Mortgage Closing Cost Calculator

Estimate your closing costs and plan your home purchase with confidence

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Understanding Mortgage Closing Costs

Closing costs represent the various fees and expenses that homebuyers and sellers incur when finalizing a real estate transaction. These costs typically range from 2% to 6% of the loan amount and can significantly impact your overall home buying budget. Understanding what these costs entail helps you prepare financially and potentially negotiate better terms with lenders and sellers.

Our closing cost calculator provides a comprehensive estimate of what you might pay at closing based on your specific loan details, property location, and other factors. While actual costs may vary, this tool gives you a solid starting point for planning your home purchase or refinance.

What Are Closing Costs?

Closing costs encompass a variety of fees and expenses associated with finalizing a mortgage transaction. These costs are paid at the closing of your real estate transaction and typically include:

  • Lender fees: Origination fees, application fees, underwriting fees, and processing fees
  • Third-party fees: Appraisal fees, credit report fees, title search and insurance, attorney fees, and survey fees
  • Prepaid expenses: Property taxes, homeowners insurance, and mortgage insurance premiums
  • Government fees: Recording fees and transfer taxes

The specific closing costs you'll encounter depend on various factors, including your location, loan type, lender requirements, and property characteristics. Some costs are fixed regardless of loan amount, while others are calculated as a percentage of the loan or home value.

Average Closing Costs Nationwide

According to recent data, the national average for closing costs on a single-family home purchase is approximately $5,749 including taxes, or about $3,339 excluding taxes. However, these figures can vary significantly based on location. For example:

  • States like New York, Delaware, and Washington have some of the highest average closing costs, often exceeding $8,000 including taxes
  • States like Missouri, Indiana, and Kentucky tend to have lower average closing costs, sometimes below $2,500 excluding taxes
  • Urban areas typically have higher closing costs than rural areas, even within the same state

For refinances, closing costs are typically lower than for purchases, averaging around 1% to 2% of the loan amount, though they can still amount to several thousand dollars.

Who Pays Closing Costs?

In most real estate transactions, both buyers and sellers incur closing costs, though buyers typically face the larger share. The allocation of these costs can sometimes be negotiated as part of the purchase agreement.

Buyer's Typical Closing Costs:

  • Loan origination fees
  • Appraisal fees
  • Credit report fees
  • Title search and insurance
  • Attorney fees
  • Recording fees
  • Underwriting fees
  • Prepaid interest
  • Escrow deposits for property taxes and homeowners insurance
  • Home inspection fees

Seller's Typical Closing Costs:

  • Real estate agent commissions
  • Transfer taxes
  • Title insurance (in some regions)
  • Escrow fees (often split with buyer)
  • Attorney fees
  • Property tax prorations
  • Home warranty (if offered as an incentive)

In some cases, particularly in a buyer's market, sellers may agree to pay a portion of the buyer's closing costs as a concession to facilitate the sale. Conversely, in a competitive seller's market, buyers may offer to cover some seller costs to make their offer more attractive.

How to Reduce Your Closing Costs

While closing costs are an inevitable part of the mortgage process, there are several strategies you can employ to potentially reduce these expenses:

  1. Shop around for lenders: Different lenders charge different fees, so comparing Loan Estimates from multiple lenders can help you find the best deal.
  2. Negotiate with the seller: In many cases, sellers may be willing to cover some closing costs, especially in a buyer's market or if the property has been listed for a while.
  3. Schedule your closing at the end of the month: This can reduce the amount of prepaid interest you need to pay at closing.
  4. Ask about lender credits: Some lenders offer credits to offset closing costs in exchange for a slightly higher interest rate.
  5. Look into no-closing-cost loans: These loans roll the closing costs into the loan amount or interest rate, eliminating upfront expenses but potentially costing more over time.
  6. Check for assistance programs: Many states and local governments offer closing cost assistance programs for first-time homebuyers or low-to-moderate income buyers.
  7. Negotiate lender fees: Some lender fees may be negotiable, particularly if you have good credit or are bringing substantial business to the lender.

FHA, VA, and Conventional Loan Closing Costs

Different loan types come with different closing cost structures and requirements:

FHA Loans:

Federal Housing Administration (FHA) loans typically have closing costs similar to conventional loans but include some specific fees:

  • Upfront Mortgage Insurance Premium (MIP) of 1.75% of the loan amount
  • FHA-specific appraisal requirements that may increase appraisal costs
  • Potentially higher origination fees

FHA loans allow sellers to contribute up to 6% of the sales price toward the buyer's closing costs.

VA Loans:

Veterans Affairs (VA) loans often have lower closing costs compared to conventional loans:

  • No mortgage insurance requirement
  • VA Funding Fee (ranges from 1.4% to 3.6% of the loan amount, depending on down payment and service history)
  • Limitation on certain fees lenders can charge

VA loans allow sellers to pay all of the buyer's closing costs and concessions up to 4% of the loan amount.

Conventional Loans:

Conventional loans typically have standard closing costs that include:

  • Loan origination fees (usually 0.5% to 1% of the loan amount)
  • Private Mortgage Insurance (PMI) if down payment is less than 20%
  • Standard third-party fees for appraisal, title search, etc.

Conventional loans typically allow sellers to contribute 3% to 9% of the home's purchase price toward closing costs, depending on the down payment amount.

Home Equity Line of Credit (HELOC) Closing Costs

If you're considering a HELOC instead of a traditional mortgage, be aware that these loans also come with closing costs, though they're typically lower than those for a full mortgage:

  • Application fees: $75-$450
  • Appraisal fees: $300-$700
  • Title search: $75-$200
  • Document preparation: $200-$400
  • Annual fees: $50-$100 (ongoing)

Some lenders offer HELOCs with no closing costs, but these typically come with higher interest rates or annual fees to offset the lender's costs.

Frequently Asked Questions About Closing Costs

1. When do I pay closing costs?

Closing costs are typically paid at the closing or settlement of your real estate transaction. This is when the property officially changes hands from the seller to the buyer. You'll usually need to bring a cashier's check or arrange for a wire transfer to cover these costs on the closing day.

2. Can closing costs be included in the loan?

Yes, in many cases, closing costs can be included in the loan amount, a practice known as "rolling in" the closing costs. This increases your loan amount and monthly payments but reduces the upfront cash needed at closing. FHA and VA loans specifically allow for this, while conventional loans may have more restrictions.

3. Are closing costs tax-deductible?

Some closing costs may be tax-deductible, including mortgage interest, certain mortgage points, and property taxes. However, many closing costs, such as appraisal fees and title insurance, are not tax-deductible. Consult with a tax professional to understand which specific costs in your situation may qualify for deductions.

4. How accurate are closing cost estimates?

By law, lenders must provide a Loan Estimate within three business days of receiving your application, which includes estimated closing costs. These estimates are typically accurate to within 10% of the final costs. You'll receive a Closing Disclosure at least three business days before closing with the final figures.

5. What's the difference between recurring and non-recurring closing costs?

Non-recurring closing costs are one-time fees paid at closing, such as appraisal fees, attorney fees, and loan origination fees. Recurring closing costs are ongoing expenses that you prepay at closing, such as property taxes, homeowners insurance, and mortgage insurance premiums.

6. Can I negotiate closing costs with my lender?

Yes, many closing costs are negotiable, particularly lender fees such as application fees, underwriting fees, and origination charges. Shopping around and comparing Loan Estimates from multiple lenders can give you leverage in negotiations.

7. Why do closing costs vary by state?

Closing costs vary by state primarily due to differences in transfer taxes, recording fees, and other government charges. Additionally, some states require attorney involvement in real estate transactions, while others don't, which affects legal fees.

8. What happens if I don't have enough money for closing costs?

If you're short on funds for closing costs, you have several options: negotiate with the seller for concessions, ask the lender about lender credits, look into closing cost assistance programs, consider a gift from family, or explore rolling the costs into your loan if your loan program allows it.

9. Are closing costs higher for refinancing?

Closing costs for refinancing are typically lower than for purchasing a home, as some fees like transfer taxes may not apply. However, refinance closing costs still include many of the same expenses, such as appraisal fees, title search, and lender fees.

10. What's an escrow account and how does it affect closing costs?

An escrow account is a third-party account that holds funds for property taxes and insurance premiums. At closing, you typically need to fund this account with several months' worth of these expenses, which increases your closing costs. However, these are prepayments for expenses you would have to pay anyway.

11. Can I use my down payment assistance for closing costs?

Many down payment assistance programs also allow funds to be used for closing costs. Check with the specific program you're considering, as rules vary by program and location.

12. What are discount points and are they worth paying?

Discount points are fees paid to the lender at closing in exchange for a lower interest rate. Each point typically costs 1% of the loan amount. Whether points are worth paying depends on how long you plan to keep the loan—the longer you keep the mortgage, the more likely you'll recoup the upfront cost through lower monthly payments.

13. Do VA loans have lower closing costs?

VA loans often have lower closing costs because the VA limits the fees lenders can charge and doesn't require mortgage insurance. However, VA loans do include a funding fee that can range from 1.4% to 3.6% of the loan amount, depending on your down payment and service history.

14. What closing costs are typically paid by the seller?

Sellers typically pay real estate agent commissions (usually 5-6% of the sale price), transfer taxes in some states, title insurance for the buyer in some regions, escrow fees (often split with the buyer), and any agreed-upon concessions to the buyer.

15. How do closing costs affect my APR?

The Annual Percentage Rate (APR) includes both the interest rate and certain closing costs, providing a more comprehensive view of the loan's cost. Higher closing costs result in a higher APR relative to the interest rate. The APR is useful for comparing loans with different fee structures.

References and Further Reading

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