First-time buyers routinely budget for the down payment and then get blindsided by closing costs. On a typical purchase, expect to pay 2% to 5% of the purchase price in closing costs and prepaids — on a $350,000 home, that is $7,000 to $17,500 due at or before closing, on top of your down payment.
The Four Buckets of Cash-to-Close
1. Lender Fees
These compensate your mortgage lender for originating the loan:
- Origination charge / underwriting fee: $1,000-$2,500
- Application fee: $0-$500
- Points (optional): each point is 1% of the loan amount paid to buy down the rate
- Credit report and flood certification: $50-$150
2. Third-Party Fees
- Appraisal: $500-$800 (multi-unit appraisals run higher, often $800-$1,500)
- Title search and title insurance (lender's policy): $700-$2,000 depending on state and price
- Settlement/escrow/closing agent fee: $500-$1,500
- Recording fees: $50-$250
- Survey (where applicable): $400-$600
3. Prepaid Items (Escrow Deposits)
Lenders collect money upfront to fund your escrow account:
- First year of homeowners insurance: paid at or before closing ($1,200-$2,500 typical)
- Property tax deposits: 2-6 months of taxes depending on when the next tax bill is due
- Initial escrow cushion: up to 2 months of escrow payments
4. Prepaid Interest
Interest from your closing date to the end of that month. Closing on the last day of the month minimizes this; closing on the 1st means paying nearly a full month of interest.
Worked Example: $350,000 Duplex, 5% Down
| Line Item | Amount |
|---|---|
| Loan amount ($332,500 after down payment) | — |
| Origination + underwriting | $1,895 |
| Appraisal (2-4 unit) | $1,100 |
| Title search + lender's title insurance | $1,450 |
| Settlement fee | $950 |
| Recording + misc. | $250 |
| Prepaid interest (closing on the 15th) | $900 |
| First-year insurance premium | $1,800 |
| Property tax escrow (4 months @ $292/mo) | $1,167 |
| Escrow cushion (2 months) | $583 |
| Total closing costs & prepaids | ~$10,095 |
That is roughly 2.9% of the purchase price — a realistic planning number.
Five Ways to Reduce Cash-to-Close
- Seller concessions: on conventional loans, sellers can contribute 3% of the price toward your closing costs (more with larger down payments); FHA allows up to 6%. In slower markets, ask for concessions in your offer.
- Lender credits: accept a slightly higher rate in exchange for the lender covering part of the closing costs.
- Close at month-end to minimize prepaid interest.
- Shop title and settlement services: these are not fixed prices; comparing two or three providers can save $500+.
- Down payment assistance programs: many state and local programs also cover closing costs for first-time buyers.
A Warning About "No-Cost" Refinances and Thin Estimates
A Loan Estimate with vague line items ("$2,000 total closing costs") is a red flag. Demand an itemized estimate and compare it against the final Closing Disclosure line by line — federal rules require the final numbers to stay within tolerance of the estimate for most items.
Plan Your Full Cash-to-Close
Our First-Time Homebuyer Mortgage Calculator estimates upfront cash needed as your down payment plus 3% for closing costs, so you can see the true minimum savings required before you start touring properties.