Estimate your total closing costs for buying a home

Last updated: January 1

Most homebuyers are prepared to make a down payment on their new home, but when it comes to closing costs, it’s a much different story. Survey data showed that more than 50% of buyers are surprised they have closing costs at all or are shocked by the amount they must pay, according to ClosingCorp. To make sure you’re properly prepared, learn what’s included in closing costs, how they’re calculated, and try our closing costs calculator to estimate how much you might pay to seal the deal on your new home

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How do you calculate closing costs?

Homebuyers pay several expenses at the time their purchase is completed, and these figures totaled up are known as closing costs. But how are closing costs calculated? Well, it depends on a handful of factors, including:

  • Purchase price: Closing costs are often estimated to be between 2% and 5% of the final sale price of your house, according to Zillow. In other words, the more expensive the home, the more you can expect to pay in closing costs.
  • Down payment: Many assume down payments are the same thing as closing costs, but they are separate and paid in addition to closing costs. A down payment is the amount of upfront money you put toward the purchase of a home. It is subtracted from the sale price of your home to help determine your loan amount. The amount of money you have for a down payment affects your loan amount and the types of loans you’re eligible for.
  • Loan term and loan type: The type, amount, and structure of your loan can alter your closing costs. For example, an FHA loan requires an upfront mortgage insurance premium equal to 1.75% of the loan amount to be paid at the time of closing, according to Investopedia.
  • Application fee: Your lender may charge an application fee to start your loan application. It is typically a flat fee paid when you submit your loan or at closing depending on your lender, according to the Balance.
  • Loan origination fee: Your lender typically charges a fee for generating and processing your loan. They can vary from company to company, but they are generally 1% or less of your loan amount, according to Homebuyer.

What is included in closing costs?

How much you pay in closing costs depends in part on how many points you pay on your loan. One point is equal to 1% of the loan amount. In addition to loan points, other major categories of closing costs include:

  • Fees to process your loan application, review your loan documents and fund the loan.
  • Payments to fund an impound account. These funds are used to pay your homeowner's insurance and property taxes. Generally, you replenish an impound account as you make your mortgage payments.
  • Fees for legal and appraisal services, credit review, title search and insurance.

Other important closing cost terms

We’ve discussed some of the main factors that help shape closing costs and major expense categories, but what are some of the individual line items included in closing costs? Here are some of the most common expenses according to Bankrate:

  • Appraisal fee: Lenders will want to have your house appraised by a professional to determine its worth. This ensures the money they loan you isn’t more than the actual value of the property.
  • Home inspection fee: Before purchasing a home, you’ll want an inspector to make sure everything in and around the home is safe and functioning properly. Paying this fee now can help prevent surprise expenses later.
  • Credit check fee: Your lender will typically charge a small fee to verify your credit score is where they’d like it to be.
  • Title insurance: This type of coverage is typically a small percentage (starting around .5%) of the loan amount and protects the lender if there are any issues with the borrower’s ownership following the sale.
  • Title search fee: If you’re not purchasing a new house, you’ll typically pay a small fee to a title search company to ensure there are no issues with the property ownership.
  • Transfer tax: Buyers often pay a fee for the property title to transfer over from the seller.

It’s important to note that closing costs can vary widely depending on your specific circumstances and where you’re purchasing your new home. For example, certain states require you to have a real estate attorney at your closing, according to Zillow.

What are common hidden fees in closing costs?

When it comes to closing costs, there aren’t really any hidden fees. However, any fee you aren’t expecting can be big a surprise on closing day. We’ve already mentioned some line items that could sneak up on you above (like application fees, credit check fees, appraisal fees, and more), but here are some others that people don’t see coming, according to HomeLight.

  • Attorney fees: You might need an attorney present for closing depending on where you live.
  • Homeowner’s insurance: When you take out a loan for a house, your lender will typically require homeowner’s insurance. The initial payment is often lumped in with closing fees.
  • Pest inspection fees: Some states, counties, and lenders could require a pest inspection before you close on a house, according to Policygenius. Even if it’s not required, it’s a good idea to have someone inspect the home, and the fee is often paid at closing.
  • HOA dues: If your new home is part of a homeowner’s association, you will have to pay the required fees.
  • Survey fees: You’ll typically need a surveyor to assess the house and land you’re interested in buying after making an offer on a home, according to Business Insider. The fee is often paid with closing costs.
  • Escrow fees: These fees are paid to the escrow company, attorney, or title company to manage the closing process and distribute money to the parties involved in the home sale, according to Rocket Mortgage.
  • Flood determination fees: Your lender may have you pay a fee for a third party to review flood maps and determine if your home is in a flood zone.

Example: Estimated closing costs on a $400,000 home

For the visual learner, here’s what closing costs could look like on a $400,000 home purchase using the calculator, above. For this example, let’s assume the buyer is making a 10% down payment ($40,000), has a 30-year term, paid one discount point, and locked in a 5% interest rate.

Total adjusted orgination charges

$5,100

Origination charge

$1,500

Charge for discount points

$3,600

Total other settlement services

$4,058

Appraisal

$300

Credit report

$50

Flood certification

$50

Tax service

$150

Title services

$350

Owner’s title insurance

$350

Government recording fees

$25

Transfer taxes

$50

Survey

$175

Pest inspection

$100

Initial escrow account deposit

$708

Prepaid interest

$750

Homeowner’s insurance

$1,000

Total estimated closing costs

$9,158

Remember, the table above is just an example. Closing requirements vary by state and fees vary from lender to lender and company to company.