Updated August 2026

Closing costs: What to expect as a buyer and how to budget

Buyers shaking hands with a title agent as keys change hands, the moment closing costs are paid at settlement

Buyer closing costs typically run 2% – 5% of the home’s purchase price, $6,000 – $15,000 on a $300,000 home, and you pay them at closing on top of your down payment. Freddie Mac cites the same 2% – 5% band measured against your purchase price.

The total bundles lender fees (origination, underwriting, credit report), property fees (appraisal, title search and title insurance, survey), and government and prepaid items (recording fees, transfer taxes, prorated property taxes, homeowners insurance). You don’t have to guess: your Loan Estimate itemizes every fee within three business days of applying, and your Closing Disclosure locks in the final figures at least three business days before you sign.

Learn what closing costs cover as a buyer, including which fees are locked and which can still move, how each loan program changes the math, and five ways to bring your cash to close down. If you’re earlier in the process, start with our Home Buying guide.

Key takeaways:

Budget 2% – 5% on top of your down payment: That’s $6,000 – $15,000 on a $300,000 home, due at closing and separate from the money you put down.
Your Loan Estimate is the comparison tool: It arrives within 3 business days of applying, itemizes every fee, and locks lender charges, which generally can’t increase at all.
Several costs are negotiable: Seller concessions are capped at 3% – 9% on conventional loans depending on your down payment, 6% on FHA and USDA, and 4% on VA, and title services and lender credits shrink your cash to close.

What are closing costs?

Closing costs are the one-time fees, taxes, and prepaid items you pay to finalize a mortgage and transfer ownership of a home, typically 2% – 5% of the purchase price, paid at closing and separate from your down payment. They’re split between your lender, third parties like the appraiser and title company, and the county.

Money you’ve already put in counts. Your earnest money deposit is credited at closing, and any fee paid up front, usually the appraisal, shows as already paid.

Say you’re buying a $300,000 home in Waterford with 5% down on a conventional loan. Your down payment is $15,000 and your loan amount is $285,000. At the middle of the range, roughly 3.5%, closing costs land near $10,500, putting your cash to close around $25,500, or about $22,500 wired on closing day after a $3,000 earnest money credit.¹ That number, not the down payment alone, is what to save toward. See how to budget for closing costs and the home buying process guide.

What do closing costs include?

Only the first group below is set by the lender you choose. Across Align Lending’s network, lender-side fees on the same borrower’s file have differed by more than $1,500 between the best and worst quote.

Cost	Group	Typical range	Shoppable?
Origination and underwriting	Lender	0.5% – 1% of the loan amount ($1,425 – $2,850 on $285,000)	No, but compare lenders
Discount points (optional)	Lender	1 point = 1% of the loan amount	Your choice
Credit report	Lender	The only fee chargeable before your Loan Estimate	No
Appraisal	Property	$500 – $800 across Align’s Michigan network in 2026	No, the lender orders it
Title search, settlement fee, lender’s policy, survey	Property	Scales with price and loan amount	Yes, the largest shoppable group
Recording fees	Government	$30 per document in Michigan	No
Transfer taxes	Government	$8.60 per $1,000 of price in Michigan, owed by the seller	No, set by statute
Prepaid interest and first-year insurance	Prepaid	Daily interest to your first payment, plus one premium	Insurance only
Escrow reserves and prorated taxes	Prepaid	Reserves plus a cushion of up to two months	No

Property and title fees

These pay the people who verify the house is worth the price and that the seller can legally convey it. The home appraisal process is ordered by your lender, so you can’t shop it. Title is different: most lenders require a lender’s title policy protecting the amount they lend, and the CFPB notes you can usually shop your title provider separately and save money. An owner’s policy protecting your own stake is optional, see title insurance and why it’s important. The inspection isn’t a loan cost at all: you hire the inspector, typically for $350 – $600 in Metro Detroit, using a home inspection checklist for buyers.

Government fees and prepaid items

Recording fees and transfer taxes are set by statute. Prepaid items aren’t fees, they’re your own future expenses collected early, and federal rules cap the escrow cushion at one-sixth of annual escrow payments, or two months. See mortgage escrow accounts for the annual analysis.

Which closing costs are tax deductible?

Most of them aren’t. The IRS states that the only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes.² Your credit report fee and the lender-required appraisal fee are neither deductible nor added to your home’s basis. Recording fees, the survey, transfer taxes, and the owner’s title policy get added to your cost basis instead. Points are prepaid interest, generally deducted over the loan’s term. Talk with a tax professional first.

How do you find out what your closing costs will be?

Two federal disclosure forms answer that with itemized numbers, on a fixed schedule.

Your Loan Estimate: itemized costs within three business days

A lender must deliver your Loan Estimate no later than three business days after receiving your application. Every lender uses the identical form, which is what makes side-by-side comparison possible. Page 2 separates origination charges, services you can and cannot shop for, government fees, prepaids, and escrow. The CFPB’s Loan Estimate explainer walks through it.

Your lender must also give you a written list naming at least one provider for each service you may shop for, the shopping map most buyers never open. And a lender generally can’t charge any fee until you’ve received the Loan Estimate and said you intend to proceed, the one exception being a reasonable credit report fee.

Which fees can change before closing?

Federal good-faith rules sort every estimated charge into three buckets, and the bucket tells you how much a fee can move.

Zero tolerance, cannot increase: What you pay can’t exceed what was disclosed. That covers lender fees and services you aren’t permitted to shop for, such as the appraisal.
10% cumulative tolerance: Third-party services and recording fees may exceed the disclosed total by no more than 10% in aggregate, provided the service isn’t paid to your lender or its affiliate and you were allowed to shop for it.
No tolerance limit: Prepaid interest, property insurance premiums, escrow deposits, property taxes, and any provider you chose off your lender’s written list can change without a cap.

Your Closing Disclosure: the final numbers three days early

You must receive your Closing Disclosure at least three business days before consummation, and it states the exact cash to close. Compare it line by line against your latest Loan Estimate. Only three changes restart the clock: the annual percentage rate becoming inaccurate, a change in loan product, or a prepayment penalty being added. The CFPB’s Closing Disclosure explainer lists what to check, and the home closing process covers what happens after you sign.

Bring the money by wire or cashier’s check, and confirm wire instructions by calling your title company at a number you looked up yourself, closing wire fraud works by spoofing that email. Our checklist for how to prepare for a home closing covers day-of details.

How does your loan type change closing costs?

Your loan program caps how much of your closing costs a seller may cover, and two add a government fee you can finance. Because Align is a broker, we place all four through partner lenders.

Conventional loans

Interested party contributions are capped at 3% of the lower of sales price or appraised value when your loan-to-value is above 90%, 6% between 75.01% and 90%, and 9% at 75% or less, a larger down payment buys more help. Investment properties are capped at 2%. Contributions can cover closing costs and prepaid items, but not your down payment or reserves.

FHA loans

Interested parties may contribute up to 6% of the sales price toward origination fees, other closing costs, prepaid items, and discount points. Anything above 6% is treated as an inducement to purchase and reduces the price the loan is calculated against. FHA also charges an upfront mortgage insurance premium of 1.75% of the base loan amount, typically financed rather than paid in cash.³

VA loans

Seller concessions are limited to 4% of the home’s reasonable value, and a lender may charge a flat fee of no more than 1% of the loan amount in place of other origination fees.⁴ The purchase funding fee runs 2.15% for first use with less than 5% down, 1.5% with 5% or more down, and 1.25% with 10% or more down, rising to 3.3% for subsequent use with less than 5% down. It can be financed, and veterans receiving VA compensation for a service-connected disability and surviving spouses receiving Dependency and Indemnity Compensation are exempt.

USDA loans

Interested parties are limited to a combined maximum of 6% of the sales price. A proposed rule published in April 2026 would exclude real estate commission fees, but it is a proposal, not current policy, plan around the 6% limit as written.

5 ways to lower your closing costs

Four cost nothing but a conversation. The fifth is a trade to run the math on.

1. Negotiate seller concessions into the offer

Asking the seller to pay a defined amount toward your closing costs is the largest single lever, and it belongs in the purchase agreement. Stay inside your program’s cap, 3% to 9% conventional, 6% FHA and USDA, 4% VA, because a concession above the limit is disallowed, not merely trimmed. Start with seller-paid closing costs, then seller concessions for what sellers agree to.

2. Shop the services on your lender’s written list

Title services, the settlement fee, and where required the survey and pest inspection are yours to shop; title is usually the biggest. Get two or three quotes on the same coverage. One caution: a provider off your lender’s list moves that charge into the no-tolerance bucket, forfeiting its 10% protection.

3. Ask for a lender credit

A lender credit cuts your closing costs in exchange for a slightly higher interest rate, the mirror image of paying points. It’s the right trade when you’re short on cash and expect to move or refinance within a few years, and the wrong one when you’ll hold the loan long enough for the higher rate to outrun the credit. Ask for both versions of the same Loan Estimate.

4. Compare Loan Estimates from more than one lender

Lender fees are the part of your closing costs that competition actually moves. Shopping one file to several wholesale lenders is what a broker does: one application, one credit pull, several sets of numbers.

5. Understand what closing later in the month does, and doesn’t do

Closing near month’s end lowers the prepaid interest collected at the table because you’re prepaying fewer days. It does not reduce what the loan costs you; that interest simply accrues later. Treat it as a cash-flow tool, not a discount; the durable fixes are concessions, a lender credit, or a longer runway, see how to save for a down payment.

What Michigan buyers should know

Michigan’s transfer taxes fall on the seller by statute, taking the largest government charge off your side of the ledger.

State transfer tax: Michigan levies $3.75 per $500 of value, $7.50 per $1,000, and state law makes the seller or grantor liable.
County transfer tax: Counties charge 55 cents per $500, or $1.10 per $1,000, with the statute allowing up to 75 cents per $500 in a county of 2 million or more residents. The seller is liable here too, so combined the two run $8.60 per $1,000 about $2,580 on a $300,000 sale.
A seller exemption worth knowing: A sale is exempt from the state transfer tax when the seller claims Michigan’s principal residence exemption and the property’s state equalized value at sale is no higher than when the seller acquired it. $2,250 the seller doesn’t owe on a $300,000 sale.
Recording fees and tax cycles: Michigan registers of deeds charge a flat $30 per document regardless of page count, and most communities bill property taxes twice a year, summer and winter, so your proration depends on which bills have been issued and paid.

Owner’s title insurance is customarily addressed in the Michigan purchase agreement and often provided by the seller, while the buyer pays for the lender’s policy. It’s negotiable, so read that paragraph of the offer.

FAQ: Closing costs for buyers

Here are answers to common questions about closing costs.

How much are closing costs on a $300,000 house?

Plan on roughly $6,000 to $15,000, using the standard 2% to 5% range. Where you land depends on your state’s transfer taxes, your lender’s fees, title insurance rates, and how much prepaid tax and insurance you must fund at closing. Your Loan Estimate replaces that range with itemized numbers within three business days of applying. Building the full cash-to-close number early is part of preparing to buy.

Can closing costs be rolled into the loan?

On a purchase, usually not directly. The loan is capped by the price and your down payment. Instead, buyers use seller concessions negotiated in the offer, lender credits in exchange for a slightly higher rate, or assistance programs. VA and USDA loans allow certain fees to be financed. On refinances, rolling costs into the new balance is common. See how to negotiate seller concessions for the purchase-side version.

Who pays closing costs, the buyer or the seller?

Both, but different ones. Buyers typically pay lender fees, the appraisal, the lender’s title policy, recording fees, and prepaid taxes and insurance. Sellers commonly pay agreed agent compensation, transfer taxes in many markets including Michigan, and the owner’s title policy by local custom. Everything is negotiable, and seller concessions are a standard bargaining chip. See a seller’s closing costs for the other side of the settlement statement.

When do I pay closing costs?

At closing, alongside your down payment, almost always by wire or cashier’s check. Personal checks generally aren’t accepted for large amounts. Your Closing Disclosure, delivered at least three business days beforehand, states the exact cash to close. One earlier exception: appraisal and application fees are usually paid during the loan process. Verify wire instructions by phone first. The role of escrow in home buying explains who holds the money in between.

The bottom line on closing costs

Closing costs for buyers typically run 2% – 5% of the purchase price, $6,000 – $15,000 on a $300,000 home, paid at closing on top of your down payment. Your Loan Estimate itemizes all of it within three business days of applying, and your Closing Disclosure confirms the final figures at least three business days before you sign. Freddie Mac puts the average purchase loan at 43 days from application to closing, enough time to shop title, ask for a lender credit, and negotiate concessions.

If you’re ready to see what your cash to close actually looks like, talk to Align Lending. We’ll shop your scenario across our lender network and put competing Loan Estimates side by side so you can see every fee before you commit. Call 248-506-5727 or start online today.

Footnotes:

1. Example figures are hypothetical and for educational purposes only; they do not constitute an advertisement of credit terms or a rate quote under federal or state lending laws. Your loan amount, closing costs, and cash to close will depend on your application, the property, your loan program, and market conditions. Return to text.

2. This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Tax treatment of settlement costs depends on your individual circumstances and current law. Consult a qualified tax professional about your situation. Return to text.

3. Align Lending is not acting on behalf of or at the direction of FHA or HUD. FHA interested party contribution limits and mortgage insurance premium rates are set by HUD and are subject to change. Return to text.

4. Align Lending works with VA-approved lenders and is not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency. VA funding fee amounts, seller concession limits, and allowable charges are set by the Department of Veterans Affairs and are subject to change. Return to text.

Sources: closing costs of 2% – 5% of the purchase price and an average of 43 days to close a purchase loan, My Home by Freddie Mac (Closing Your Loan When Buying); closing costs of 2% – 5% of the purchase price, and the buyer generally paying the costs of the transaction with the seller paying some depending on the contract or state law, Consumer Financial Protection Bureau. Loan Estimate delivered no later than three business days after application, the written list of settlement service providers, the restriction on charging fees before delivery of the Loan Estimate and intent to proceed with a bona fide credit report fee exception, the zero-tolerance general rule, the 10% cumulative tolerance for third-party services and recording fees, charges with no tolerance limitation, the Closing Disclosure received at least three business days before consummation, and the three changes requiring a new three-day waiting period, 12 CFR § 1026.19(e) and (f). Escrow cushion limited to one-sixth of estimated annual escrow payments, 12 CFR § 1024.17(c)(1). Lender’s title insurance generally required, owner’s title insurance optional, and title providers shoppable, Consumer Financial Protection Bureau. Interested party contribution limits of 3%, 6%, and 9% by LTV, the 2% investment property limit, and the prohibition on applying contributions to down payment, reserves, or minimum borrower contribution, Fannie Mae Selling Guide B3-4.1-02. FHA interested party contributions of up to 6% of the sales price, treatment of excess as an inducement to purchase, and the upfront mortgage insurance premium of 1.75% of the base loan amount, HUD Single Family Housing Policy Handbook 4000.1. VA seller concession limit of 4% of reasonable value and purchase funding fee rates of 2.15%, 1.5%, 1.25%, and 3.3% with financing and exemption rules, U.S. Department of Veterans Affairs; VA flat charge not exceeding 1% of the loan amount, 38 CFR § 36.4313(d)(2). USDA interested party contributions limited to 6% of the sales price, 7 CFR § 3555.102(h), and the April 2026 proposed rule on real estate commission fees, 91 FR 20941. Deductibility of settlement costs, basis treatment of nondeductible items, and treatment of points as prepaid interest, IRS Publication 530. Michigan state real estate transfer tax of $3.75 per $500 and seller liability, MCL 207.525 and MCL 207.523; county real estate transfer tax of 55 cents per $500, up to 75 cents per $500 in a county of 2,000,000 or more, MCL 207.504, with seller liability under the County Real Estate Transfer Tax Act, 1966 PA 134; exemption from the state transfer tax for a seller claiming the principal residence exemption, MCL 207.526(u); register of deeds recording fee of $30 per document, MCL 600.2567(1)(a). Appraisal and lender fee ranges and the observed spread in lender-side fees between competing quotes, Align Lending broker network data.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Closing cost amounts, seller concession limits, and program rules vary by loan program, lender, property, and state, and are subject to change. Consult a qualified tax, legal, or real estate professional about your situation. Figures shown are illustrative, are not a rate quote or an offer of credit, and do not constitute an advertisement of credit terms. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.