If you're shopping for a mortgage, you've probably read that closing costs on a home loan are usually 2% to 5% of the amount borrowed. That's a big range. If you're buying or refinancing a median-value home, which Zillow valued at about $256,000 at the end of August 2020, that's anywhere from $5,000 to $12,500 in closing costs. You'll need more information than that to know whether a mortgage offer is a good deal. To help you make the best decision on your mortgage offer, we've gathered information on the average mortgage closing costs in 2020.
Key findings
The average closing costs in the United States total $5,749, including taxes.
The average closing costs without taxes come to $3,339.
The District of Columbia has the highest closing costs at over $25,000 with taxes.
Indiana has the lowest average closing costs at $1,909.
Pennsylvania residents pay, on average, 4.88% of their home price in closing costs -- the highest of any state.
Colorado, Wyoming, Montana, and Indiana residents pay less than 1% of their home sale price in closing costs.
San Francisco, CA, has the highest closing costs of any city at $11,125.
Centralia, IL, has the lowest closing costs of any city at $1,821.
What are closing costs?
Closing costs are fees that borrowers pay to finalize a home mortgage. They include both lender fees and third-party fees.
You can shop around for a mortgage, which gives you some say in the lender fees you'll pay. You can also shop around for some third-party fees. Your loan estimate will show you which ones are included.
Lender fees
Here are some examples of lender fees you might need to pay. Not all of them will necessarily apply to your situation.
Loan application fee
Prepaid interest
Points to reduce the interest rate
Origination fee or loan fee
Broker fee
Underwriting fee
Mortgage insurance
Rate lock or rate lock extension fee
Third-party fees
Here are some examples of third-party fees you might have to pay. Again, some fees may not apply to your loan.
Title search
Lender's title insurance
Borrower's title insurance
Appraisal fee
Pest inspection fee
Flood hazard determination fee
Credit check fee
Settlement or escrow agent fee
Attorney fee (in states where borrowers need a real estate attorney)
Deed recording fee
Property transfer tax
Courier fee
Wire transfer fee
Condo certification fee
Homeowners association certification fee
Loan document preparation fees
Prepaid homeowners insurance
Escrow reserves
Prepaid property taxes
Prepaid flood insurance
Notary fees
VA funding fee, FHA up-front mortgage insurance premium, or USDA guarantee fee
Average closing cost figures:
As we've seen, the list of potential closing costs you might have to pay is huge. The specific costs and their amounts can vary dramatically by location, and not just because of variations in home prices. One of the biggest differences lies in whether transfer taxes apply to transactions in your area. To see what's normal for closing costs where you live or where you're about to buy, check out these figures from ClosingCorp's Closing Cost Trends report. It was released in April 2020 and is based on costs in 2019. Average closing costs in the United States: $5,749 The average closing costs in the United States, if you include taxes, are $5,749. Without taxes, the average closing costs are $3,339.
Which states have the highest closing costs?
Closing costs vary widely by state. We'll put the full list in a table below, but here are some highlights at the top of the range:
Including taxes
District of Columbia ($25,800)
Delaware ($13,273)
New York ($12,847)
Washington ($12,406)
Maryland ($11,876)
Excluding taxes
District of Columbia ($5,723)
New York ($5,612)
Hawaii ($5,388)
California ($5,064)
Washington ($4,538)
As a percentage of home purchase price
Pennsylvania (4.88%)
Delaware (4.72%)
District of Columbia (4.00%)
Maryland (3.65%)
New York (3.05%)
Which states have the lowest closing costs?
Including taxes:
Indiana ($1,909)
Missouri ($2,063)
South Dakota ($2,159)
Iowa ($2,194)
Kentucky ($2,276)
Excluding taxes:
Indiana ($1,909)
Nebraska ($1,952)
Iowa ($1,954)
South Dakota ($2,002)
Arkansas ($2,056)
As a percentage of the purchase price
Colorado (0.86%)
Wyoming (0.86%)
Montana (0.95%)
Indiana (0.99%)
Missouri (1.02%)
Which cities have the highest closing costs?
San Francisco has the highest closing costs among U.S. cities, but all top five are in California.
San Francisco, CA: $11,125
San Jose, CA: $10,767
Los Angeles, CA: $8,113
Santa Cruz, CA: $5,970
Napa, CA: $5,812
Which cities have the lowest closing costs?
Centralia, Illinois is a small town with the lowest closing costs of any American city.
Centralia, IL: $1,821
London, KY: 1,984
Union, SC: $2,139
Summerville, GA: $2,301
Miami, OK: $2,632
13 states with no real estate transfer taxes
Real estate transfer taxes aren't paid in 13 states, so the average closing costs in these states are unaffected by taxes.
Utah: $4,026
Texas: $3,744
Arizona: $3,631
Arkansas: $3,517
Idaho: $3,063
New Mexico: $2,908
Montana: $2,773
Mississippi: $2,548
Kansas: $2,459
Wyoming: $2,430
North Dakota: $2,428
Missouri: $2,063
Indiana: $1,909
Who pays closing costs?
If you're the borrower, closing costs are your responsibility. But that doesn't mean you can't get help paying them. There are several ways to cover your closing costs on a mortgage.
Pay cash out of pocket at the closing table. This option can be the least expensive in the long run if you can afford to part with the cash now and plan to keep your loan for a long time.
Ask the lender to pay your closing costs. Your lender may be willing to cover some or all of your closing costs in exchange for a higher interest rate. This option might be best if you don't have extra cash or if you don't plan to keep your loan for a long time. Paying a higher interest rate for a few years can be less expensive in the long run.
Roll your closing costs into your mortgage. Instead of paying cash up front or paying a higher interest rate, you can finance a larger sum by tacking your closing costs onto the loan principal. Your monthly payment will be slightly higher, and you'll pay interest on the additional amount you're financing. If you're close to the upper limit of what a lender will give you, this might not be possible.
Ask the seller to pay your closing costs. If you're buying a home and not refinancing, the seller might be willing to cover part or all of your closing costs. If the seller pays them, it's called a "seller concession" or a "seller credit," and you might have to pay more for the house to make up for it. As a result, asking the seller to pay your closing costs can end up being just another way of financing them, especially in a seller's market. In a buyer's market, you'll have more negotiating power.
How to save on closing costs
Your efforts to save money on closing costs shouldn't just focus on limiting the cash you bring to the closing table. You should take steps to lower the costs themselves, too.
Get loan estimates from at least three lenders. Make sure you're getting estimates for the exact same type of loan so you can make an accurate comparison of the closing costs.
Shop around for the closing services you're allowed to choose your own vendor for. The Consumer Financial Protection Bureau recommends shopping around for title insurance as a way to save a few hundred bucks.
Go ahead and finance them. If you're planning to keep your loan for only a few years, paying a lot of cash up front for that loan could be more expensive than making a higher monthly payment.
Ask about closing cost grants. If you're a low- to moderate-income homebuyer, you might qualify for a closing cost grant, depending on what's available where you live.
Ask a relative to help you out with a gift: If you can demonstrate to your family that you've been financially responsible, they may be happy to help with a cash gift to put toward your down payment or closing costs. The lender may require a gift letter to prove that you didn't borrow the funds.
Sources
ClosingCorp (2020). "ClosingCorp Reports Average Mortgage Closing Cost Data for 2019."
Consumer Financial Protection Bureau (n.d.). "Closing on Your New Home."
Consumer Financial Protection Bureau (n.d.). "Loan Estimate Explainer."
National Association of Realtors (n.d.). "Summary of Real Estate Transfer Taxes by State."
Zillow (2020). "United States Home Prices & Values."