Quick answer
Closing costs are the fees and prepayments due on top of your down payment when you buy — typically 2% to 5% of the purchase price. On a $425,000 purchase with a $340,000 loan, the itemised total is $10,547: about $7,278 of lender, title and government fees plus about $3,269 of prepaid tax and insurance. Cash to close with 20% down is $95,547.
How the Closing Cost Calculator works, step by step
Work through the list line by line: lender charges (origination, application, underwriting), third-party services (appraisal, credit report, title search, title insurance, settlement), government charges (recording fees, transfer taxes where they apply), and prepaids (a year of homeowners insurance, several months of property tax, and the initial escrow deposit). Every line is editable — replace an estimate with your lender's actual quote and the total updates.
The calculator separates true fees from prepaids, which matters for judgement. Prepaids are your own future bills collected early — they would be paid anyway. Fees are the transaction's real friction, and they are the part worth negotiating and comparing between lenders on the Loan Estimate form. On these figures the fees are $7,278 and the prepaids and escrow reserves are $3,269.
Some costs scale with the loan, some with the price, and many are flat. Origination is modelled at 0.5% of the loan ($1,700 here) and title insurance at 0.5% of the price ($2,125), while the appraisal ($450) and recording charges ($275) are flat. Prepaid interest covers 15 days at the loan's per-diem rate — $943 on this loan at 6.75%. That mix is why the total lands in a 2% to 5% band rather than at a single percentage.
Your state and city move the total more than any other factor. Transfer taxes range from zero in many states to several percent of the price in some cities, and title insurance is rate-regulated in some states and shopped in others. The calculator's estimates are national typicals; a purchase in a high-transfer-tax city can total twice the figure shown here, and your Loan Estimate is the authoritative number.
The total is also a negotiating lever. Lender credits can cover part of the costs in exchange for a slightly higher rate, and a seller concession — the seller crediting part of your closing costs — is effectively a price adjustment, capped by loan programme rules. Compare the lender-credit option's rate increase against the fee it covers: on a long-held loan, a quarter-point higher rate usually costs far more than the fee.
The formula
Total closing costs = lender fees + third-party fees + government charges + prepaid items and escrow deposits. As a rule of thumb: 2% to 5% of purchase price for a purchase; refinances typically run lower, around 2% to 3% of the loan amount.
Worked example — try it on the calculator above
Worked example: $425,000 purchase, $340,000 loan
Lender and third-party fees: origination 0.5% of the loan $1,700, application and processing $500, appraisal $450, credit report and flood certificate $85, title search and settlement $1,200, title insurance 0.5% of the price $2,125, recording and transfer charges $275, prepaid interest for 15 days $943 — subtotal $7,278. Prepaids and escrow: 12 months of homeowners insurance $1,800, a 2-month insurance reserve $300, and 3 months of property tax at 1.1% of the price ($1,169) — subtotal $3,269. Total: $10,547, about 2.5% of the price. Add the $85,000 down payment and cash to close is $95,547.
Frequently Asked Questions
Who pays closing costs — buyer or seller?
The buyer pays most, but the split is negotiable and custom varies by market. Sellers pay their own costs, dominated by agent commissions (historically 5% to 6% of price, now negotiable since the 2024 NAR settlement changes). Buyers can also ask for a seller concession — the seller credits part of the buyer's closing costs — effectively a price adjustment, capped by loan programme rules.
Can closing costs be rolled into the loan?
Effectively, in three ways: a larger loan amount (needs sufficient equity and appraisal value), a lender credit in exchange for a slightly higher rate, or a seller concession. All three trade a higher ongoing cost for lower cash today. Compare the lender-credit option's rate increase against the fee it covers — on a long-held loan, a quarter-point higher rate usually costs far more than the fee.
What is the Loan Estimate and why does it matter?
It is the standardised three-page form a lender must give you within three business days of application, itemising the rate, payment and every closing cost, and marking which services you may shop for. Federal rules limit how much final costs can exceed the estimate for most categories: lender fees and transfer taxes cannot increase, and many third-party fees are capped at a 10% cumulative tolerance.
Are closing costs tax-deductible?
Mostly no for a purchase — they are added to your cost basis in the home instead, which reduces taxable gain when you sell. Points paid to buy down the rate on a primary-home purchase are generally deductible in the year paid if you itemise. Keep the Closing Disclosure; it is the document your basis calculation will rely on.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.