On a typical home purchase, buyers pay about 2% to 5% of their loan amount in closing costs, and sellers pay roughly 6% to 10% of the sale price once agent commissions are included.1Fannie Mae. Closing Costs Calculator On a $400,000 home with the buyer financing 80% of the price, that works out to roughly $6,400 to $16,000 for the buyer and $24,000 to $40,000 for the seller. Your exact closing costs as a percentage of the purchase price depend on your loan type, the property’s location, and what you negotiate with the other side.
How the Buyer’s Percentage Is Calculated
The 2% to 5% range applies to the mortgage amount, not the full purchase price.1Fannie Mae. Closing Costs Calculator That distinction changes the math. On a $400,000 home with 10% down, you’re borrowing $360,000, so 2% to 5% of the loan is $7,200 to $18,000. These charges are separate from your down payment and are due at the closing table or wired to the settlement agent beforehand.
If you’re paying cash, every lender-related fee disappears. No origination charge, no discount points, no mortgage insurance. You still owe title fees, recording fees, and any transfer taxes, but the total as a share of the purchase price drops well below the financed range.
How the Seller’s Percentage Breaks Down
Sellers have historically paid 6% to 10% of the sale price, and the largest single piece has been real estate agent commissions. Before August 2024, standard practice was for the seller to pay both the listing agent and the buyer’s agent, typically 5% to 6% combined, with each side receiving roughly 2.5% to 3%.
New rules that took effect in August 2024 ended the automatic offer of compensation to a buyer’s agent through the listing service. A seller can still agree to cover the buyer’s agent fee, but it’s now negotiated rather than assumed. A seller who declines to pay the buyer’s agent could see total closing costs fall by 2.5 to 3 percentage points, bringing the range closer to 3% to 7% of the sale price in some transactions.
Outside of commissions, sellers commonly pay transfer taxes, a prorated share of property taxes, their portion of title and escrow fees, and any outstanding liens or mortgage payoff. These additional items typically add up to 1% to 3% of the sale price, depending on where the property sits.
What’s Inside the Buyer’s Percentage
Knowing where the money goes helps you spot errors on your settlement statement and identify charges worth shopping around for. Buyer closing costs fall into four groups.
Loan Fees
Lenders charge an origination fee for processing the mortgage, commonly 0.5% to 1% of the loan amount. You’ll also pay for a credit report and a property appraisal. If you buy discount points to lower your interest rate, each point costs 1% of the loan amount and is added to your closing costs.2Consumer Financial Protection Bureau. How Should I Use Lender Credits and Points (Also Called Discount Points)?
Title and Insurance
A title search confirms the seller legally owns the property and that no outstanding liens or disputes attach to it. Two title insurance policies are typically issued at closing: one protecting the lender and one, optional but recommended, protecting you against future ownership claims. Costs vary by location but appear in almost every residential closing.
Government Charges
Local governments charge recording fees to enter the new deed into public records. Transfer taxes, sometimes called documentary stamp taxes or excise taxes, are imposed by state, county, or municipal authorities when property changes hands. Some jurisdictions charge a flat fee; others apply a percentage of the sale price. Rates across states range from nothing to around 0.7% or higher, which is why location is one of the biggest variables in your total.
Prepaid Items and Escrow
Lenders require you to prepay certain recurring costs at closing. You’ll typically owe your first year’s homeowner’s insurance premium upfront, plus a prorated share of property taxes from closing day to the next tax due date. Your lender also sets up an escrow account, and federal law caps the initial escrow cushion at two months’ worth of payments.3Consumer Financial Protection Bureau. 12 CFR 1024.17 – Escrow Accounts Prepaid interest covering the days between closing and your first mortgage payment is also collected at settlement.
How Loan Type Shifts the Percentage
The mortgage program you choose can push your closing costs toward the top of the 2% to 5% range or add charges that don’t appear with other loans.
- FHA loans: An Upfront Mortgage Insurance Premium of 1.75% of the base loan amount is collected at closing or rolled into the loan balance. On a $360,000 loan, that’s $6,300 before any other fees.4U.S. Department of Housing and Urban Development. What Is the FHA Mortgage Insurance Premium Structure for Forward Mortgage Loans
- VA loans: Eligible veterans and service members pay a funding fee instead of mortgage insurance. For first-time use with less than 5% down, the fee is 2.15% of the loan amount; 5% or more down lowers it to 1.5%, and 10% or more brings it to 1.25%. On subsequent use with less than 5% down, the fee rises to 3.3%.5Veterans Affairs. VA Funding Fee and Loan Closing Costs
- Conventional loans: No upfront government insurance premium, but if your down payment is below 20%, private mortgage insurance is typically required. PMI is usually paid monthly, so it may not appear in your closing cost total, but it raises your ongoing payment.6Consumer Financial Protection Bureau. What Is Private Mortgage Insurance?
- Cash purchases: No origination fee, no discount points, no mortgage insurance, and no lender-required appraisal. Title fees, recording fees, transfer taxes, and any attorney fees your jurisdiction requires still apply.
Bringing the Percentage Down
Closing costs are more negotiable than many buyers realize. A few approaches can meaningfully shrink your out-of-pocket share.
Compare lenders. Origination fees, underwriting charges, and discount point pricing vary. Getting Loan Estimates from two or three lenders gives you leverage to negotiate or pick the lowest-cost option.
Shop third-party services. Your lender must give you a list of services you’re allowed to shop for, such as title insurance and settlement agents. Comparing prices on these items can save hundreds of dollars.
Ask for seller concessions. The seller can agree to credit a portion of the sale price toward your fees. If you’re using a conventional loan backed by Fannie Mae, the cap depends on your down payment: up to 3% with 10% or less down, up to 6% with between 10% and 25% down, up to 9% with 25% or more down, and 2% on investment properties regardless of down payment.7Fannie Mae. Interested Party Contributions (IPCs) FHA concessions are generally capped at 6% and VA at 4%. Any concession above your actual closing costs is treated as a sale-price reduction for underwriting purposes.
Consider a no-closing-cost mortgage. Some lenders cover your closing costs in exchange for a higher interest rate or by adding the costs to the loan balance. You pay less upfront, but a higher rate means more interest over time, so the trade works best if you plan to sell or refinance within a few years.8Consumer Financial Protection Bureau. Is There Such a Thing as a No-Cost or No-Closing Cost Loan or Refinancing?
Look into assistance programs. State and local housing agencies offer closing cost grants or forgivable loans for first-time or lower-income buyers. Programs vary by location and often carry income limits.
Verifying What You’ll Actually Pay
Your lender must deliver a Loan Estimate within three business days of receiving your mortgage application, and a Closing Disclosure at least three business days before closing.9eCFR. 12 CFR 1026.19 – Certain Mortgage and Variable-Rate Transactions Together, these documents let you confirm the percentage you’re actually being charged.
Not every fee can increase between the two documents. Fees paid to your lender, fees paid to a mortgage broker, transfer taxes, and fees for services the lender didn’t let you shop for cannot go up at all. If they do, the lender covers the difference. Recording fees and fees for third-party services you were allowed to shop for can rise, but the total for that group cannot exceed the original estimate by more than 10%. Prepaid interest, insurance premiums, escrow deposits, property taxes, and fees for providers you chose outside the lender’s list have no fixed cap, though they must be based on the best information available at the time.
When your Closing Disclosure arrives, compare it line by line against your Loan Estimate. If a zero-tolerance fee increased or the 10% group blew past its limit, you’re entitled to a refund of the overage. That final figure, divided by the sale price, is your real closing cost percentage.