How to Budget for Closing Costs

Learn how much to save for closing costs when buying a home, what they cover, and how to avoid last-minute surprises.

1. Save 2-5% of the purchase price. Closing costs typically run 2-5% of your home's purchase price. On a $400,000 home, that's $8,000 to $20,000. Higher-priced areas and smaller loan amounts usually hit the higher end of this range. Start with 3% as your baseline target.
2. Get your Loan Estimate within 3 days. Your lender must provide a Loan Estimate within three business days of your application. This three-page form breaks down your projected closing costs by category. Use this document, not online calculators, to set your actual budget.
3. Identify which costs you can control. You can shop around for title insurance, home inspections, and homeowner's insurance. Lender fees and government taxes are mostly fixed. Focus your negotiation energy on the controllable items, which can save you $500 to $2,000.
4. Ask about seller concessions. Sellers can pay up to 3-9% of the purchase price toward your closing costs, depending on your loan type and down payment. This moves money from your savings account to the purchase price, but can help if you're cash-tight.
5. Review your Closing Disclosure 3 days before closing. You'll get a Closing Disclosure at least three business days before closing. Compare it line-by-line to your Loan Estimate. Most fees can't increase, but some can rise up to 10%. Question anything that looks wrong before closing day.
6. Keep a $2,000 buffer beyond your estimate. Even with careful planning, small surprises pop up. Pro-rated property taxes, last-minute lender requirements, or recording fee changes can add $500 to $1,500. A buffer prevents you from scrambling for cash at the closing table.