This is a floor built from six standard lines, not the 2–5% range lenders quote
On a $350,000 purchase with 20% down, the six lines modelled here total $6,853 — about 1.96% of the price. That is deliberately a lower bound. It covers a 1% origination fee ($2,800), a flat $500 appraisal, title insurance at 0.5% ($1,750), government recording and transfer charges at 0.2% of the loan ($560), fifteen days of prepaid interest ($805.48) and three months of homeowner’s insurance into escrow ($437.50).
Total ≈ 2–5% of home price | Lender fees + Title + Government + Prepaids
Real closings commonly land between 2% and 5% because they include items no general model can predict: discount points if you buy the rate down, lender underwriting and processing fees, survey and pest inspection where required, HOA transfer fees, attorney fees in states that require one, and property tax escrow whose size depends entirely on when in the tax year you close. Treat this figure as the irreducible base and your official Loan Estimate as the real number.
Paying cash removes $4,165 of the $6,853, and leaves $2,687 you still owe
Three of the six lines scale with the loan: origination, government fees and prepaid interest. Put 100% down and all three fall to zero. Title insurance and the appraisal follow the property rather than the borrowing, and escrow follows the insurance policy, so a cash buyer still pays $1,750, $500 and $437.50 respectively.
The same split explains why a larger deposit reduces closing costs as well as the mortgage. Moving from 20% down to 25% on this purchase shrinks the loan by $17,500 and takes roughly $210 off the origination and government lines. It is a small effect next to the interest saved, but it is real cash at the table on the day.
Origination is the largest single item and the most negotiable one here
Costs divide into three kinds. Lender charges — origination, underwriting, processing — are set by the lender and are genuinely negotiable, or avoidable by shopping a different lender; at $2,800 this is the biggest line in the estimate. Third-party services such as title insurance, the appraisal and the survey can often be shopped, and in many states the Loan Estimate must tell you which ones you are allowed to choose yourself.
Government recording and transfer taxes are fixed by statute and cannot be negotiated by anyone. Prepaid interest and escrow are not fees at all — they are your own money, paid early. Closing near the end of a month cuts the prepaid interest line simply because fewer days remain before the first full payment.
A seller credit moves these costs into the price rather than removing them
In many markets a buyer can negotiate a seller credit toward closing costs. This does not make the costs disappear; it usually raises the agreed price by a similar amount, converting cash needed at the table into money borrowed over thirty years. That trade can be sensible when cash is the binding constraint, and expensive when it is not.
Lender credits work the same way against the rate. Taking a higher interest rate in exchange for the lender covering closing costs reduces what you pay today and increases what you pay monthly for as long as you hold the loan. Both are worth modelling against how long you actually expect to keep the mortgage rather than against the headline saving.
Your state, your closing date, and your lender all move the total
Transfer taxes vary enormously by jurisdiction — some states charge nothing, others well over 1% of the price — and the 0.2% modelled here is a generic default. Title insurance is regulated in some states and competitive in others. Attorney involvement is mandatory in several, optional elsewhere. None of that can be inferred from a price and a rate.
The property tax escrow is the largest omission. Depending on when your closing falls relative to the local tax calendar, a lender may collect several months of property tax up front, and on a high-tax property that single line can exceed everything modelled here. Ask for an itemised estimate early, and compare it against the Loan Estimate you receive within three business days of applying.
Frequently Asked Questions
Can closing costs be rolled into the mortgage?
Often, yes. Some closing costs can be added to your loan balance, or you can take a no-closing-cost mortgage that covers them in exchange for a higher interest rate. Either way you pay less cash up front but more over time, since you finance the costs with interest. It can make sense if cash is tight or you do not plan to keep the loan long.
How much are closing costs, typically?
They commonly run about 2% to 5% of the purchase price, though the exact figure varies widely by state, lender, and the specifics of your transaction. On a $350,000 home that is roughly $7,000 to $17,500. This calculator uses conservative assumptions, so its estimate tends to sit toward the lower end of that range.
What is the difference between closing costs and a down payment?
They are separate amounts you both need at closing. The down payment is the portion of the price you pay directly toward the home, reducing your loan. Closing costs are the fees to process the loan and transfer the property. Budgeting for one and forgetting the other is a frequent and expensive mistake.
Can the seller pay my closing costs?
Sometimes. Seller concessions, where the seller agrees to cover part of your closing costs, are negotiable and more common in slower markets. Loan programs cap how much a seller can contribute, and the amount is part of your overall negotiation. It is worth asking, especially if the seller is motivated.
What are prepaid items?
Prepaid items are amounts you pay in advance at closing rather than fees for a service. They include interest from your closing date to the end of the month and an escrow cushion for upcoming property taxes and homeowners insurance. Because interest is charged from closing to month-end, closing later in the month reduces the prepaid interest you owe.
How can I lower my closing costs?
Compare Loan Estimates from several lenders, since origination and processing fees are negotiable and vary. You can also ask the seller for concessions, shop for services like title insurance where allowed, and time your closing later in the month to reduce prepaid interest. The lender-controlled fees offer the most room to save.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
Results are estimates based on the figures you enter and standard formulas. Rates, fees, taxes, and lender terms vary and change over time, so confirm important numbers with your lender or a qualified professional. This is educational information, not financial advice.
Published the calculator with its formula, worked example, assumptions, limitations and FAQs, and added an automated formula test suite covering it.
Fixed a breakdown that did not add up: the total already included the appraisal, prepaid interest and escrow setup, but only the origination, title and government lines were shown, so the itemisation on screen could not be reconciled against the headline figure. Every component is now displayed.
Frequently Asked Questions now show on the page: 6 answers, checked in a page-by-page audit.
What the calculation assumes and where it stops now show on the page.
Show it to your clients, not just tell them
Mortgage brokers, accountants, and advisors embed this to walk clients through the numbers live — nothing they enter ever leaves their browser.