Closing Cost Calculator for Buyers

What Are Closing Costs?

Closing costs are the total fees that are paid for the services required when you purchase a new home or refinance your existing home. Closing costs are usually paid by the buyer of the home, but the seller pays some closing costs in the form of real-estate commission.

Closing costs will include expenses such as property-related charges, lender fees, insurance costs and any other costs that are incurred to finalize the mortgage. Some of these expenses are fixed such that they are the same for anyone buying a similar valued home, for example, property taxes. On the other hand, some of the expenses you can shop around for and get a lower fee, for example, home inspection fee or lawyer costs.

When you apply for the mortgage, your lender is required to provide you the Loan Estimate document which will include an outline of the closing costs. Once the mortgage is approved and the deal has gone through, a few days before the settlement date, the lender will give you the Closing Disclosure document which will show all the closing costs that will have to be paid.

How Much Are Closing Costs?

Closing costs are the fees that a buyer and a seller need to pay at the time of closing on a real estate deal. Closing costs are composed of the fees charged by service providers that are involved in the real estate transaction. A buyer and a seller pay closing costs towards different items depending on the state they are in. As a rule of thumb, every party pays for the services that are related to them. For example, a seller will pay the commission to the real estate agents for their help facilitating the transaction while a buyer will pay loan origination fees to their lender for providing the funds for the transaction.

The buyer’s closing costs will include expenses such as property-related charges, lender fees, insurance costs, and any other costs that are incurred to finalize the mortgage. Some of these expenses are fixed such that they are the same for anyone buying a similarly valued home, for example, property taxes. On the other hand, some expenses, such as home inspection fees or lawyer costs, are variable, which means that it is best to check different service providers and find the best deal.

When you apply for the mortgage, your lender is required to provide you with the loan estimate document which will include an outline of the closing costs. Once the mortgage is approved and the deal has gone through, a few days before the settlement date, the lender will give you the Closing Disclosure document which will show all the closing costs that will have to be paid.

Map of Average Closing Costs Across All 50 States

What Is Included in Closing Costs?

Closing costs can be divided into four main cost segments with each having its own subset of fees. Some of the fees are fixed, such that their cost does not change from situation to situation. However, a majority of the fees are variable, which means you can shop around different providers to get the lowest cost offer.

Closing Costs Summary Table

Property Related Fees

1. Appraisal Fee - An appraisal is required by the lender to determine the value of the property and the amount that needs to be borrowed. The appraisal fee is around $350.
2. Home Inspection Fee - This fee is used to determine if the property meets safety and quality standards. Home inspection fees can range from $350 - $600, our calculator assumes $450.
3. Title Search - If the property being purchased is not new, then a title search is required to ensure there are no issues of ownership or liens. Title search fees can range from $400 - $800, our calculator assumes $600.
4. Title Insurance - Lenders will require you to get title insurance to ensure that if a situation arises where your ownership is disputed, they can recoup their loan. Title insurance can range from 0.5% - 1% of the home price, our calculator assumes 0.5%.
5. Transfer Tax - Transfer tax covers the cost of transferring the deed and the title to a new homeowner. This tax can be quite hefty and is only applicable in some states.

Which States Have a Transfer Tax?

Mortgage-Related Fees

1. Credit Report Fee – The lender uses this fee to obtain your credit report. It costs about $25.
2. Application Fee – Processing the application has a fee of $350.
3. Loan Origination Fee – This fee is one of the largest, and it is also known as the underwriting or processing fee. It involves preparing and evaluating your mortgage such as notary fee, documentation, checking your financial records, verifying information, and the service provided during the entire process. The fee can change depending on the lender, and hence, it is very important to shop around and find the lowest-cost lender. The fee can range from 0.5% - 1% of the loan value, our calculator assumes 0.75%.
4. Legal Fee – A lawyer is required at closing to verify all the documents, with legal fees charged hourly. Fees can range from $600 - $1300, our calculator assumes, $1,000.
5. Discount Points – Points can be bought which can in turn help reduce your mortgage rate. One point can be bought for 1% of the loan amount and it lowers your mortgage rate by 0.25%. For example, if your loan amount is $300,000 at a mortgage rate of 3.25%, you can buy 1 discount point for $3,000 ($300,000 * 1%) and reduce your mortgage rate to 3% (3.25% - 0.25%). Use our mortgage points calculator to see how points will affect your mortgage.
6. Prepaid-Interest – Lenders will require you to pay any interest that is charged from the date of settlement to the first monthly mortgage payment. Prepaid interest can vary based on the number of days interest has to be paid, our calculator assumes 0.14% of the loan amount.

Mortgage Insurance Fees

1. Upfront Mortgage Insurance – If the down payment is less than 20% of the home value, then the lender will require you to get private mortgage insurance (PMI). PMI can be financed into the mortgage, or it can be paid upfront.
2. FHA, VA & USDA Fees – Government-backed loans have initial costs that have to be paid. FHA loans require FHA Mortgage Insurance Premium (MIP) which is 1.75% of the loan amount. VA loans have the VA funding fee and USDA loans have guarantee fees.

Annual Fees

1. Property Taxes – You will be required to pay two months of property taxes. The property rate will be dependent on your location.
2. Homeowners Insurance – Lenders will require you to get insurance against potential damages. In most cases, 12 months of insurance is paid upfront, our calculator assumes a cost of 0.4% of the home price.
3. Homeowners Association Fees – Some condominium associations, also known as homeowners associations, have fees for maintenance and improving the public condominium property and amenities.

After Closing Costs

There are some costs which generally occur when you move to your new home. They are not part of closing costs, but they should be considered. These costs include moving costs, the bump in expenses which occurs after each move, and the cost of replacing furniture and appliances which are past their prime time and you feel are not worth the move.