher rate or larger loan.

What is a Closing Disclosure?

A Closing Disclosure is the final itemized list of all closing costs and loan terms. Lenders must provide it at least three business days before closing. Compare it carefully to your original Loan Estimate.

Who pays closing costs, buyer or seller?

Buyers typically pay most closing costs. Sellers pay real estate agent commissions and sometimes transfer taxes. Buyers can negotiate seller concessions in their offer to have the seller contribute toward closing costs.

Mortgage Closing Costs: What You'll Pay and How to Reduce Them

Closing costs are fees and expenses you pay when finalizing a mortgage transaction, whether for a home purchase or refinance. They typically run between 2 and 5 percent of the loan amount and can catch first-time buyers off guard if they have only budgeted for the down payment. Coventry Enterprises LLC Loans provides a complete breakdown of what these costs include and what strategies can reduce them.

Complete Breakdown of Closing Costs

Lender Fees (Origination Charges)

Origination fee: The lender's fee for processing the loan, typically 0.5 to 1% of the loan amount. Sometimes broken into an underwriting fee and a processing fee.
Discount points: Optional prepaid interest to reduce your rate. Each point = 1% of the loan amount.
Application fee: Some lenders charge a flat fee upfront; others roll it into the origination charge.

Third-Party Fees

Appraisal: Typically $400 to $700 for a standard single-family home. More for complex or large properties.
Credit report fee: $20 to $75, depending on number of borrowers.
Title search: A search of public records to confirm the seller has clear ownership. Usually $200 to $500.
Title insurance (lender's policy): Required by almost all lenders. Protects the lender if a title defect emerges. Typically $500 to $1,500 based on loan amount.
Owner's title insurance: Optional but strongly recommended. Protects you as the buyer from pre-existing title defects. One-time premium, similar in cost to lender's policy.
Survey: Some lenders or states require a property survey. $300 to $700.
Flood determination fee: $15 to $25 to determine if the property is in a flood zone.
Pest inspection: Required for VA and some other loans in certain states. $75 to $150.

Government and Recording Fees

Recording fee: Charged by the local government to record the deed and mortgage. Typically $50 to $250.
Transfer taxes: Some states and counties charge a tax on the property transfer. Can be substantial (1 to 2% in high-tax states).

Prepaid Items (Not Really Fees)

Prepaids are not fees the lender pockets; they are money you owe anyway, collected at closing to fund your escrow account and cover expenses that fall due shortly after closing:

Homeowner's insurance (12 months upfront): Your first year of insurance premium paid at closing. $800 to $2,500+ depending on the home and location.
Property tax reserves: Two to six months of property taxes placed into your escrow account.
Prepaid mortgage interest: Interest from the closing date to the end of the month. Closing later in the month reduces this amount.
Mortgage insurance premium (upfront MIP for FHA): 1.75% of the loan amount paid at closing (can be financed).

Typical Total Closing Cost Range

On a $350,000 loan, closing costs typically range from $7,000 to $17,500. The wide range reflects state-specific taxes, whether you buy points, owner's title insurance, and lender fee structures. Your Loan Estimate will give you a precise breakdown for your specific loan within three business days of submitting an application.

Loan Estimate vs. Closing Disclosure

Lenders are required to provide a Loan Estimate within three business days of receiving your application. This document shows your interest rate, monthly payment, and an itemized estimate of all closing costs. Review it carefully.

The Closing Disclosure is provided at least three business days before your closing date. It shows the final, binding numbers. Compare it line by line with your Loan Estimate. RESPA (Real Estate Settlement Procedures Act) prohibits certain fees from increasing at all, and others can increase by no more than 10% between the Loan Estimate and Closing Disclosure.

Which Closing Costs Are Negotiable?

Lender fees (origination, underwriting, processing) are negotiable, especially if you have competing offers. Title company selection in some states may also give you control over title costs. Third-party fees like appraisals are largely set by the market, but you can ask the lender to waive an application fee or reduce origination charges.

Fees that cannot realistically be negotiated: government recording fees, transfer taxes, and prepaid interest are fixed by law or market rates.

Seller Concessions

In a purchase transaction, you can ask the seller to contribute toward your closing costs. These are called seller concessions. Limits vary by loan type:

Conventional loan with 10%+ down: up to 6% of purchase price
Conventional loan with less than 10% down: up to 3%
FHA: up to 6%
VA: up to 4% plus reasonable and customary costs
USDA: no formal cap when the appraisal supports the value

In a buyer's market, sellers may agree to concessions to close the deal. In a competitive seller's market, asking for concessions can make your offer less attractive.

No-Closing-Cost Loans: The Real Tradeoff

Some lenders offer "no-closing-cost" loans, but the costs do not disappear. They are offset either by rolling them into the loan balance (you borrow more and pay interest on the higher amount) or by accepting a lender credit in exchange for a slightly higher interest rate. For example, a lender might offer you either 6.75% with no costs or 6.50% with $5,000 in closing costs. If you plan to stay long-term, paying the $5,000 and taking the lower rate saves money. If you plan to sell or refinance within three years, the no-cost option might win. Coventry Enterprises LLC Loans recommends doing the math on your specific timeline.

Strategies to Reduce Closing Costs

Shop at least three lenders and compare Loan Estimates directly
Negotiate lender fees; they have more flexibility than third-party fees
Ask for seller concessions in your purchase offer
Choose your own title company in states where that is permitted (shop for quotes)
Close later in the month to minimize prepaid interest
Ask if any fees can be waived or reduced for being a repeat customer
Look for lender credit options if you can offset the higher rate with a shorter holding period