Closing Costs: Average Cost and How to Calculate

What are closing costs?

Closing costs are due at the time you close on a home and are made up of various fees that can add up to as much as 2% to 5% of the home’s cost.

Closing costs essentially cover all the back-end work of drawing up a mortgage loan, said Karen Kostiw, a real estate agent with Coldwell Banker Warburg in New York. They cover administrative tasks like the home’s appraisal, credit checks, title research, lender fees and escrow-related services.

Other things that factor into closing costs include the following, according to Kostiw:

• Application fees
• Brokerage commissions
• Condominium fees
• Discount points
• Document or transaction taxes
• Homeowner dues
• Home warranties or home insurance
• Inspection fees
• Management fees
• Move-in and move-out fees
• Private mortgage insurance
• Recording costs
• Survey fees
• Title insurance

Who pays closing costs?

It’s not just the buyer who must bring money for closing costs to the table in a real estate transaction. The seller faces closing costs, too, and there are even some fees that buyers and sellers share.

Seller closing costs

While buyer closing costs are largely focused on the mortgage loan (origination, title, etc.), seller fees are most often related to the cost of transferring the property from one party to another. Examples of seller closing costs include transfer fees, home warranty expenses and the owner’s title insurance.

Buyer closing costs (including commissions)

Since 2024, real estate agent compensation for the buyer’s agent is now negotiated between the buyer and the agent — not handled by the listing agent. This change is a result of a settlement involving the National Association of Realtors.

How much are closing costs?

On average, closing costs range from about 2% to 5% of the purchase price of the home. The exact amount can vary depending on the type of property (house, co-op, condo or townhouse), your loan structure (fixed or adjustable rate) and the location of the home, according to Kostiw.

For a $500,000 home, closing costs between 2% and 5% would range from $10,000 to $25,000.

The key to keeping your closing costs low is to get quotes from several top mortgage lenders and choose the one with the most favorable terms. “When shopping for a lender, discuss what fees there are and ask for a closing cost estimate so you can easily compare various lenders and closing costs with one another,” said Kostiw. “This information will provide you the leverage to negotiate the percentage of fees down or even see if they will waive the fee.”

Average closing costs in select states

Here are some sample averages by state to give you a general idea of what to expect:

» FIND OUT: Can I deduct closing costs on my taxes?

How to calculate closing costs

Before you get the official breakdown, you can estimate closing costs yourself. Fannie Mae’s closing costs calculator lets you input your state, county, home price and down payment to generate a detailed range.

The tool organizes fees into categories like origination, settlement and title services, third-party charges and government fees. It provides a low-to-high estimate for each, which can help you budget. Just keep in mind that your final costs can change based on your loan type, appraisal or location.

Closing costs vary from one transaction to another. Loan products, local regulations and final lender terms may introduce or omit fees entirely. That’s why it’s smart to estimate early and set aside extra funds to cover higher-than-expected charges.

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Can closing costs be negotiated?

Some closing costs are negotiable, while others are not. 

Examples of potentially negotiable closing costs include:

• Origination fees
• Application fees
• Underwriting fees
• Title insurance
• Title search fees
• Appraisal expenses
• Rate-lock fees
• Processing fees
• Extension fees
• Credit report fees

Examples of nonnegotiable closing costs include:

• Government recording fees
• Transfer taxes
• Property taxes

Prior to selecting a lender, you can ask if they would waive certain processing fees, rate-lock fees, credit checks, recording fees and extension fees, Kostiw told us.

“When shopping for a lender, discuss what fees there are and ask for a closing cost estimate so you can easily compare various lenders and closing costs with one another,” Kostiw said. “This information will provide you the leverage to negotiate the percentage of fees down or even see if they will waive the fee.”

In addition, Kostiw said that certain lenders and real estate brokers may have affiliations with insurance companies and offer discounted rates if you bundle the costs. This can potentially help you save money on negotiable fees if you ask up front.

Knowledge is key from the start. Even the appraisal cost can be part of your closing costs, so stay informed and ask questions along the way. That way, you’re not caught off guard by high fees with little time to pull funds together. Be clear on which fees you’re responsible for, when they’re due and how you’ll need to pay them, Kostiw said.