Closing Cost Calculator Formula

Understand the math behind the closing cost calculator. Each variable explained with a worked example.

Use the Closing Cost Calculator

Formulas Used

Total Closing Costs

total_closing_costs = lender_fees + title_and_gov + prepaids

Closing Costs as % of Price

closing_cost_pct = (lender_fees + title_and_gov + prepaids) / home_price * 100

Total Lender Fees

lender_fees_total = lender_fees

Title & Government Fees

title_gov_total = title_and_gov

Total Prepaids / Escrow

prepaids_total = prepaids

Variables

VariableDescriptionDefault
home_priceHome Purchase Price(USD)350000
loan_amountLoan Amount(USD)280000
origination_fee_pctLoan Origination Fee(%)1
appraisal_feeAppraisal Fee(USD)500
title_insuranceTitle Insurance(USD)1500
attorney_feeAttorney / Settlement Fee(USD)800
recording_feeRecording Fee(USD)200
prepaid_taxes_monthsPrepaid Property Tax (months)3
monthly_taxMonthly Property Tax(USD)350
prepaid_insurance_monthsPrepaid Insurance (months)14
monthly_insuranceMonthly Homeowner Insurance(USD)125
origination_feeDerived value= loan_amount * origination_fee_pct / 100calculated
prepaid_taxesDerived value= prepaid_taxes_months * monthly_taxcalculated
prepaid_insuranceDerived value= prepaid_insurance_months * monthly_insurancecalculated
lender_feesDerived value= origination_fee + appraisal_feecalculated
title_and_govDerived value= title_insurance + attorney_fee + recording_feecalculated
prepaidsDerived value= prepaid_taxes + prepaid_insurancecalculated

How It Works

Understanding Closing Costs

Closing costs are fees and expenses paid at settlement when a real estate transaction is finalized. They typically range from 2% to 5% of the home purchase price.

Major Categories

  • Lender fees: Origination charges, appraisal, credit report, underwriting
  • Title and government fees: Title search, title insurance, recording fees, transfer taxes
  • Prepaids and escrow: Upfront property tax, homeowner insurance, and prepaid interest

    • Who Pays What

    Buyers typically pay lender fees, prepaids, and a portion of title costs. Sellers often cover agent commissions and transfer taxes, though everything is negotiable.

    Worked Example

    A $350,000 home with a $280,000 loan. Origination fee 1%, appraisal $500, title insurance $1,500, attorney $800, recording $200, 3 months tax at $350/mo, 14 months insurance at $125/mo.

    home_price = 350000loan_amount = 280000origination_fee_pct = 1appraisal_fee = 500title_insurance = 1500attorney_fee = 800recording_fee = 200prepaid_taxes_months = 3monthly_tax = 350prepaid_insurance_months = 14monthly_insurance = 125
    1. 01Origination fee: $280,000 x 1% = $2,800
    2. 02Lender fees: $2,800 + $500 = $3,300
    3. 03Title & government: $1,500 + $800 + $200 = $2,500
    4. 04Prepaid taxes: 3 x $350 = $1,050
    5. 05Prepaid insurance: 14 x $125 = $1,750
    6. 06Total prepaids: $1,050 + $1,750 = $2,800
    7. 07Total closing costs: $3,300 + $2,500 + $2,800 = $8,600
    8. 08As percentage of price: $8,600 / $350,000 = 2.46%

    Frequently Asked Questions

    What is the average closing cost on a home?

    Closing costs typically range from 2% to 5% of the purchase price. On a $350,000 home, expect $7,000 to $17,500. The exact amount depends on your lender, location, loan type, and what is negotiated with the seller.

    Can closing costs be rolled into the mortgage?

    Some loan programs allow you to finance closing costs into the loan, but this increases your loan balance and total interest paid. FHA and VA loans may allow certain costs to be financed. You can also negotiate a seller credit to cover part of the costs.

    Are closing costs tax deductible?

    Some closing costs are deductible, including prepaid property taxes and mortgage interest. Origination fees (points) are also deductible if used to lower your interest rate. Title fees, appraisal fees, and recording fees are generally not deductible.

    Ready to run the numbers?

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