Closing costs catch many first-time buyers off guard — not because the fees are hidden, but because they sit beside the down payment in a separate column of the settlement statement. On a $400,000 home, expect roughly $8,000 to $20,000 in closing costs depending on location, loan type, and lender, in addition to your down payment. This guide breaks down what you pay, why each fee exists, government loan charges that do not appear on conventional loans, and practical ways to reduce the total before you sign.
Typical Closing Cost Range: 2–5%
Most buyers pay 2–5% of the loan amount in closing costs. On a $400,000 purchase with a $380,000 loan, that is $7,600 to $19,000 — though many buyers land near $8,000–$12,000 before prepaids. Refinances often run $2,000–$6,000. Location, loan size, and whether you pay points all shift the total.
Major Closing Cost Categories
- Lender fees: origination, underwriting, processing, rate lock extension
- Third-party services: appraisal, credit report, flood certification
- Title: title search, lender's title insurance, owner's title policy (optional but recommended)
- Government recording: county recording fees, transfer taxes where applicable
- Prepaids: upfront property tax and homeowners insurance deposits, prepaid interest
- Escrow setup: initial escrow cushion for taxes and insurance (not the same as PMI)
Government Loan Upfront Costs
FHA charges an upfront mortgage insurance premium of 1.75% of the base loan amount — usually rolled into the balance. On a $380,000 FHA loan, that is $6,650 added to principal. VA loans charge a one-time funding fee (often 2.3% for first use with zero down, lower with down payment or subsequent use) — frequently financed. USDA charges an upfront guarantee fee. These are not optional lender markups; they are program costs. Compare totals in our FHA requirements guide and VA funding fee guide.
Ways to Reduce Closing Costs
- Negotiate seller concessions toward buyer closing costs (within program caps)
- Accept lender credits in exchange for a slightly higher interest rate
- Shop title and settlement services where state law allows
- Compare Loan Estimates from at least three lenders — fees vary widely
- Close near month-end to reduce prepaid interest days
Loan Estimate vs. Closing Disclosure
The Loan Estimate (LE) arrives within three business days of application — it is your quote. The Closing Disclosure (CD) is the final accounting, due at least three business days before closing. Compare line by line: lender fees, title charges, prepaids, and credits. Material changes to the APR or loan product can restart the three-day waiting period. Use our First-Time Homebuyer Calculator to estimate closing costs alongside down payment, and the Refinance Calculator for refinance closing cost break-even.
Try it yourself — adjust the numbers below
Your Finances
Car loans, student loans, credit cards, etc.
≈ $15,000 down payment
Your Affordability Range
You can afford homes between $268,000 and $300,000
Based on a 6.25% interest rate and 34.4% debt-to-income ratio
Range assumes PMI of approximately $195/month included in payment
Recommended Price
$268,000
$1,982.79/mo · conservative
Maximum Price
$300,000
$2,219.54/mo · upper limit
Monthly Payment Breakdown
34.4%
Your DTI is within ideal range. Lenders typically approve up to 43%.
Your 5.0% down payment triggers PMI. At your credit score (Good (670–739)) and 95.0% LTV, PMI costs approximately $195/month ($2337/year).
How to eliminate PMI:
Putting down $60,000 (20%) eliminates PMI and saves $2337/year.
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Max home price
$268,000 recommended
$300,000
Key Takeaway
Budget closing costs separately from your down payment. Read the Loan Estimate early, compare lenders, and negotiate seller credits or lender credits when the market allows.
This guide is for educational purposes only and is not financial or legal advice. Closing costs vary by location, lender, and transaction. Confirm all figures on your Loan Estimate and Closing Disclosure.