Closing Cost Estimator

Closing costs are fees and expenses paid at the end of a real estate transaction, above and beyond the property purchase price. Both buyers and sellers pay closing costs, but the amounts differ significantly. For buyers, total closing costs typically run 2–5% of the loan amount.

Total Buyer Closing Costs formula: Total Closing Costs = Loan Origination Fee + Appraisal + Title Insurance + Escrow/Attorney + Prepaid Items + Government Fees

Rule of thumb: Estimated Closing Costs ≈ Loan Amount × 0.02 to 0.05

What each variable means:

Lender fees (typically 0.5–1% of loan):

• Origination fee — lender’s fee for processing the loan; 0–1% of loan amount
• Discount points — optional upfront fee to buy down the interest rate; 1 point = 1% of loan = ~0.25% rate reduction
• Appraisal fee — required by lender to verify property value: $500–$1,000
• Credit report fee: $25–$50

Title and escrow fees (vary by state):

• Title search and insurance: $700–$2,000 (owner’s policy); lender’s policy is mandatory and similarly priced
• Escrow/attorney fee: $500–$2,500; attorney states (e.g., NY, MA) require a closing attorney

Prepaid items (not “fees” — you own these):

• Homeowner’s insurance: first year paid upfront (~$1,200–$3,000)
• Prepaid interest: daily interest from closing date to month-end
• Escrow reserves: 2–3 months of property taxes + insurance

Government recording fees and transfer taxes: vary widely; $100–$3,000+

Worked example: $450,000 home, 20% down, $360,000 loan.

Origination fee (0.5%): $1,800 Appraisal: $700 Title insurance (lender + owner): $2,200 Escrow fee: $1,200 Prepaid interest (15 days at 7%): $360,000 × 0.07 / 365 × 15 = $1,036 Insurance prepaid: $1,800 Escrow reserves (3 months taxes + insurance): $4,000 Recording fees: $300 Total estimated closing costs: ~$13,036 ≈ 3.6% of loan amount

Seller closing costs are typically higher in dollar terms: agent commissions (5–6% of sale price = $27,000 on this sale), prorated taxes, and transfer taxes.