Closing Costs Calculator
Work out the money you need on top of the down payment, so the closing table does not produce a number you were not expecting.
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What you actually pay at closing
Closing costs are everything you pay to complete a purchase other than the down payment. They are easy to forget when you are focused on saving a deposit, and they are not small: typically two to five percent of the purchase price. On a 400,000 dollar home that is 8,000 to 20,000 dollars due on the same day as the deposit.
They fall into three groups. Lender fees are what the mortgage provider charges for making the loan, principally the origination fee, usually expressed as a percentage of the loan amount. Third-party fees cover services you need but the lender does not provide: the appraisal, the title search and title insurance, a survey, and recording the deed with the county. Prepaid items are different again, because they are not fees at all: they are property taxes and insurance premiums collected in advance and held in escrow, which you would have had to pay eventually anyway.
That third group explains why closing costs feel larger than the fee schedule suggests. Lenders typically collect several months of property tax and insurance upfront, plus a cushion of about two months, so that the escrow account never runs dry when the tax bill arrives. On the example here, six months of tax and insurance plus the cushion comes to 3,600 dollars of the 9,300 dollar total, which is 39 percent of it.
The most useful thing you can do is ask for a Loan Estimate and read it line by line. Lenders are required to provide one in a standard format within three business days of an application, and it breaks the costs into categories that cannot increase and categories that can. Comparing two Loan Estimates side by side tells you more about which lender is cheaper than comparing advertised rates ever will.
How the estimate is built
The three groups are calculated separately and added together.
| Symbol | Meaning |
|---|---|
Lender fees |
Origination and any points, charged by the mortgage provider |
Third-party fees |
Appraisal, title, survey and recording costs |
Prepaid items |
Months of property tax and insurance collected in advance |
Escrow cushion |
A reserve the lender holds, commonly two months of payments |
Prepaid taxes and insurance are not a cost in the way a fee is: the money sits in escrow and is used to pay bills you would owe anyway. They still have to be found in cash at closing, which is why they belong in the total.
Worked example: 400,000 dollar home with a 320,000 dollar loan
A 1 percent origination fee, 2,500 dollars of third-party fees, six months of taxes and insurance collected upfront, and a two-month escrow cushion.
| Figure | Result |
|---|---|
| Home price | $400,000.00 |
| Loan amount | $320,000.00 |
| Origination fee (1%) | $3,200.00 |
| Third-party fees | $2,500.00 |
| Prepaid property tax (6 months) | $1,800.00 |
| Prepaid home insurance (6 months) | $900.00 |
| Escrow cushion (2 months) | $900.00 |
| Total closing costs | $9,300.00 |
| As a share of the price | 2.33% |
You need 9,300 dollars on top of your deposit, which is 2.33 percent of the purchase price. Note that 3,600 dollars of that is prepaid tax and insurance plus the cushion, money that is not a fee but still has to be available in cash. Budget for closing costs separately from the deposit from the moment you start saving.
Estimates only. Your lender's figures may differ because of fees, escrow and rounding.
Paying less at the closing table
Compare Loan Estimates, not advertised rates
A lower rate with a higher origination fee can cost more than the reverse. Lenders must give you a standard Loan Estimate within three business days. Ask three lenders for one on the same day and compare them line by line, focusing on the categories that cannot change.
Negotiate the fees that are negotiable
Origination fees, application fees and rate lock fees are set by the lender and can often be reduced or waived, particularly if you have a competing offer. Title insurance and appraisal fees are less flexible, though you can sometimes shop for title services yourself.
Ask the seller to contribute
In a buyer's market, sellers will often pay some closing costs as part of the negotiation, especially if you offer close to the asking price. It is one of the few levers that costs the seller nothing out of pocket if they were going to concede on price anyway.
Keep the prepaid items in perspective
Roughly a third of the total is prepaid tax and insurance rather than fees. That money is not lost, it pays bills you would face as an owner regardless. Knowing which lines are fees and which are prepayments stops you negotiating over the wrong numbers.
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Frequently asked questions
How much are closing costs on a house?
Typically two to five percent of the purchase price. On a 400,000 dollar home that is 8,000 to 20,000 dollars. The range is wide because it depends on the loan amount, the origination fee, local taxes and how many months of prepaid items the lender collects.
Are closing costs included in the mortgage?
Usually not. You pay them in cash at closing, separately from the deposit. Some costs can be rolled into the loan by taking a slightly higher rate, and seller contributions can cover part of them, but the default is that you find the money yourself.
What is an escrow cushion?
A reserve the lender keeps in your escrow account so that property tax and insurance bills are always covered even if a payment is late. It is commonly two months of escrow payments. The money is yours and is returned if the account closes with a surplus.
Can I avoid paying closing costs?
You can reduce them but rarely eliminate them. Shopping several lenders, negotiating the origination fee, choosing a title provider yourself and asking the seller to contribute all help. A no-closing-cost mortgage exists but simply moves the cost into a higher interest rate.
Why are prepaid taxes and insurance part of closing costs?
Because the lender needs your escrow account funded before the first tax and insurance bills arrive, which may be months after you complete the purchase. The money is not a fee; it pays obligations you would owe as an owner anyway. It still has to be available in cash on the day.