Closing costs can be one of the easiest homebuying expenses to underestimate. You may budget for the down payment first, then find out the final cash to close also includes lender fees, title charges, prepaid taxes, insurance and escrow deposits.
For a conventional loan, those costs can vary by lender, property, state and loan size, but often center around the same general buckets.
Conventional Loan Closing Costs Basics
| Cost Category |
What It Means |
What To Watch |
| Loan Costs |
Charges tied directly to getting the mortgage |
Origination charges and points can vary by lender |
| Third-Party Fees |
Fees for services such as appraisal, title and settlement |
Some services may be shoppable |
| Prepaid Costs |
Items paid upfront, such as taxes, insurance and prepaid interest |
These can change based on closing date and local tax schedules |
What Are Closing Costs?
Closing costs are the fees, charges and prepaid expenses needed to finalize a mortgage and transfer ownership of the home.
They can include lender charges, title fees, appraisal fees, government recording fees, property taxes, homeowners insurance and escrow deposits.
Fannie Mae says closing costs usually range from 2% to 5% of the mortgage amount and are paid in addition to the down payment.
For example, if you borrow $400,000, a 2% to 5% closing cost range would equal about $8,000 to $20,000. Your actual amount can be higher or lower depending on your state, lender, property taxes, insurance, title fees and whether you use points or credits.
Common Conventional Loan Closing Costs
Conventional loan closing costs generally fall into five categories: lender fees, third-party fees, government fees, prepaid costs and escrow deposits.
| Cost |
What It Covers |
How It Affects You |
| Origination Charges |
Lender charges for making and processing the loan |
Can vary by lender and loan structure |
| Discount Points |
Optional upfront cost paid to reduce the interest rate |
May lower the payment but increases cash due at closing |
| Appraisal Fee |
A property value estimate for the lender |
May be required unless an appraisal waiver applies |
| Credit Report Fee |
The cost of pulling credit reports |
Usually a smaller fee, but it may appear as part of loan costs |
| Title Search |
Review of property records for ownership and liens |
Helps confirm the seller can transfer clear title |
| Lender’s Title Insurance |
Protects the lender against certain title problems |
Usually required when you get a mortgage |
| Owner’s Title Insurance |
Protects you against certain title problems |
Often optional, but commonly purchased in many markets |
| Settlement Or Escrow Fee |
Closing agent services for handling documents and funds |
May vary by state and settlement provider |
| Recording Fees |
Local government fees to record mortgage and deed documents |
Usually depends on local rules |
| Transfer Taxes |
State or local taxes on the transfer of property |
Who pays can vary by state, county and contract |
| Prepaid Interest |
Interest from closing through the start of your first payment period |
Closing date can affect the amount |
| Prepaid Homeowners Insurance |
Insurance premium paid upfront |
Often required before closing |
| Escrow Deposits |
Initial funds for taxes and insurance held by the servicer |
Can be a major part of cash to close |
Lender Fees
Lender fees are charges from the mortgage lender or broker. They may include origination charges, underwriting fees, processing fees and application-related charges.
Origination charges are important to compare because they can vary from lender to lender. A lower advertised rate may not be the better deal if it comes with higher upfront points or fees.
Discount points are a separate pricing choice. One point equals 1% of the loan amount.
Paying points can lower your interest rate, but it only makes sense if the long-term payment savings justify the upfront cost.
Third-Party Closing Fees
Third-party closing fees are charges from companies involved in the transaction, such as appraisers, title companies, settlement agents, attorneys, inspectors or surveyors.
Some third-party services may be listed as services you can shop for on the Loan Estimate. Others may be selected by the lender or required by the transaction.
Title insurance protects against certain ownership or lien issues. The lender’s title policy protects the lender. An owner’s title policy protects you if a covered title issue appears after closing.
Government Fees And Transfer Charges
Government fees can include recording fees, transfer taxes and local charges tied to documenting the sale or mortgage.
Recording fees pay the local government to record the deed, mortgage or deed of trust. Transfer taxes are state or local taxes charged when property changes ownership.
These costs vary heavily by location. In some areas, transfer taxes are a small line item. In others, they can be one of the largest closing costs.
Prepaid Costs And Escrow Deposits
Prepaid costs are expenses collected at closing for items that apply after closing. They can include prepaid interest, homeowners insurance and property taxes.
Escrow deposits are funds placed into an escrow account so the loan servicer can pay future property taxes and homeowners insurance. The amount depends on tax due dates, insurance premiums, closing date and escrow rules.
Prepaid costs and escrow deposits are not the same as lender fees. They are still part of your cash to close, so they matter for budgeting.
Private Mortgage Insurance And Closing Costs
Private mortgage insurance, or PMI, may be required on a conventional loan when you put less than 20% down. PMI protects the lender if you default, but you pay the premium.
PMI can be structured in different ways. It may be paid monthly, upfront, split between upfront and monthly payments, or paid by the lender through a higher interest rate. The structure affects both your closing costs and your monthly payment.
Fannie Mae and Freddie Mac allow borrower-paid mortgage insurance to be canceled when legal and investor requirements are met, which can make conventional PMI different from some government-backed mortgage insurance structures.)
Mortgage Rates, Points And Lender Credits In 2026
Mortgage rates affect how you evaluate closing costs. When rates are higher, you may be more likely to consider discount points to lower the payment or lender credits to reduce upfront cash.
A lender credit means the lender gives you money toward closing costs in exchange for loan pricing, usually a higher interest rate. The CFPB explains that lender credits can help with closing costs, but you usually pay for them through the loan, often with a higher rate or higher payment.
Discount points work in the opposite direction. You pay more upfront to reduce the interest rate. Whether points or credits make sense depends on how much cash you have, how long you expect to keep the loan and how the payment changes.
APR vs. Interest Rate
The interest rate helps determine your monthly principal and interest payment. Annual percentage rate, or APR, is a broader cost measure that includes the interest rate and certain loan costs.
APR can help compare loans, especially when two loans have different rates and fees. A loan with a lower rate but higher points may have a higher APR than a loan with a slightly higher rate and lower upfront costs.
The Loan Estimate includes both the interest rate and APR, so use both when comparing offers.
How To Read A Loan Estimate
A Loan Estimate is a standard disclosure that shows projected loan terms, payments, closing costs and cash to close for your specific loan scenario.
Review these sections closely:
- Loan amount
- Interest rate
- Monthly principal and interest
- Mortgage insurance, if applicable
- Estimated taxes, insurance and assessments
- Origination charges
- Services you cannot shop for
- Services you can shop for
- Taxes and government fees
- Prepaids and initial escrow payment
- Lender credits
- Cash to close
- APR
If something looks different from what you discussed with the lender, ask why before moving forward. The CFPB says borrowers should compare Loan Estimates from different lenders to choose the loan that fits their needs.
Seller Concessions For Conventional Loans
Seller concessions are seller-paid credits that help cover costs that are normally your responsibility. For conventional loans, Fannie Mae and Freddie Mac call these interested party contributions.
Fannie Mae says interested party contributions can cover costs that are typically the buyer’s responsibility, but they cannot be used for the down payment, reserves or minimum borrower contribution. Freddie Mac also allows interested party contributions only when they meet its financing concession and sales concession requirements.
For a conventional primary residence or second home, the general seller contribution limits depend on the loan-to-value ratio. If your loan-to-value ratio is greater than 90%, the limit is generally 3%. If it is greater than 75% and up to 90%, the limit is generally 6%. If it is 75% or less, the limit is generally 9%. For investment properties, the limit is generally 2%.
| Occupancy And Loan-To-Value Ratio |
Typical Conventional Seller Contribution Limit |
What It Means For You |
| Primary Residence Or Second Home, LTV Greater Than 90% |
3% |
Lower down payments generally allow smaller seller credits |
| Primary Residence Or Second Home, LTV Greater Than 75% And Up To 90% |
6% |
A larger down payment can allow a higher seller credit |
| Primary Residence Or Second Home, LTV 75% Or Less |
9% |
The highest limit usually applies when you borrow a smaller share of the home’s value |
| Investment Property |
2% |
Investment property seller credits are more limited |
Lender Credits vs. Seller Credits
Lender credits and seller credits can both reduce upfront cash to close, but they work differently.
| Option |
How It Works |
Main Tradeoff |
| Seller Credit |
The seller contributes toward eligible buyer costs |
Limited by conventional interested party contribution rules and the purchase contract |
| Lender Credit |
The lender gives a credit toward closing costs through loan pricing |
Usually tied to a higher rate or higher long-term cost |
| Discount Points |
You pay upfront to reduce the interest rate |
Higher cash to close, with savings only if you keep the loan long enough |
A seller credit may be useful when you can afford the monthly payment but need help with upfront costs. A lender credit may be useful when you need to reduce cash to close and are comfortable with the payment impact. Discount points may be useful when you plan to keep the loan long enough to recover the upfront cost through monthly savings.
Can You Roll Closing Costs Into A Conventional Loan?
For a home purchase, closing costs are usually paid at closing through your own funds, seller credits, lender credits or other acceptable sources. You generally cannot simply add all purchase closing costs on top of the maximum conventional loan amount if that would exceed loan-to-value limits.
For a refinance, some closing costs may be financed into the new loan if the final loan amount still meets program and lender requirements.
Rolling costs into the loan can reduce upfront cash, but it increases the loan balance and long-term interest. It can also affect your loan-to-value ratio, which may affect pricing, mortgage insurance and approval.
How To Reduce Conventional Loan Closing Costs
You may not be able to avoid closing costs entirely, but you can often manage them with planning and negotiation.
Ways to reduce costs include:
- Compare Loan Estimates from multiple lenders.
- Ask about lender credits and the payment tradeoff.
- Ask the seller for a credit if market conditions allow.
- Compare title and settlement providers when shopping is allowed.
- Ask whether an appraisal waiver is available.
- Review whether discount points make sense for your timeline.
- Check whether local or employer assistance programs are available.
- Review the Closing Disclosure against your Loan Estimate before closing.
Do not focus only on the lowest upfront cost. A loan with lower cash to close may cost more over time if it has a higher interest rate or larger loan balance.
Step-By-Step Closing Cost Checklist
Use this process to keep closing costs clear from application to closing.
- Estimate closing costs before making an offer.
- Ask how much cash you need for the down payment and closing costs separately.
- Request Loan Estimates from more than one lender.
- Compare rate, APR, origination charges, points and lender credits.
- Review which third-party services you can shop for.
- Ask whether PMI is required and how it is structured.
- Negotiate seller credits when appropriate.
- Confirm your rate lock, credits and closing timeline in writing.
- Review the Closing Disclosure against the Loan Estimate.
- Ask questions before wiring funds or signing closing documents.
Common Closing Cost Surprises
Closing cost surprises often come from items that are not lender fees. Taxes, insurance, title charges and escrow deposits can be larger than expected.
Common surprise costs include:
- Prepaid property taxes
- Initial escrow deposits
- Higher homeowners insurance premiums
- Flood insurance, if required
- HOA transfer or setup fees
- Survey fees
- Local transfer taxes
- Owner’s title insurance
- Additional inspections required by the property or location
Ask for local estimates early, especially if you are buying in a state, county or community with high taxes, special assessments or homeowners association fees.
When Conventional Closing Costs May Be Worth Paying Upfront
Paying closing costs upfront may make sense when it reduces your long-term cost and you have enough cash after closing.
It may be worth considering if:
- You plan to keep the home and loan for several years.
- Paying points creates a break-even point that fits your timeline.
- You want a lower monthly payment.
- You want to avoid a higher rate from lender credits.
- You will still have emergency savings after closing.
When You May Want To Reduce Upfront Closing Costs
Reducing upfront closing costs may make sense when preserving cash is more important than minimizing long-term interest.
It may be worth considering if:
- You need to keep cash available for repairs, moving or emergency savings.
- You expect to sell or refinance before long-term costs matter.
- The seller is willing to contribute within conventional limits.
- A lender credit keeps the payment affordable.
- You do not want to drain savings at closing.
The Bottom Line
Conventional loan closing costs in 2026 can include lender fees, appraisal fees, title charges, recording fees, prepaid taxes, homeowners insurance and escrow deposits. A common planning range is about 2% to 5% of the mortgage amount, separate from the down payment.
Frequently Asked Questions
How Much Are Closing Costs On A Conventional Loan In 2026?
Closing costs vary, but a common planning range is about 2% to 5% of the mortgage amount.
What Is Included In Conventional Loan Closing Costs?
Conventional loan closing costs can include origination charges, discount points, appraisal fees, credit report fees, title search, title insurance, settlement fees, recording fees, transfer taxes, prepaid interest, homeowners insurance, property taxes and escrow deposits.
Can Sellers Help Pay Conventional Loan Closing Costs?
Yes. Seller credits are allowed within conventional interested party contribution limits. For a primary residence or second home, limits are generally 3%, 6% or 9% depending on the loan-to-value ratio. For investment properties, the limit is generally 2%.
Do Conventional Closing Costs Include The Down Payment?
No. Closing costs and the down payment are separate. Your down payment reduces the amount you borrow. Closing costs pay for loan fees, third-party services, government charges and prepaid items.
What Are The 2026 Conforming Loan Limits?
For 2026, the FHFA set the baseline conforming loan limit for one-unit properties in most of the U.S. at $832,750. The one-unit high-cost area ceiling is $1,249,125.
Does PMI Count As A Closing Cost?
PMI can affect closing costs or monthly costs depending on how it is structured. Monthly PMI increases the monthly payment. Upfront or split-premium PMI can increase cash due at closing.
What Is The Difference Between A Loan Estimate And Closing Disclosure?
A Loan Estimate shows projected loan terms and closing costs after you apply. A Closing Disclosure shows final loan terms and costs before closing.
How Can I Lower My Conventional Loan Closing Costs?
You can compare Loan Estimates from multiple lenders, ask about lender credits, negotiate seller credits, shop for eligible third-party services, ask about appraisal waivers and review whether discount points make sense for your timeline.
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