Closing costs catch most first-time buyers off guard. You saved up your down payment, got approved for a mortgage — then learn you need another $6,000–$15,000 to actually close. Here's what those fees are and how to prepare.
Closing costs typically run 2–5% of the loan amount. On a $350,000 home with 10% down ($315,000 loan), expect $6,300–$15,750. The exact amount depends heavily on your state — transfer taxes alone can add thousands in states like New York, Pennsylvania, and Delaware.
The national average closing cost is around $6,000–$7,000 excluding transfer taxes. But averages are misleading because costs vary wildly by state. In Missouri, average closing costs are about $2,100. In New York, they're over $12,000. Always check your specific state's averages on our state pages.
Lender fees include origination charges (0–1% of loan amount), underwriting fees ($400–$900), and credit report fees ($30–$50). These are the most negotiable — always get Loan Estimates from at least 3 lenders and compare line by line.
This is the lender's main profit center — typically 0.5–1% of the loan amount. On a $300,000 loan, that's $1,500–$3,000. Some lenders advertise "no origination fee" but compensate with a higher interest rate. Compare the total cost over your expected hold period, not just the upfront fee.
Covers the cost of the lender evaluating your creditworthiness, verifying your income, and assessing the risk of the loan. Typically $400–$900. This is somewhat negotiable, especially if you have strong credit and a large down payment.
Optional fees you can pay to "buy down" your interest rate. One point costs 1% of the loan amount and typically reduces your rate by 0.25%. On a $300,000 loan, one point costs $3,000 and saves about $50/month. You break even in about 5 years. Only worth it if you plan to stay long-term.
Third-party fees cover the appraisal ($400–$700), home inspection ($300–$500), title search ($150–$400), and title insurance (0.5–1% of purchase price). Title insurance is required by lenders, but you can shop for your own title company in most states.
Required by the lender to verify the home is worth what you're paying. The appraiser visits the property, compares it to recent sales of similar homes, and provides a value estimate. If the appraisal comes in low, you may need to renegotiate the purchase price, increase your down payment, or walk away.
Not required by lenders but absolutely essential. A qualified inspector examines the home's structure, electrical, plumbing, HVAC, roof, and foundation. This $300–$500 investment can save you from a $15,000–$50,000 surprise. Never skip the inspection, even in competitive markets.
Protects against claims on the property's ownership history — unpaid liens, forged documents, unknown heirs, boundary disputes. You'll pay for the lender's policy (required) and can optionally buy an owner's policy (recommended). Total cost is typically 0.5–1% of the purchase price.
Recording fees ($50–$250) cover filing the deed and mortgage with your county. Transfer taxes are the wildcard — they range from 0% (no transfer tax) in states like Texas, Montana, and Indiana to 4% in Delaware. On a $400,000 home in Delaware, that's $16,000 in transfer taxes alone.
Some cities add their own transfer taxes on top of state taxes. In Chicago, the city and county combined charge about 1.5% on top of Illinois' state rate. In New York City, homes over $500,000 face a "mansion tax" starting at 1%. Always check both state and local rates.
Prepaid items aren't really 'costs' — they're advance payments of recurring expenses. Expect to prepay property taxes (2–6 months), homeowners insurance (12 months), and daily mortgage interest from closing day to month-end.
Your lender will also require escrow reserves — typically 2 months of property taxes and 2 months of insurance held in an escrow account as a buffer. This ensures there's always enough to cover the next payment when it comes due. On a $350,000 home with 1.1% tax rate, escrow reserves add about $1,280 to closing costs.
Ways to reduce closing costs: negotiate seller concessions (common in buyer's markets — sellers pay 2–3% of your costs), ask about lender credits (higher rate in exchange for lower closing costs), and explore first-time buyer programs in your state that offer closing cost assistance.
Other strategies: shop for your own title company (can save $500–$1,500), close at the end of the month (reduces prepaid interest), ask the seller to pay for a home warranty, and negotiate the real estate commission. In some markets, buyer's agents will rebate a portion of their commission to you.
Many state housing finance agencies offer closing cost assistance grants or forgivable loans to first-time buyers. These can cover $2,000–$10,000+ of your closing costs. Check your state page on our site for specific program details.