How Much Are Closing Costs in 2026? Complete Breakdown + 8 Ways to Reduce
Buying a $400K home? Expect $8,000-$20,000 in closing costs (2-5% of price). But here's the good news: Many fees are negotiable, and you can save $2,000-$5,000 with the right strategies. Here's exactly what you'll pay and how to reduce it.
⚡ Quick Closing Costs Estimate
$200K Home
$4K-$10K
2-5% of price
$400K Home
$8K-$20K
2-5% of price
$600K Home
$12K-$30K
2-5% of price
🎯 Compare Lenders to Save on Closing Costs
Lender fees vary by $1,000-$3,000. Compare 3-5 lenders to find lowest closing costs:
Complete Closing Costs Breakdown
Closing costs are fees paid at closing to complete your home purchase. They're separate from your down payment and typically range from 2-5% of the home price.
Real Example: $400K Home Purchase
Purchase Details:
- Home price: $400,000
- Down payment: $80,000 (20%)
- Loan amount: $320,000
- Loan type: Conventional 30-year fixed
- Rate: 6.5%
Estimated Closing Costs:
Total: $12,800 (3.2% of price)
- Lender fees: $4,200
- Title & escrow: $3,100
- Third-party fees: $1,500
- Prepaid items: $4,000
Category 1: Lender Fees ($3,000-$6,000)
Lender fees are charged by your mortgage lender for processing and underwriting your loan. These are the most negotiable fees.
| Fee | Typical Cost | Negotiable? | What It Covers |
|---|---|---|---|
| Origination Fee | 0.5-1% ($2K-$4K) | Yes | Lender's profit for making loan |
| Underwriting Fee | $400-$800 | Yes | Underwriter reviews loan file |
| Processing Fee | $300-$500 | Yes | Loan processor handles paperwork |
| Appraisal Fee | $500-$700 | No | Appraiser determines home value |
| Credit Report | $30-$50 | No | Pull credit from 3 bureaus |
| Application Fee | $0-$500 | Yes | Process application (often waived) |
| Rate Lock Fee | $0-$300 | Yes | Lock rate for 30-60 days |
💡 NEGOTIATION TIP:
Origination fee is pure profit for lender. Ask to reduce or waive it. Example: "Lender A quoted 0.5% origination ($2,000). Can you match that?" Many lenders will negotiate to win your business. Potential savings: $500-$2,000.
Category 2: Title & Escrow Fees ($2,000-$4,000)
Title and escrow fees ensure clean ownership transfer and protect against title defects.
| Fee | Typical Cost | Negotiable? | What It Covers |
|---|---|---|---|
| Title Search | $200-$400 | Maybe | Research property ownership history |
| Title Insurance | $1,000-$2,000 | Maybe | Protects against title defects |
| Escrow/Closing Fee | $500-$1,000 | Maybe | Escrow company handles closing |
| Recording Fees | $100-$300 | No | County records deed transfer |
| Transfer Taxes | $0-$4,000 | No | State/local tax on transfer (varies) |
📐 TITLE INSURANCE TIP:
Title insurance rates are regulated in some states (fixed price). In other states, you can shop around. Call 2-3 title companies for quotes. Potential savings: $500-$1,000. Ask lender for list of approved title companies.
🎯 Get Loan Estimate to See Exact Costs
Lenders must provide Loan Estimate within 3 days of application. Compare estimates from 3-5 lenders:
Get Loan Estimate (Compare Costs)Category 3: Third-Party Fees ($1,000-$2,000)
Third-party fees are paid to independent service providers (not lender or title company).
| Fee | Typical Cost | Required? | What It Covers |
|---|---|---|---|
| Home Inspection | $400-$600 | Optional | Inspector checks home condition |
| Survey | $300-$500 | Sometimes | Surveyor maps property boundaries |
| Pest Inspection | $100-$200 | Sometimes | Check for termites/pests (required in some states) |
| HOA Transfer Fee | $200-$500 | If HOA | HOA processes ownership transfer |
| Attorney Fee | $500-$1,500 | Some States | Attorney reviews closing docs (required in some states) |
💡 OPTIONAL FEES TIP:
Home inspection is optional but HIGHLY recommended ($400-600). Survey is optional unless lender requires it. Pest inspection required in some states (CA, FL, TX). Don't skip inspection to save $500 - it can reveal $10K+ of issues.
Category 4: Prepaid Items ($2,000-$5,000)
Prepaid items aren't fees - they're expenses you'd pay anyway, but you must bring cash at closing.
| Item | Typical Cost | What It Covers |
|---|---|---|
| Homeowners Insurance | $1,200-$2,400 | 1 year prepaid (required by lender) |
| Property Taxes (Escrow) | $1,000-$3,000 | 2-6 months upfront for escrow account |
| Mortgage Interest | $200-$800 | Prorated interest from closing to month-end |
| HOA Dues | $200-$600 | 2-3 months upfront (if HOA) |
💡 PREPAID SAVINGS TIP:
Close at month-end to minimize prepaid interest. Example: Close on Jan 31 = 0 days interest. Close on Jan 1 = 30 days interest ($800 on $400K loan). Savings: $800. Also shop homeowners insurance (3-5 quotes) to save $200-500/year.
8 Ways to Reduce Closing Costs
Here are proven strategies to save $2,000-$5,000 on closing costs:
- Shop 3-5 Lenders (Save $1,000-$3,000)
Lender fees vary significantly. Get Loan Estimates from 3-5 lenders and compare Section A (lender fees). Focus on origination fee - it varies from 0% to 1.5%. Example: 0.5% vs 1.5% on $400K = $2,000 vs $6,000 = $4,000 savings.
- Negotiate Origination Fee (Save $500-$2,000)
Origination fee is negotiable. Ask: "Can you reduce or waive the origination fee?" Show competing quotes. Many lenders will negotiate to 0.25-0.5% to win your business.
- Ask for Lender Credits (Save $2,000-$4,000)
Lender credits = lender pays some of your closing costs in exchange for slightly higher rate (0.25-0.5% higher). Example: Accept 6.75% rate instead of 6.5%, get $3,000 credit toward closing costs. Good if you plan to refinance in 2-3 years.
- Close at Month-End (Save $200-$800)
Prepaid interest is prorated from closing to month-end. Close on last day of month = 0-1 days interest. Close on first day = 28-30 days interest. Savings: $200-800 on $400K loan.
- Shop Title Insurance (Save $500-$1,000)
In states where title rates aren't regulated, shop 2-3 title companies. Rates can vary 20-30%. Ask lender for list of approved title companies, then call for quotes.
- Skip Optional Fees (Save $200-$500)
Some lenders charge junk fees: courier fee ($50), document prep ($200), notary fee ($100). Ask to waive these. They're pure profit and often negotiable.
- Ask Seller to Pay Closing Costs (Save $5,000-$15,000)
Seller concessions allowed: Conventional 3-6%, FHA 6%, VA 4%, USDA 6%. Negotiate in offer: "Seller to pay $10,000 toward buyer's closing costs." Common in buyer's market.
- Use No-Closing-Cost Mortgage (Save $0 Upfront)
Roll closing costs into loan amount. Example: $400K home + $12K closing costs = $412K loan. Pro: No cash needed at closing. Con: Higher monthly payment ($80/month more) and more interest paid over 30 years.
Seller Concessions: How to Get Seller to Pay
Seller concessions (also called seller credits) are when the seller pays some or all of your closing costs.
Seller Concession Limits by Loan Type
| Loan Type | Max Concession | Example ($400K) | Notes |
|---|---|---|---|
| Conventional (20%+ down) | 6% | $24,000 | Most generous |
| Conventional (10-19% down) | 6% | $24,000 | Same as 20%+ |
| Conventional (<10% down) | 3% | $12,000 | Lower limit |
| FHA | 6% | $24,000 | Generous for low down |
| VA | 4% | $16,000 | Common for veterans |
| USDA | 6% | $24,000 | Rural properties |
How to Negotiate Seller Concessions
Example Negotiation:
Scenario:
- • Home price: $400,000
- • Your closing costs: $12,000
- • You have: $80,000 saved (20% down)
- • Seller's market: No (balanced market)
Your Offer:
- • Purchase price: $400,000
- • Down payment: $80,000 (20%)
- • Seller to pay $10,000 toward buyer's closing costs
- • Net to seller: $390,000 - $10,000 = $380,000
Your Savings:
- • Closing costs: $12,000
- • Seller pays: $10,000
- • You pay: $2,000
- • Savings: $10,000 cash at closing
📐 WHEN SELLER CONCESSIONS WORK:
✅ Buyer's market (homes sitting 60+ days)
✅ Home overpriced (offer full price but ask for concessions)
✅ Seller motivated (divorce, job relocation, financial hardship)
✅ Home needs repairs (ask for credits instead of repairs)
❌ Seller's market (multiple offers, bidding war)
🎯 Ready to Save on Closing Costs?
Compare lenders to find lowest closing costs. Get Loan Estimates from 3-5 lenders in 3 minutes:
Frequently Asked Questions
Are closing costs tax deductible?
Some are, most aren't. Tax deductible: Mortgage points (if buying down rate), Prepaid mortgage interest, Property taxes. NOT deductible: Lender fees, Title fees, Appraisal, Inspection, Recording fees. Consult tax advisor for your situation.
Can I roll closing costs into my mortgage?
Yes, with no-closing-cost mortgage. Lender adds closing costs to loan amount. Example: $400K home + $12K costs = $412K loan. Pro: No cash at closing. Con: Higher monthly payment ($80/month more) and $28,800 more interest over 30 years. Only do this if you're cash-strapped.
When do I pay closing costs?
At closing (signing day). You wire funds or bring cashier's check to closing. Amount is on Closing Disclosure (received 3 days before closing). Wire funds 1-2 days before closing to ensure they clear. Never bring cash or personal check.
What if I don't have enough for closing costs?
Options: 1) Ask seller to pay (seller concessions), 2) Get lender credits (higher rate, lender pays costs), 3) Gift money from family, 4) Down payment assistance programs, 5) Roll into loan (no-closing-cost mortgage), 6) Delay closing and save more. Don't skip inspection to save money - that's risky.
Do closing costs include down payment?
No, they're separate. Down payment goes toward home purchase. Closing costs are fees for processing loan and transferring ownership. Example: $400K home with 20% down = $80K down payment + $12K closing costs = $92K total cash needed at closing.
Meet Sarah
Senior Mortgage Advisor & VA Loan Specialist
Sarah Mitchell brings over 12 years of mortgage industry expertise, specializing in VA loans and first-time homebuyer programs. As a certified NMLS professional, she has helped thousands of veterans and military families achieve homeownership through specialized loan programs. Her deep understanding of VA benefits and down payment assistance programs makes her a trusted advisor for service members transitioning to civilian life.
EXPERTISE:
KEY ACHIEVEMENT:
Helped 2,500+ veterans secure home loans