Closing costs are the fees and expenses due at the end of a home purchase, separate from your down payment. Budgeting for them accurately helps you avoid last-minute financial stress right before closing day.
Typical Range
Closing costs generally run between 2% and 5% of the loan amount, though the exact figure depends on your location, loan type, and lender. On a $350,000 loan, that translates to roughly $7,000 to $17,500.
Common Closing Cost Categories
- Lender fees: Origination fees, underwriting fees, and application fees.
- Third-party fees: Appraisal, credit report, title search, and title insurance.
- Prepaid items: Homeowners insurance, property taxes, and prepaid interest placed into escrow.
- Government fees: Recording fees and transfer taxes, which vary by state and locality.
Ways to Reduce Closing Costs
- Shop multiple lenders and compare loan estimates side by side.
- Ask the seller to contribute toward closing costs as part of your offer negotiation.
- Consider a no-closing-cost loan option, though this typically means a higher interest rate.
- Close near the end of the month to reduce prepaid interest.
Bottom Line
Ask your lender for an early estimate of closing costs so you can plan your total cash-to-close accurately, well before your closing date arrives.