The three kinds of closing cost
- Costs you cannot shop for: The lender's own charges — origination, underwriting, processing — plus the appraisal and the credit report. These are set by the lender you choose. You compare them by comparing lenders, not by shopping the individual line.
- Costs you can shop for: Title insurance, the settlement or closing agent, the survey, and pest inspection. Federal rules require the lender to give you a written list of providers, and you are free to use someone else. On a $400,000 purchase the spread between the cheapest and most expensive title quote is routinely over $1,000.
- Costs that are not really fees: Prepaid interest, the first year of homeowners insurance, and the initial escrow deposit for taxes and insurance. This is your own money moving into an account you own; it is not a charge, though it is cash you need at the table.
Reading a Loan Estimate
Within three business days of your application, a lender must give you a Loan Estimate on a standard three-page form. Page two itemises closing costs in exactly the categories above: section A is the lender's own fees, section B is services you cannot shop for, and section C is services you can. That structure is deliberate — the form is designed so that two lenders' estimates can be laid side by side and compared line for line.
Some figures on the form are guaranteed and some are not. The lender's own charges in section A cannot increase at all. Section C items can increase without limit if you choose a provider not on the lender's written list. Everything else is subject to a 10% tolerance across the group. If the final Closing Disclosure exceeds those tolerances, the lender must refund the difference — a right that goes unclaimed largely because borrowers do not compare the two documents.
What actually reduces the total
Shopping title and settlement services is the single largest lever available to a buyer, and it is the one most often skipped because the lender's recommended provider arrives pre-filled on the form. Getting two additional quotes takes an afternoon.
Seller concessions are the second lever. In a balanced or slow market, asking the seller to pay a portion of closing costs is routine, and the amount permitted is capped by loan type — 3% of the price on most conventional loans with less than 10% down, 6% on FHA, 4% on VA. A concession is generally worth more to a buyer than an equivalent price reduction, because it reduces cash needed at closing rather than monthly payment.
Lender credits are the third: accepting a slightly higher interest rate in exchange for the lender paying part of your closing costs. This is the reverse of buying points, and it makes sense when you expect to move or refinance within a few years, because you never hold the higher rate long enough for it to cost more than the credit was worth.
Frequently asked questions
How much are closing costs on a $400,000 house?
At the typical 2–5% range, closing costs on a $400,000 purchase run roughly $8,000 to $20,000. The spread is wide because transfer taxes vary enormously by state — some charge nothing, others take more than 1% of the price on their own. Run the calculator with your state selected for a figure that reflects local transfer tax rather than a national average.
Who pays closing costs, the buyer or the seller?
Both, but for different things. The buyer pays the costs of obtaining the loan and insuring the title. The seller typically pays the real estate commissions and, in many states, the transfer tax. Which side pays which specific item is partly local custom and entirely negotiable — a seller paying some of the buyer's costs is a standard term in a slow market.
Can closing costs be rolled into the mortgage?
On a purchase, generally not — the loan is capped at a percentage of the price and closing costs sit outside it. There are two exceptions: government-programme fees like the FHA upfront MIP and the VA funding fee can be financed into the balance, and a lender credit lets you trade a higher rate for the lender covering costs. On a refinance, rolling costs into the new balance is normal and is what the refinance calculator assumes.
What is the difference between closing costs and a down payment?
The down payment is equity — it becomes your stake in the house. Closing costs are the transaction expenses of buying it and buy you nothing. Both are due at closing, so what you need in cash is the sum of the two, which is the figure this calculator reports as cash to close.
Reference sources
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For developers
This calculation is also available as a REST API and through an MCP server, both running the same engine as this page — so the figures match by construction rather than by convention. No key required.