Closing costs & concessions
How much cash do I actually need to close?
Your down payment is not the whole number. Closing costs, prepaids, and property-specific fees all add to the total cash you need on closing day. Here is what each one is and why it exists.
The rates and costs on this page are illustrations chosen to explain the math. They are not quotes. Real pricing changes daily and varies by lender, loan program, and scenario.
In a hurry?See the key points
- Cash to close includes more than the down payment.
- Closing costs pay the lender, title company, appraiser, government offices, and other parties involved in the transaction.
- Prepaids fund interest, property taxes, and insurance based on timing, rather than paying for a new service.
- The property and location can add transfer taxes, association charges, insurance needs, and other expenses.
- Some costs, including home inspections, are paid out of pocket before closing and never appear on your final loan documents.
Four buckets make up your total cash to close.
When people say "I need 20% down to buy a home," they are only talking about one piece. The full amount you need on closing day is the sum of four categories, each serving a different purpose.
Your equity stake in the home. The percentage you choose affects your loan amount and whether mortgage insurance applies.
One-time fees for the services required to create your mortgage. Lender fees, title, appraisal, and recording.
Money you owe anyway (interest, taxes, insurance) collected upfront to set up your escrow account.
Items tied to the specific property: HOA fees, transfer taxes, or special assessments. These vary widely.
The formula
Down payment + closing costs + prepaids + property-specific items = total cash to close. The sections below break down each bucket so you know what to expect.
The closing costs to get your mortgage done.
These are one-time charges for the services involved in creating your mortgage. On a typical purchase at par pricing (no discount points, no lender credits), expect closing costs to run roughly 1.5% to 2.5% of your loan amount. This does not include prepaids.
About these estimates
These ranges assume par pricing. If you choose to buy discount points, your closing costs will be higher. If you take above-par pricing with lender credits, your costs will be lower. Neither is included in the estimates above. These are not quotes.
Prepaids are money you owe anyway, collected upfront.
Prepaids often surprise buyers because they add a significant amount to the cash needed at closing. But these are not charges for services. They are funds your lender collects to set up your escrow account and cover interest between your closing date and your first mortgage payment.
Prepaids can add roughly 1% to 2% of the loan amount to your cash needed at closing, depending on your property tax rate, insurance costs, and when in the month you close. They are fully itemized on your Loan Estimate.
Property-specific costs depend entirely on the home.
Not every purchase has these. They vary by location, community, and property type. Your lender and title company will identify which apply to your specific transaction.
Location matters
Some states have no transfer tax at all. Others require an attorney at closing, which adds an additional fee. These differences can add thousands of dollars depending on where you are buying. Your title company or closing attorney will provide specifics for your transaction.
The home inspection cost isn't on your Loan Estimate.
The Loan Estimate itemizes everything the lender knows about at the time of application. But there is one significant cost that never appears on it because it is not part of the loan transaction.
A home inspection is typically paid out of pocket during the contract period, well before closing day. It is not a lender requirement and is not part of the loan file, so it never appears on your Loan Estimate or Closing Disclosure.
Despite not being on the LE, it is a real cost of buying a home and should be factored into your total budget. Inspection fees vary by property size and location, and additional specialized inspections (radon, sewer scope, structural) add to the total.
Typically $400 to $800 for a standard inspection, with additional costs for specialized inspections
Which fees are fixed and which you can influence.
Not every line item on your Loan Estimate is set in stone. Understanding which fees are shoppable helps you make informed decisions about where to focus your attention.
You can influence these
- Title company selection (you have the right to choose in most states)
- Homeowner's insurance provider and coverage level
- Closing date (affects how much prepaid interest you owe)
- Home inspector selection
These are generally fixed
- Appraisal fee (set by the appraisal management company)
- Recording fees (set by your county)
- Transfer taxes (set by state or local law)
- HOA transfer fees (set by the HOA)
- Credit report fee
Your Loan Estimate is the source of truth
Within three business days of submitting a loan application, your lender is required to provide a Loan Estimate that itemizes all anticipated costs. This is where you will see the real numbers for your specific transaction.
Seller credits and lender credits can reduce what you owe at closing.
Closing costs and prepaids do not always have to come entirely out of your pocket. Seller credits (negotiated as part of your offer) and lender credits (received in exchange for a slightly higher interest rate) can both be applied toward these costs.
The cap
Seller credits and lender credits, alone or combined, can never exceed the actual closing costs and prepaids on your transaction. If you negotiate more in credits than you have in costs, the excess cannot be used. It does not go toward your down payment or come back to you as cash.
Why offer design matters
Careful communication between you, your real estate agent, and your lender regarding offer structure is critical. The goal is to make sure all credits negotiated can actually be used. If the credits exceed the costs, you leave money on the table. Your lender can estimate your costs early in the process so your agent knows exactly how much to request.
What to remember about cash to close.
- Your down payment is not the only cash you need. Closing costs, prepaids, and property-specific fees all add to the total.
- Closing costs (lender fees, title, appraisal, recording) typically run 1.5% to 2.5% of the loan amount at par pricing.
- Prepaids (interest, taxes, insurance reserves) are not extra fees. They are money you owe anyway, collected upfront to fund your escrow account.
- Property-specific costs (transfer taxes, HOA fees) vary widely by location and community. Not every purchase has them.
- A home inspection is a significant cost that never appears on your Loan Estimate. Budget for it separately.
- These estimates assume par pricing. Buying discount points increases your costs. Taking lender credits decreases them.
- Your Loan Estimate, provided within three business days of application, will itemize the real numbers for your transaction.
If you found this useful
These guides explore related topics you might be wondering about.
Are seller concessions free money?
Why concessions are not free and when the math works in your favor.
Read guideWhy would I take a higher rate?
How lender credits reduce your cash to close.
Read guideWhen to get pre-approved
Why getting pre-approved before searching protects everyone.
Read guideBrowse all of our plain-English mortgage guides
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