Closing Costs Explained: What to Expect and How to Save in 2026

What Are Closing Costs?

Closing costs are the fees and expenses you pay when finalizing a home purchase beyond the purchase price and down payment. They typically range from 2% to 5% of the home's purchase price. On a $350,000 home, that means $7,000 to $17,500 in additional costs that many buyers do not plan for.

Complete Breakdown of Closing Costs

Lender Fees

• Origination fee: 0.5-1% of loan amount ($1,400-$2,800 on a $280,000 loan)
• Application fee: $0-$500
• Underwriting fee: $400-$900
• Credit report fee: $25-$50
• Discount points: Optional — 1% of loan per point to lower your rate by ~0.25%

Third-Party Fees

• Home appraisal: $300-$600
• Home inspection: $300-$500
• Title search: $200-$400
• Title insurance: $500-$3,500 (varies by state and purchase price)
• Survey fee: $300-$800
• Attorney fees: $500-$2,000 (required in some states)

Government Fees

• Recording fees: $50-$250
• Transfer taxes: 0.1-2% of sale price (varies greatly by state and locality)

Prepaid Items

• Homeowners insurance: First year premium ($1,500-$3,000)
• Property tax escrow: 2-6 months prepaid ($500-$3,000)
• Prepaid interest: Daily interest from closing to first payment date
• HOA fees: First month or quarter if applicable

Average Closing Costs by State

Closing costs vary significantly by state due to differences in transfer taxes, attorney requirements, and title insurance rates. States with the highest closing costs include New York (due to mansion tax and transfer taxes), Delaware, and Washington DC. States with the lowest include Missouri, Indiana, and Iowa.

Who Pays Closing Costs?

Both buyers and sellers have closing costs, but in a buyer's market, you may be able to negotiate seller concessions where the seller covers some of your closing costs (up to 3-6% depending on loan type).

Buyer typically pays: Loan-related fees, prepaid items, inspections, and most title costs.

Seller typically pays: Real estate agent commissions (5-6%), their portion of title fees, and any agreed-upon concessions.

7 Ways to Reduce Your Closing Costs

1. Shop multiple lenders: Get Loan Estimates from 3-5 lenders and compare fees line by line
2. Negotiate with the seller: Ask for seller concessions, especially in a buyer's market
3. Ask about lender credits: Some lenders offer credits to offset closing costs in exchange for a slightly higher rate
4. Close at the end of the month: This reduces the prepaid interest you owe
5. Skip unnecessary add-ons: Extended warranties and optional insurance can be declined
6. Use DPA programs: Many down payment assistance programs also cover closing costs
7. Compare title companies: You often have the right to choose your own title company

Can You Roll Closing Costs Into Your Mortgage?

With some loan types, yes. FHA, VA, and USDA loans allow you to finance certain closing costs into your loan amount. However, this increases your loan balance and total interest paid over time.

Use our Mortgage Calculator to see how financing closing costs affects your monthly payment and total loan cost.