Closing costs on a home purchase commonly run about 2% to 5% of the loan amount, as of 2026. That is a general rule of thumb, not a quote, and the exact total depends on the loan, the state, and whose pricing you choose. On a $400,000 loan, that spread is roughly $8,000 to $20,000.
Duane Buziak explains below what makes up average mortgage closing costs, category by category. You will see a worked dollar example, learn which fees you can compare and which are fixed, and see how the free comparison tool at Free Mortgage Search by Duane Buziak lets you line up Loan Estimates with a NoTouch Credit Pull, a soft-pull comparison with no hard inquiry.
The 2% to 5% Rule of Thumb and Why the Range Is So Wide
The 2% to 5% range is widely used by housing counselors and loan professionals as a planning figure for buyers. Published studies of closing costs vary by year, loan size, and state, so treat any single national average with caution. The practical takeaway is that a buyer with a $350,000 loan should plan for something in the neighborhood of $7,000 to $17,500, then replace that guess with a real Loan Estimate as soon as possible.
Several things stretch the range:
- Loan size. Many fees are flat, so smaller loans tend to land at a higher percentage and larger loans at a lower one.
- Loan program. Some programs carry upfront or financed fees, and others do not.
- Prepaid taxes and insurance. A home with a high insurance premium or a tax bill due soon after closing can add thousands in prepaids and escrow deposits.
- State and local taxes. Transfer taxes, mortgage recording taxes, and title insurance pricing differ a great deal by state. Some states charge little, and others add a full percentage point or more.
- Pricing choices. Paying discount points lifts closing costs now. Taking a lender credit lowers them in exchange for a higher rate.
Closing costs are not your down payment
A common misconception is that closing costs are part of the down payment. They are separate. The down payment reduces the amount you borrow. Closing costs pay for the services and prepaid items needed to create and record the loan.
The number labeled “cash to close” on your paperwork combines your down payment, closing costs, prepaids, and escrow deposits, less any credits. Buyers who budget only for the “fees” often come up short, because prepaids and escrow deposits can account for a third or more of the total. Those items are not lost money. They fund your first insurance premium and tax payments, and the escrow deposit is held in your account.
Line by Line: Where the Money Goes on a Loan Estimate
The Loan Estimate is a standardized three-page form, and page two breaks closing costs into lettered sections. The Consumer Financial Protection Bureau explains the form in its Loan Estimate explainer, and the Closing Disclosure you receive before closing uses a matching layout. That consistency is what lets you compare two offers side by side.
- Section A, origination charges. What the broker or lender charges for making the loan: application, underwriting, processing, and any discount points. A discount point is prepaid interest equal to 1% of the loan amount, paid to lower your rate.
- Section B, services you cannot shop for. Third-party services the lender requires and selects, typically the appraisal, credit report, and flood certification. The appraisal estimates the home’s value for the lender’s benefit, not yours.
- Section C, services you can shop for. Usually title and settlement services, plus items like a survey or pest inspection. You can choose your own provider for these.
- Section E, taxes and other government fees. Recording fees, which pay the county to put the deed and mortgage in the public record, plus any transfer taxes your state or locality charges.
- Section F, prepaids. Items paid in advance: the first year of homeowners insurance, and prepaid interest covering the days between closing and the end of that month. Some loans also require prepaid property taxes.
- Section G, initial escrow payment at closing. A cushion of several months of taxes and insurance deposited into your escrow account, from which the servicer later pays those bills.
Title insurance deserves its own note. The lender’s policy protects the lender against ownership defects and is nearly always required. The owner’s policy protects you and is optional, though skipping it leaves you exposed to a claim against the property. In some states the owner’s policy is cheaper when bought together with the lender’s, so ask for both prices.
Section D totals Sections A through C, Section I totals E through H, and Section J adds them to give total closing costs. Section H holds other items, such as an owner’s title policy or a home warranty, depending on how the form is completed.
A Worked Example: Closing Costs on a $400,000 Purchase Loan
Suppose you are buying with a $400,000 loan at an illustrative 6.5% rate on a 30-year fixed term. Every figure below is an illustration to show the math. None of it is a quote, and your numbers will differ.
| Fee category | Illustrative amount | Negotiable or shoppable? |
|---|---|---|
| Origination charges (Section A) | $2,800 | Negotiable and comparable across brokers and lenders |
| Appraisal ($650) and credit report ($60) (Section B) | $710 | Mostly fixed; the provider is chosen for you |
| Title and settlement services (Section C) | $2,300 | Shoppable |
| Recording fees (Section E) | $250 | Fixed by the county |
| Subtotal: loan and third-party costs | $6,060 | |
| Prepaid interest, 15 days (Section F) | $1,068 | Set by closing date |
| Homeowners insurance, 12 months (Section F) | $1,800 | Shoppable through your insurance quotes |
| Initial escrow deposit (Section G) | $1,650 | Set by your tax and insurance bills |
| Total closing costs and prepaids | $10,578 |
The math: $2,800 + $710 + $2,300 + $250 = $6,060. Prepaid interest is $400,000 × 6.5% ÷ 365 = about $71.23 per day, times 15 days, or $1,068. Escrow is three months of property taxes at $400 ($1,200) plus three months of insurance at $150 ($450), or $1,650. Then $6,060 + $1,068 + $1,800 + $1,650 = $10,578, which is 2.64% of the loan. That sits inside the 2% to 5% range, toward the lower end.
The same loan with a point versus a no-out-of-pocket option
Now compare two pricing choices, again with illustrative rates.
- One discount point. You pay $4,000 (1% of the loan) to drop the rate from 6.5% to 6.25%. Total costs rise to $14,578. Principal and interest falls from about $2,528 to about $2,463, a saving of roughly $65 per month. Break-even is $4,000 ÷ $65 = about 61 months, or just over five years.
- A no-out-of-pocket closing option. You accept a higher rate, an illustrative 6.875%, in exchange for a lender credit of $6,060 that covers Sections A through E. Principal and interest rises to about $2,628, roughly $100 more per month, or $1,200 a year. After about five years the extra interest has roughly matched the credit. Prepaids and escrow of $4,518 are still due at closing.
Neither is better in the abstract. The point suits someone staying a decade, and the credit suits someone short on cash now or likely to sell or refinance within a few years. Illustrative APR disclosure: the annual percentage rate, which folds fees and points into a yearly cost, will be higher than the note rate in each scenario, and the point option and credit option will show different APRs. Rates and payments above are examples, not offers, and do not reflect taxes, insurance, or mortgage insurance.
Which Costs You Can Shop and Which Are Fixed
Closing costs fall into three groups, and knowing which is which tells you where to spend your effort.
- Fixed or government-set. Recording fees, transfer taxes, and prepaid property taxes are set by the county or state. Nobody can negotiate them down, though you should confirm they match the published rates.
- Controlled by the broker or lender. Origination charges, underwriting fees, and discount points. This is where pricing differs most between offers.
- Shoppable. Title and settlement services, a survey, and a pest inspection, when the Loan Estimate lists them in Section C. Homeowners insurance is also yours to shop.
What can change between estimate and closing
Under the CFPB’s rules, the Loan Estimate fees fall into tolerance categories. Charges from the lender, broker, or their affiliates, such as origination charges and discount points, generally cannot increase at closing unless you request a change or a valid changed circumstance arises. Recording fees and services you choose from the lender’s provider list can rise by no more than 10% in total. Items such as prepaid interest, insurance premiums, escrow deposits, and services you pick on your own can change without a cap, though the figures should be good-faith estimates. The CFPB’s Loan Estimate guidance covers the details.
The most common comparison mistake
Many buyers compare only the interest rate. A low rate can sit alongside high Section A charges or no lender credit, and a slightly higher rate can come with a credit that cuts your cash to close. That is why a rate quote by itself tells you little, and why the full Loan Estimates, line by line, are the right thing to compare. The lowest rate is not automatically the lowest cost.
Why a Broker’s Access Can Change Your Closing Costs
A national direct lender prices your loan from its own shelf: one set of products, one underwriting team, one rate sheet. A broker such as Duane Buziak places loans with hundreds of wholesale lenders, so the same file can be priced across many shelves and matched to the one whose pricing and guidelines fit it. Section A charges and lender credits can differ meaningfully from one wholesale lender to another, and that is where the access shows up in your closing costs.
| Dimension | Broker with wholesale access | Single-shelf direct lender |
|---|---|---|
| Pricing sources | Many wholesale lenders priced against one file | One company’s rate sheet |
| Fee and credit comparison | Offers can be compared across lenders before you commit | One set of fees and credits to accept or decline |
| Fit for unusual files | Can move a file to a lender whose guidelines suit it | Limited to in-house guidelines and overlays |
| Underwriting and closing | Handled by the chosen wholesale lender | In-house underwriting and processing |
| Cost to compare | Free through Duane Buziak’s search tool | Varies; each quote may need its own application |
A single-shelf lender has real strengths, including one team that controls the whole process. The difference is structural, not a verdict on any one company.
How the free search works
You complete one application on Free Mortgage Search by Duane Buziak. Offers come back for comparison, and the comparison uses a NoTouch Credit Pull, a soft-pull process that does not create a hard inquiry on your credit report. There is no obligation to proceed. Duane has been helping buyers find the right mortgage since 2014, and the tool is built for the stage when you are still comparing.
Dare to Compare
If you already hold a Loan Estimate from another source, Dare to Compare lets you set it beside what the search returns, line by line: Section A, credits, rate, and APR. Results depend on your credit, loan type, and the market, and nothing is guaranteed. Sometimes the comparison shows your existing estimate is competitive, and that is useful to know too.
Ways to Lower Your Cash to Close
You have several levers, and they work best in combination.
- Lender credits. Accepting a modestly higher rate can offset some or all of Sections A through E, as the $400,000 example showed. It is a trade of monthly cost for upfront cost.
- Seller concessions. A seller can agree to pay part of your closing costs, within program caps. For conventional primary-residence loans, Fannie Mae’s Selling Guide has capped these at 3% of the price with a down payment under 10%, 6% with 10% to under 25% down, and 9% with 25% or more, as of 2026. Confirm the current limits and your specific program before writing an offer.
- Shopping title. Section C services are yours to compare. Request quotes from two or three providers and ask for the owner’s policy price alongside the lender’s policy.
Closing date timing
Prepaid interest covers the days from closing to month end, so the date matters. Using the earlier example at about $71.23 per day, closing on the 15th leaves about 16 days of interest (about $1,140), while closing on the 28th leaves about 3 days (about $214). The difference is roughly $926 less cash to close. You still owe that interest, since your first full payment is not due until the following month, so you pay less now rather than less overall. A late-month closing helps cash flow but does not reduce total interest paid.
Assistance programs
State housing finance agencies often offer down payment and closing cost assistance to eligible buyers. As one example, Virginia Housing runs assistance programs for qualifying buyers, with income, price, and credit rules that change over time, so check its current program details directly. Agencies in the other states Duane is licensed in, including Florida, Tennessee, Georgia, the District of Columbia, North Carolina, South Carolina, and Maryland, have similar offerings. Ask which programs fit your situation before you sign a purchase contract.
Eight Questions Buyers Ask About Average Mortgage Closing Costs
What are average mortgage closing costs?
As a rule of thumb, as of 2026, buyers commonly see about 2% to 5% of the loan amount. On a $400,000 loan that is roughly $8,000 to $20,000, depending on the loan, the state, and the pricing you choose.
Do refinances cost the same as purchases?
Not exactly. Many of the same fees apply, such as origination, appraisal, and title, but a refinance has no seller, no transfer tax in many states, and often a different title cost. Refinance costs are also commonly cited in the 2% to 6% range, so compare actual Loan Estimates.
Can I roll closing costs into the loan?
Sometimes. On a refinance, costs can often be added to the balance, subject to loan-to-value limits. On a purchase, you generally cannot finance them unless the purchase price and appraisal leave room or a credit covers them. Financing costs means paying interest on them for the life of the loan.
Can the seller pay my closing costs?
Yes, through seller concessions negotiated in the contract, up to the limits of your loan program. Limits depend on the occupancy type and your down payment, so confirm them before you make an offer.
Does comparing quotes hurt my credit?
Not with a NoTouch Credit Pull. The comparison on Free Mortgage Search by Duane Buziak uses a soft pull, so it does not create a hard inquiry. A hard pull comes later, if you choose to move forward with a specific loan.
Are Loan Estimates binding?
Partly. Some fees are held in place by tolerance rules, while others can change within limits or without a cap, as described above. A Loan Estimate is a good-faith estimate, not a rate lock. Locking your rate is a separate step, and the lock period matters if closing could slip.
What is the difference between APR and the interest rate?
The interest rate sets your monthly interest charge. The APR also folds in certain fees and points and expresses the total as a yearly cost, so it is usually higher. Comparing APRs helps when two offers have different fee structures, though it is less reliable for loans you will keep a short time.
Are there no-out-of-pocket closing options, and what is the trade-off?
Yes. A lender credit can offset some or all of the loan and third-party costs in exchange for a higher rate. The trade-off is a larger monthly payment and more total interest, which is why the length of time you expect to keep the loan matters. Prepaids and escrow deposits usually remain due.
Comparing Loan Estimates Before You Commit
Closing costs are a range, not a single figure, and where you land in it depends on the loan and on whose pricing you accept. The surest way to know your number is to put real Loan Estimates side by side. Your dream home is within reach: start comparing personalized mortgage rates from trusted lenders today and discover the loan solution that fits your budget and goals. Compare rates now and take the first step toward securing your home with expert guidance every step of the way. If you already have an estimate in hand, use Dare to Compare to see how it stacks up, with a NoTouch Credit Pull keeping your credit report untouched while you do.
