start portlet menu bar

Web Content Viewer

end portlet menu bar

What Are Closing Costs?

What you can expect to pay on closing day

You are likely to pay closing costs on the day that you close on your mortgage. These closing costs can be different, depending on whether you are buying or refinancing a home. How much you pay can be affected by the loan type you choose, your personal finances, the state where your house is located, and other factors. Your closing costs might include things like:

  • Appraisal fee. This is paid to a third-party appraiser to determine the property value. A professional appraiser will come out to the home and evaluate its market value. This generally costs between $300 and $500, but it could be more, depending on the area, the complexity of the property, and the size of the house.
  • Attorney fee. This is paid to the attorney to review the financial documents that need to be prepared. Not all states require an attorney.
  • Credit report fee. A fee for pulling your credit report.
  • Home inspection. A professional inspector will come to the home and will be tasked with uncovering any potential problems, such as a leaky roof, mold, or structural issues.
  • Mortgage broker. If you used a mortgage broker, there may be a mortgage broker fee you’ll need to pay at closing.
  • Origination fee. A fee to originate and process your loan application which is typically a percentage of your loan amount and/or payoff.
  • Pest inspection. Some states and loans may require a pest inspection before the mortgage is approved. The cost of a pest inspection might average $100, according to Home Advisor.
  • Points, the cost to buy down your interest rate. One point is equal to 1% of the loan amount. You can choose to buy a lower rate by paying points with some mortgages.
  • Pre-paid interest. This is the interest due between your settlement date and the end of the month in which your loan closes.
  • Property insurance. This is paid to insure the property. The insurance amount depends on your provider, as well as the size of the home. Insurance costs are typically included in your escrow account. You pay an amount into your escrow account each month as part of your monthly mortgage payment.
  • Property taxes. The amount due for property taxes. During the first year of your mortgage, this amount will be pro-rated for the time period in which you own the home. Like property insurance, the amount due for property taxes is paid as part of your monthly escrow payment.
  • Recording fees. Local governments typically charge a fee to record transactions in public records.
  • Title search. This fee covers the search for any liens on the property and helps ensure that the person selling is, indeed, the owner of the property.
  • Upfront Mortgage Insurance Premium. If you choose an FHA loan, you will be required to pay an upfront mortgage insurance premium.
  • Underwriting fee. This covers the cost of processing and underwriting the loan application.
  • VA Funding Fee. If you choose a VA loan, you will need to pay the VA funding fee, although it can be financed into your loan amount. This fee is used to support the government VA loan program.

How much are closing costs?

When you are buying or refinancing a home, you will want to plan to pay closing costs. Some closing costs you may need to pay in cash, at closing, while others you may be able to finance into your loan amount. Here are some estimates of how much you might pay:

  • Conventional loan closing costs: Typically, you'll pay between 2% and 5% of the price of the home at closing with a Conventional loan.
  • FHA loan closing costs: According to the U.S. Department of Housing and Urban Development, FHA loan closing costs average between 3% and 4% of the purchase price of the home. You will pay an upfront mortgage insurance premium as part of your FHA closing costs. This is equal to 1.75% of the base loan amount.
  • VA loan closing costs: VA closing costs can range between 2% and 5% of the home's price. These closing costs typically include the VA funding fee, although this fee can often be financed into your mortgage balance.

Also, check out our closing costs calculator to estimate how much you might pay when you buy a home.

Are closing costs tax deductible?

Some closing costs may be tax deductible. For example, you may be able to deduct the cost of mortgage insurance premiums, property taxes, prepaid interest, points, or origination fees from your taxes. On the other hand, the cost of things like home appraisals, inspections, title insurance, and HOA fees are usually not tax deductible. Consult a tax advisor for information regarding the deductibility of interest and charges.

Who pays closing costs?

Most of the time, homebuyers are responsible for paying their closing costs. Sometimes, closing costs can be paid by the seller, too. For example, some sellers may be willing to help pay closing costs in return for a higher sale price on their house. The seller usually pays for real estate agent's commissions and may pay some taxes for the time period in which they owned the home.

Closing cost assistance

Some states or counties offer programs or grants that help with the cost of closing on a home. These are often called homebuyer assistance programs and are very similar to down payment assistance programs. Visit the Housing and Urban Development (HUD) website to select your state and navigate to homeownership, then homeownership assistance for more information about what your state or city has to offer.

How to check your closing costs

Make sure you understand all your closing costs and check that they are correct before you close on your new mortgage. You will see an estimate of your closing costs on the Loan Estimate your lender will send you after you submit your mortgage application. After your loan has been approved, you will receive a Closing Disclosure that will reflect the actual costs you will need to pay on the day you close on your mortgage.

Last reviewed and updated April 2024 by Freedom Mortgage.

What are mortgage discount points?

Decide if paying for discount points is right for you

How Much Is a Mortgage?

How much should you expect to pay?

Practical tips for closing on a mortgage

Advice that can help you avoid hassles and delays