In total, house closing costs typically range from 2% to 5% of the loan amount, which can equal thousands of dollars. Understanding what’s included and knowing how to manage these costs can make the process smoother and help you save.
What are closing costs?
Closing (or settlement) costs are the fees and expenses you pay when finalizing a mortgage loan, whether you’re purchasing a home or refinancing an existing mortgage.
These costs are additional to your down payment and include charges for services needed to process, approve, and document the loan, as well as to legally transfer ownership (in a home purchase) or update loan terms (in a refinance).
Key components of closing costs
As we’ll discuss below, house closing costs can include a wide range of fees. In general, though, they fall into three different categories:
- Lender Fees: Charges from the lender, such as loan origination and application fees.
- Third-Party Fees: Fees for services provided by other parties, like appraisal, inspection, and title insurance.
- Government Fees: Charges for recording the transaction and taxes imposed by local or state governments.
How to calculate your closing costs
Calculating your settlement costs is simple when you use a percentage range. House closing costs typically range from 2% to 5% of your loan amount. To estimate your costs, multiply your loan amount by this range.
For example, on a $200,000 mortgage:
- 2% of $200,000 = $4,000
- 5% of $200,000 = $10,000
Your settlement costs in this case would likely fall between $4,000 and $10,000. Keep in mind that some of these fees are negotiable, so it’s smart to shop around and compare lenders to secure the best possible terms.
When closing costs are paid
Settlements costs are generally paid at the time of closing—when the loan is finalized. For home purchases, they’re usually due along with the down payment. In refinancing, they’re included in the closing and may be paid upfront, added to the loan balance, or covered by the lender in exchange for a slightly higher interest rate.
What is included in closing costs?
Closing costs cover a long list of services necessary to successfully complete a real estate transaction. Those fees and services often include:
| Fee | Description | Cost* |
| Application Fee | Covers the cost of processing the loan application and checking your credit. | $75-$500 |
| Appraisal Fee | Pays for a professional evaluation of your property’s market value. | $300-$600 |
| Attorney Fees | Covers legal services for preparing and reviewing documents, sometimes required by state law. | $500-$1,200 |
| Closing Fee | Charged by the title or escrow company for managing the closing process. | $500-$1,000 |
| Courier Fee | Covers the cost of transporting documents for signing and delivery. | $25-$50** |
| Escrow Funds | An account to cover initial property tax and insurance payments held by the lender. | 2-6 months of tax and insurance payments |
| FHA Mortgage Insurance | An upfront premium for FHA loans, protecting lenders in case of default. | 1.75% of the loan amount |
| Flood Certification | Determines if your property is in a flood zone and requires flood insurance. | $15-$25 |
| HOA Transfer Fee | Pays for transferring ownership information in a homeowners’ association. | $100-$400 |
| Homeowners Insurance | Pays for a year of homeowners insurance, required by the lender. | $300-$1,000 |
| Lead-Based Paint Inspection | Optional inspection for lead paint in homes built before 1978. | $200-$400 |
| Lender’s Title Insurance | Protects the lender against title disputes or defects. | $500-$1,000 |
| Loan Origination Fee | A fee to cover lender expenses for processing and originating the loan. | 0.5%-1% of the loan amount |
| Owner’s Title Insurance | Protects you as the buyer from potential title issues after purchase. | $500-$1,500 |
| Pest Inspection Fee | Inspection for termites or pests, sometimes required by the lender. | $75-$150 |
| Prepaid Daily Interest Charges | Covers interest from closing day to the start of the next payment cycle. | Varies |
| Private Mortgage Insurance | Required if the down payment is less than 20%, covering lender risk. | 0.3%-1.5% of the loan amount annually |
| Property Tax | Prepaid property taxes that will be held in escrow and paid by the lender. | Varies |
| Rate Lock Fee | Fee to lock in your interest rate for a specified period before closing. | 0.25%-0.5%*** |
| Recording Fee | Local government fee for recording the deed and mortgage. | $25-$250 |
| Survey Fee | Fee for a survey to confirm property boundaries and identify any issues. | $150-$400 |
| Title Search Fee | A search of public records to verify the property’s ownership and uncover any liens. | $75-$200 |
| Transfer Tax | Local or state tax for transferring property ownership. | 0.1%-0.2% of the sale price |
| VA Funding Fee | Fee for VA loans to help support the VA loan program. | 1.25%-3.3% of the loan |
*Costs have been estimated based on industry averages throughout the United States. Final settlement costs may vary by location and lender.
**May be waived, especially for electronic documents
***Many lenders offer this for free
