Last reviewed: September 28, 2026. Applies to US residential mortgages covered by the federal TILA-RESPA disclosure rules. Educational information, not individual financial or legal advice.
Short answer: Mortgage closing costs are the lender fees, third-party services, government taxes and upfront deposits you pay to finalize a home loan. Freddie Mac tells buyers to budget 2% to 5% of the purchase price, although where you live (transfer taxes especially) moves the number a lot. Your Loan Estimate shows the expected costs within three business days of applying, and your Closing Disclosure must arrive at least three business days before you close. The biggest savings usually come from comparing lenders, shopping for title and settlement services, and negotiating seller credits.
Most first-time buyers focus on the down payment and discover later that closing costs can add thousands of dollars more to the cash they need. The real decision isn't only "how much will closing cost?" It's which of those costs you can influence, which are fixed by law or local custom, and whether it makes sense to pay some of them upfront or roll them into a higher interest rate.
This guide goes through the fees one by one, shows how they appear on the two federal forms every lender must use, runs a hypothetical example with real math, and covers the wire-fraud risk that tends to peak in the last few days before closing.
How much are closing costs in the US?
There is no single national price, and figures you see quoted depend heavily on what is being counted.
- Freddie Mac says buyers should "typically" be prepared to pay between 2% and 5% of the home purchase price in closing costs, a range that includes items such as insurance and escrow deposits (Freddie Mac, last reviewed February 26, 2026).
- LodeStar Software Solutions, a closing-cost data provider, reported in its 2026 Purchase Mortgage Closing Cost Data Report (published April 27, 2026) that average purchase closing costs nationally stayed near 1% of the sales price. It named transfer taxes as the single largest driver of state-to-state differences (LodeStar, April 2026; coverage by National Mortgage Professional, May 4, 2026).
Why the gap? The two figures measure different things. Freddie Mac's range is a budgeting rule that covers prepaid insurance and escrow deposits. Data-provider averages usually count a narrower set of transaction fees. For planning, use the broader number. Once you have a Loan Estimate, stop guessing and use that instead.
What you pay: the main categories
The Loan Estimate and Closing Disclosure group costs into lettered sections. Knowing the letters helps you compare offers line by line.
Lender fees and points (Section A: Origination Charges)
These are what the lender charges to create the loan. The CFPB describes origination fees as covering things like "processing the application, underwriting and funding the loan" (CFPB). Section A can include:
- Origination, application, processing or underwriting fees. Names vary by lender, so compare the section total rather than individual labels.
- Discount points. One point equals 1% of the loan amount, so one point on a $300,000 loan costs $3,000. You pay points upfront in exchange for a lower interest rate (CFPB, updated October 1, 2024).
Points are optional. Some lenders quote rates that quietly assume you'll buy points, so check Section A before comparing interest rates across offers.
Services you cannot shop for (Section B)
These are third-party services the lender requires and picks the provider for. Typical examples are the appraisal, credit report, flood certification and tax service fee. You can't pick the vendor, but you can compare the Section B totals between lenders.
Title and settlement services you can shop for (Section C)
Section C lists required services where you choose the provider. Common ones are the lender's title insurance policy, title search, settlement or closing agent fees, and sometimes a survey or pest inspection. The lender has to give you a written list of providers with the Loan Estimate. You can use a provider who isn't on the list if the lender agrees to work with them (CFPB, updated August 14, 2024).
Title insurance comes in two policies. Most lenders require a lender's policy, which protects the amount they lend. An owner's policy, which protects your own equity, is optional. The CFPB notes that the total is usually lower if one provider issues both (CFPB, updated August 5, 2024). The owner's policy usually appears under Section H ("Other") and is often marked optional.
Taxes and government fees (Section E)
This covers recording fees for the deed and mortgage, plus any state or local transfer taxes. Transfer taxes vary widely and are the main reason closing costs in some states are several times higher than in others (per the LodeStar report above). Whether the buyer or the seller pays transfer tax depends on state law, local custom and your purchase contract.
Prepaids (Section F)
Prepaids are not fees. They are costs of owning the home that you pay in advance at closing:
- Homeowners insurance premium, often the first year.
- Prepaid (daily) interest from your closing date to the end of that month. Your first regular payment covers interest in arrears, so this fills the gap.
- Property taxes due soon after closing, depending on where you live.
Initial escrow deposit (Section G)
If your loan has an escrow (impound) account, the servicer collects a starting balance so it can pay future property tax and insurance bills (CFPB). Federal RESPA rules (Regulation X) cap the extra cushion a servicer may hold at one-sixth of the estimated annual escrow disbursements, which is roughly two months' worth (12 CFR 1024.17).
Other costs (Section H)
This is a catch-all for items the lender doesn't require: the owner's title policy, HOA transfer or capital contribution fees, a home warranty, or real estate commission items where those appear on your side of the transaction.
Where each cost appears, and how much it can change
Federal rules limit how far some costs can rise between the Loan Estimate and closing unless there's a valid "changed circumstance," such as a different loan type, a new down payment amount, an appraisal that comes in different from expected, or income the lender can't document (CFPB, updated September 13, 2024).
| Section | What's in it | Can you shop or negotiate? | How much can it rise by closing?* |
|---|---|---|---|
| A. Origination charges | Lender fees, discount points | Compare lenders, negotiate | Zero increase |
| B. Services you cannot shop for | Appraisal, credit report, flood cert | Compare lenders only | Zero increase (you weren't allowed to shop) |
| C. Services you can shop for | Lender's title, settlement agent, survey | Yes | 10% total if you use the lender's list; no limit if you pick your own provider |
| E. Taxes and government fees | Recording fees, transfer taxes | Who pays can be negotiated in the contract | Transfer taxes: zero. Recording fees: within the 10% group |
| F. Prepaids | Insurance premium, prepaid interest, taxes | Shop insurance | No limit |
| G. Initial escrow | Tax and insurance reserves | Mostly fixed by bills and timing | No limit |
| H. Other | Owner's title, HOA fees, warranty | Often yes | No limit (not lender-required) |
| J. Lender credits | Credit toward costs in exchange for a higher rate | Yes, via rate choice | Credits generally can't shrink without a changed circumstance |
*Absent a valid changed circumstance. Summary based on the CFPB's consumer explanation and 12 CFR 1026.19(e)(3). The "10% group" is measured in aggregate across those charges, not per line. If costs rise beyond these limits without a changed circumstance, you are entitled to a refund of the excess (CFPB; 12 CFR 1026.19).
How to read the Loan Estimate
You get a Loan Estimate once you give a lender six pieces of information: your name, income, Social Security number (for the credit check), the property address, an estimate of its value, and the loan amount you want (12 CFR 1026.2(a)(3)(ii)). The lender must deliver or mail it within three business days of receiving that application (12 CFR 1026.19(e)(1)(iii)).
Two rules help when you're shopping around:
- No fees up front, except the credit report. Until you've received the Loan Estimate and told the lender you intend to proceed, the lender can't charge you any fee except a "bona fide and reasonable" credit report fee (12 CFR 1026.19(e)(2)(i)). That means collecting several Loan Estimates on the same day should cost little or nothing. For the credit-score side of multiple applications, see our guide to how credit scores are calculated.
- Same form everywhere. Every covered lender uses the same three-page layout, so sections line up across offers.
A page-by-page checklist
- Page 1: Loan Terms and Projected Payments. Confirm the loan amount, rate, and whether there's a prepayment penalty or balloon payment. Check that the "Estimated Closing Costs" and "Estimated Cash to Close" figures look reasonable.
- Page 2: Closing Cost Details. Compare Section A (lender pricing) and Sections B and C across lenders. Points appear in Section A; lender credits appear as a negative number in Section J (CFPB Loan Estimate explainer, updated October 29, 2025).
- Page 3: Comparisons. "In 5 Years" shows total payments and principal paid over five years. The APR and Total Interest Percentage (TIP) help you compare long-run cost.
Tip: Make sure every Loan Estimate you compare uses the same loan amount, loan type, lock status and closing date. Otherwise, differences in prepaid interest and escrow can make one offer look cheaper when it isn't.
The Closing Disclosure and the 3-business-day rule
The Closing Disclosure is the five-page final version. Your lender must make sure you receive it at least three business days before you close (CFPB). Separately, the lender generally can't close the loan until the seventh business day after the first Loan Estimate is delivered or mailed (12 CFR 1026.19(e)(1)(iii)).
Most corrections at the closing table don't restart the clock. A new three-business-day waiting period is triggered only when (12 CFR 1026.19(f)(2)(ii)):
- the APR becomes inaccurate beyond the legal tolerance,
- the loan product changes (for example, fixed to adjustable), or
- a prepayment penalty is added.
What to check on the Closing Disclosure
The CFPB suggests comparing it against your most recent Loan Estimate (CFPB Closing Disclosure explainer):
- Loan terms: amount, rate, monthly payment, product type. If you locked your rate, the lender can change it only in limited circumstances.
- Closing costs: services you didn't shop for should be similar to the estimate. For services you shopped for, confirm the price you agreed.
- Cash to Close (page 3): the table shows each figure from the Loan Estimate next to the final one and flags which ones changed.
- Seller credits and deposits: make sure your earnest money deposit and any seller credit show up in the Summaries of Transactions.
- Loan Calculations (page 5): total of payments, finance charge and APR.
If a lender-controlled fee went up with no explanation, ask in writing which changed circumstance justified it. Do this before signing.
Worked example (hypothetical)
Every number below is invented to show the math. Real fees, taxes and insurance vary by lender, state, county and property. This is not a quote or a typical-cost estimate.
Say you're buying a $400,000 home with 10% down ($40,000), borrowing $360,000 on a 30-year fixed loan at 6.5% after paying half a point. You close on the 16th of the month. Annual property tax is $6,000 and annual homeowners insurance is $1,800.
| Item (hypothetical) | Amount |
|---|---|
| A. 0.5 discount point (0.5% × $360,000) | $1,800 |
| A. Origination/underwriting fee | $1,295 |
| B. Appraisal, credit report, flood cert, tax service | $770 |
| C. Lender's title policy, title search, settlement fee, survey | $2,600 |
| D. Total loan costs | $6,465 |
| E. Recording fees + transfer tax (buyer's share) | $1,750 |
| F. 12 months homeowners insurance | $1,800 |
| F. Prepaid interest: $360,000 × 6.5% ÷ 365 = $64.11/day × 15 days | $962 |
| G. Escrow: 2 months insurance ($300) + 3 months tax ($1,500) | $1,800 |
| H. Owner's title policy (optional) | $400 |
| I. Total other costs | $6,712 |
| J. Total closing costs (D + I) | $13,177 |
That's about 3.3% of the price, within Freddie Mac's 2%–5% planning range. Roughly $4,562 of it (prepaids and escrow) is money you'd spend on the house anyway. It isn't a fee in the usual sense, but you still need the cash on closing day.
Cash to close. Say the seller agreed to a $5,000 credit and you already paid an $8,000 earnest money deposit:
$40,000 down payment + $13,177 closing costs − $5,000 seller credit − $8,000 deposit = $40,177 due at closing.
Was the half point worth it? In this example, the half point lowers the rate from 6.625% to 6.5%. Principal and interest on $360,000 over 30 years is about $2,305.12 a month at 6.625% and about $2,275.44 at 6.5%, a difference of $29.68. Break-even: $1,800 ÷ $29.68 ≈ 61 months, or about five years. If you're likely to sell or refinance before then, the point loses money. This simplified check ignores taxes and what the $1,800 could earn elsewhere.
How to lower your closing costs
1. Get at least three Loan Estimates on the same day
Rates change daily, so pull your estimates close together and compare Section A, the rate, and Section J side by side. If you have two offers with similar rates, lower origination charges are the tiebreaker. A stronger credit profile can improve both rate and pricing. Our guide to improving your credit score before applying for a loan covers the steps that usually take the longest.
2. Negotiate lender fees using competing offers
Section A is where lenders have the most room. Send the lower Loan Estimate to your preferred lender and ask whether it will match the origination charges or add a lender credit. Ask for any concession in a revised Loan Estimate, not just an email.
3. Shop Section C services
Get quotes from title and settlement companies, and ask whether a simultaneous-issue discount applies to buying the lender's and owner's policies together. Remember the trade-off: choosing a provider off the lender's list removes that line from the 10% tolerance protection, so get the quote in writing.
4. Shop homeowners insurance
The first-year premium and the insurance part of the escrow deposit both depend on the policy you choose. Compare coverage, not just price. A cheap policy with a very high deductible just moves the cost to later.
5. Ask for seller concessions
A seller can agree to pay part of your closing costs, usually shown as a seller credit. The CFPB notes sellers often raise the price to offset this, so the credit isn't free money (CFPB, updated September 13, 2024). Loan programs also cap how much a seller or other "interested party" can contribute:
| Loan type | Maximum interested-party contribution |
|---|---|
| Fannie Mae conventional, primary home or second home, LTV/CLTV above 90% | 3% |
| Fannie Mae conventional, primary home or second home, 75.01%–90% | 6% |
| Fannie Mae conventional, primary home or second home, 75% or less | 9% |
| Fannie Mae conventional, investment property | 2% |
| FHA | 6% of the sales price |
Fannie Mae percentages are based on the lower of sales price or appraised value. Contributions can cover closing costs and prepaids, but not the down payment or reserves (Fannie Mae Selling Guide B3-4.1-02, effective May 7, 2025). FHA limit per HUD Handbook 4000.1. VA, USDA, Freddie Mac and jumbo loans have their own rules, so confirm the current limit with your lender.
A credit larger than your actual closing costs is usually wasted, because the excess normally can't be paid to you as cash. Size the request against your Loan Estimate.
6. Choose your closing date with the math in mind
Closing later in the month reduces prepaid interest in Section F. That lowers your cash to close, not the total cost of the loan: you're just paying less interest upfront before the first regular payment. It helps if cash is tight. It isn't a real saving.
7. Ask about assistance programs
State and local housing finance agencies run down payment and closing cost assistance programs, often for first-time or moderate-income buyers. Rules and funding change often, so check your state agency directly.
No-closing-cost mortgages: the trade-off
A "no-closing-cost" loan doesn't make the costs disappear. Usually you accept a higher interest rate and the lender gives you a credit (Section J) to cover some or all of the fees. Sometimes the costs are simply added to the loan balance. Either way, the CFPB notes you end up with a larger loan or a higher rate (CFPB; CFPB on lender credits).
Hypothetical comparison. On the same $360,000 loan, say the no-points rate is 6.625% (about $2,305.12 a month) and a lender offers 6.875% with a $6,000 credit (about $2,364.94 a month). The credit saves $6,000 now and costs about $59.82 more each month. $6,000 ÷ $59.82 ≈ 100 months, a little over eight years. If you expect to sell or refinance well before then, the credit probably wins. If you'll keep the loan for decades, paying the costs usually wins. (Simplified: this ignores investment returns, taxes and differences in how fast the balance falls.)
A lender credit also works well if you expect rates to fall and plan to refinance. Our guide to refinancing a loan to save money shows how to run that break-even.
Wire fraud: the biggest single risk at closing
Closing funds are often sent by wire, and criminals target that moment. The CFPB warns that scammers send emails posing as your agent or settlement company, usually days before closing, with "updated" wiring instructions (CFPB, updated June 16, 2026). The FBI's Internet Crime Complaint Center reported that from 2020 to 2022, reported losses from business email compromise with a real estate connection rose 72%, from $258.4 million to $446.1 million (FBI IC3 PSA, June 9, 2023).
How to protect your closing funds:
- Early in the process, get the settlement agent's and your real estate agent's phone numbers from a trusted source, such as a signed document or an in-person meeting, and write them down.
- Treat any email or text that changes wiring instructions as suspect. Call a number you already had to verify it, never the number in the message. The FBI recommends using a secondary channel to verify any change in account details (IC3).
- Check sender addresses and links for small misspellings of the real domain, especially on a phone.
- Before wiring the full amount, call the settlement agent to confirm the account details, and call again to confirm they received it.
If you think you wired money to a scammer: call your bank right away and ask it to recall the wire, then file a report at ic3.gov as soon as possible (IC3). Speed matters more than anything else. Many of the same red flags show up in fake loan offers and loan scams.
When this doesn't apply
- Loans that don't use these forms. Reverse mortgages, HELOCs, manufactured-home loans not secured by real estate, and certain subordinate loans from homebuyer assistance programs use different disclosures, so the Section A–J layout and tolerance rules above don't apply the same way (CFPB).
- Cash purchases. With no mortgage there's no Loan Estimate, lender fees or escrow deposit, but you'll still usually pay title, settlement, recording and any transfer taxes.
- Commercial and business-purpose loans generally fall outside these consumer disclosure rules.
- Outside the US. The UK, Canada, Australia and EU countries have entirely different fee structures, taxes (such as stamp duty) and disclosure rules. Nothing here carries over.
FAQ
Can I roll closing costs into my mortgage?
On a purchase, you usually can't add costs to the loan beyond what the loan-to-value limits allow. The common workarounds are lender credits (a higher rate) and seller credits. On a refinance, financing costs into the new balance is more common. Either way, you pay interest on them.
Are closing costs tax-deductible?
Some items, such as mortgage points and property taxes, may be deductible if you itemize. Most fees are not. The rules are specific, so check IRS guidance or ask a tax professional for your situation.
Who pays closing costs, the buyer or the seller?
The buyer typically pays most loan-related costs. Depending on the contract and state law, the seller may pay some, including transfer taxes in some places (CFPB).
Why is my cash to close higher than my closing costs?
Cash to close also includes your down payment, minus your earnest money deposit and any seller or lender credits. Page 3 of the Closing Disclosure breaks it down.
Do I have to buy an owner's title policy?
No. The lender's policy is usually required, and the owner's policy is optional. It protects your equity against covered title problems, which is why many buyers still choose it.
What if my Closing Disclosure shows higher fees than the Loan Estimate?
Ask the lender which changed circumstance applies. If a zero-tolerance fee rose, or the 10% group went over its limit with no valid reason, you're entitled to a refund of the excess, typically as a cure credit at closing or a refund after.
The bottom line
Plan for closing costs of 2% to 5% of the price, then replace that guess with real numbers as soon as you have Loan Estimates. The costs you control most are lender pricing in Section A, shoppable services in Section C, your insurance choice and seller credits. Prepaids and escrow feel like fees, but they're mostly money you'd spend anyway. The one cost you can't recover is a misdirected wire, so verify instructions by phone every time.
Next step: Ask two or three lenders for Loan Estimates on the same day, lay the page-2 figures side by side, and use the lowest Section A total to negotiate with the lender you prefer. If you're still shaping your budget, our guide to getting a low-interest loan explains how lenders price risk. Just don't take on new debt while your mortgage is in underwriting.
Sources
All accessed September 28, 2026.
- Freddie Mac: What Are Closing Costs and How Much Will I Pay? (last reviewed Feb 26, 2026)
- LodeStar Software Solutions: 2026 Purchase Mortgage Closing Cost Data Report (Apr 27, 2026)
- National Mortgage Professional: Closing Costs Stay Near 1% Nationally (May 4, 2026)
- CFPB: Loan Estimate explainer (updated Oct 29, 2025)
- CFPB: Closing Disclosure explainer (updated Oct 10, 2023)
- CFPB: What are my rights regarding the Closing Disclosure? (updated Sep 6, 2024)
- CFPB: Can my final mortgage costs increase from what was on my Loan Estimate? (updated Sep 13, 2024)
- CFPB: What fees or charges are paid when closing on a mortgage? (updated Sep 13, 2024)
- CFPB: What required mortgage closing services can I shop for? (updated Aug 14, 2024)
- CFPB: Discount points and lender credits (updated Oct 1, 2024)
- CFPB: What is owner's title insurance? (updated Aug 5, 2024)
- CFPB: Mortgage origination services and fees (updated May 10, 2024)
- CFPB: What is an escrow or impound account? (updated Sep 13, 2024)
- CFPB: Beware of mortgage closing scams (updated Jun 16, 2026)
- CFPB: Your home loan toolkit (PDF)
- 12 CFR 1026.19 (Regulation Z): timing, fee restrictions, tolerances, redisclosure (Cornell LII)
- 12 CFR 1026.2(a)(3)(ii): definition of application (Cornell LII)
- 12 CFR 1024.17 (Regulation X): escrow cushion limit (Cornell LII)
- Fannie Mae Selling Guide B3-4.1-02: Interested Party Contributions (effective May 7, 2025)
- HUD Handbook 4000.1: FHA Single Family Housing Policy Handbook (Aug 13, 2025 transmittal)
- FBI IC3: Business Email Compromise: The $50 Billion Scam (Jun 9, 2023)