Mortgage
Mortgage Closing Costs Explained: What to Expect
·By Julia Kovalskiy
Down payment gets all the attention, but closing costs are the other cash number that surprises buyers. They typically run 2% to 5% of the purchase price and cover the many services that make a home sale happen. As a broker licensed in Texas and Florida, here's exactly what you're paying for and how to keep it down.
What closing costs are
Closing costs are the fees due at closing, separate from your down payment. They fall into a few buckets:
- Lender fees — origination or underwriting charges, and optional discount points to buy down your rate.
- Third-party services — appraisal, credit report, and inspections.
- Title and settlement — title insurance, title search, and the closing/escrow fee.
- Government — recording fees and any transfer taxes.
- Prepaids and escrow — upfront homeowners insurance, property taxes, and prepaid interest set aside in your escrow account.
How much to budget
Plan for roughly 2–5% of the price on top of your down payment. On a $400,000 home that's about $8,000–$20,000, though the range depends on your loan, location, and how much prepaid tax and insurance is collected. In Texas and Florida, higher property taxes (TX) and insurance (FL) can raise the prepaid/escrow portion specifically.
Ways to reduce closing costs
- Seller concessions — you can often negotiate for the seller to pay part of your closing costs (limits vary by loan type).
- Lender credits — accept a slightly higher rate in exchange for the lender covering some costs; useful if you're short on cash now.
- Shop title and services where allowed.
- Down payment assistance — some programs cover closing costs too. → Down payment assistance
Don't forget reserves
Lenders like to see you still have cash reserves after closing — a cushion for the first few months. Draining every dollar to close can actually weaken your file, so budget the down payment, closing costs, and a buffer.
Frequently asked
Frequently asked questions.
Related guides
- Pre-Qualification vs Pre-Approval vs Commitment: What's the Difference?The difference between mortgage pre-qualification, pre-approval, and a loan commitment — what each proves, which sellers trust, and when you need them. For buyers in TX & FL.
- Down Payment Assistance in Texas & Florida: How It WorksHow down payment assistance (DPA) works in Texas and Florida — grants and second-lien programs, who qualifies, and how to pair DPA with FHA, conventional, or VA loans.
- What Credit Score Do You Need to Buy a House?The credit score you need to buy a house by loan type — FHA, VA, conventional, and non-QM — plus how your score affects your rate and quick ways to improve it. TX & FL.
Explore related programs
- ConventionalThe most widely-used residential loan in the country. Flexible on property type, competitive on overall cost, and available as low as 3% down for qualified buyers.
- First-Time BuyerBuying your first home in Texas or Florida. Conventional, FHA, and down payment assistance options — built for buyers new to the process.
Let's map your total cash to close
Tell me your price range and location and I'll give you a realistic estimate of down payment plus closing costs — and show you where seller concessions or lender credits can lighten the load.
Written by
Julia Kovalskiy
Residential Mortgage Loan Originator · NMLS #2661068 · Licensed in Texas & Florida
I'm an Austin-based mortgage broker sponsored by C2 Financial Corporation, working with first-time and self-employed buyers across Texas and Florida. I shop 120+ lender partners to match your real situation to the loan built for it — and when you call me, you reach me.
Julia Kovalskiy is a residential mortgage loan originator (NMLS #2661068) licensed in Texas and Florida. This article is educational and is not a commitment to lend; programs, terms, and eligibility vary by lender and individual circumstances.