Closing Cost Calculator: What to Expect

When buying or selling a home, you may focus on one number: the sale price of the property. If you’re a seller, it’s the amount of money you’ll earn. And if you’re a buyer, it’s the figure you’ll owe. 

But there are other numbers you should consider, too, known as closing costs. Both buyers and sellers must pay fees and/or commissions before closing a real estate transaction. And some of these costs are sizeable—worth having on your radar ahead of time. 

With this closing cost calculator guide, you can estimate your expenditure and ensure you’re prepared to finalize your real estate transaction. 

What are closing costs? 

Closing costs are any fees paid by a buyer or seller to complete a home sale transaction. As such, these costs can range from real estate commissions (a percentage of the sale paid to the realtors involved) to administrative fees a buyer pays for mortgage processing to title insurance. 

Real estate commissions are one of the most significant closing costs, and the way they’re calculated and charged is changing. Historically, sellers have paid all agents (including the buyer’s agent) a percentage of 5 to 6 percent of a sale. Now, buyers, sellers, and their realtors will set commission terms, deciding on a rate and how much each party will be responsible for.

If you're a buyer 

Estimate how much you’ll owe to close by adding up the amount due for each of the following concepts and figuring in the real estate commissions you’ll cover, plus the down payment you’ll bring to the closing date—one of the most significant amounts due at that meeting.

Remember that your results are ballpark figures and that it’s wise to talk to your real estate agent and mortgage lender to get a crystal clear idea of your estimated closing costs. 

Home appraisal fee

Mortgage lenders often base a loan amount on the official appraisal value of a property. They want to ensure that the property is worth the sale price and that they’re not writing a mortgage for too large a sum. 

Generally, it’s the buyer who pays for an appraisal. And, while technically a closing cost, this fee is usually paid well before closing day itself. 

Title search

Before a sale can be completed, a title search must be performed to ensure that there are no legal reasons the home cannot be transferred. For example, a property could have a lien on it (collateral for an unpaid debt) that a buyer doesn’t want to unwittingly become responsible for. Or the home could be subject to a claim that renders it untransferrable. 

Who pays a title search fee can vary, so be sure to talk this point over with the seller and reach an agreement.

Title insurance

Buyers usually have to purchase title insurance, which protects them in case of an unforeseen title claim. If you find out about an unknown heir, forged document, or lien associated with your new home, this insurance has you covered.

Title insurance generally costs 0.5 to 1 percent of a property’s purchase price. So, if you’re buying a home for $400,000, you could expect to pay up to $4,000 for this coverage.

Origination fees 

Loan origination fees (or underwriting fees) are administrative costs associated with processing a mortgage that a lender charges a borrower. Some lenders may also ask you to cover administrative costs, like application fees, so be sure to check the requirements with the financial provider processing your mortgage.

Origination charges generally run from 0.5 to 1 percent of the total mortgage loan amount. That is, if you’re purchasing a $500,000 home, you could pay up to $5,000 in origination fees. 

If you’re a seller 

Historically, sellers have been responsible for a huge fraction of the total closing costs—paying commissions out of an escrow account to all realtors involved. But with the changing commissions landscape, sellers may no longer have to pay as much of their home earnings to agents. 

That said, there are a few other line items sellers should plan to pay to close a sale. And it’s worth talking the list of costs over with your agent and the buyer. Some costs, like the home inspection listed below, could end up getting paid by the buyer. Or, you, the seller, might pay for a title search after negotiations with the buyer.

Home inspection

A professional home inspection surfaces issues with a property that the untrained eye might not see and that could push a homeowner to make costly repairs. Inspectors look for pests, water damage, mold, structural and roofing damage, and more. 

If you pay for a home inspection on the property you’re hoping to sell, you’ll find out what repairs it needs to get into tip-top shape. And if you make those fixes, you can offer prospective buyers a more attractive property and score a higher-value sale. If you don’t do a home inspection ahead of time, an interested buyer will likely ask you to perform one. And they can negotiate down an offer price based on problems found with the home. 

Making repairs to significant issues can be costly, but with a closing line of credit (CLoC) from Titus, you can fix up your home and pay back when it sells—hopefully, at a higher price, thanks to those upgrades.

Transfer tax

State and local governments charge transfer tax when a property changes hands. Familiarize yourself with the laws in your geographical area to find out whether this tax will apply to your home sale. States like Texas and Arizona don’t charge transfer tax, for example. If your state does charge this tax, find out the percentage rate so that you can estimate how much you’ll owe on your sale.

Traditionally, sellers pay transfer tax, but you can negotiate this point with the homebuyer, splitting the responsibility.

Capital gains tax

Selling a home implies earning proceeds, which are often taxable. The Internal Revenue Service (IRS) charges home sellers capital gains taxes on the difference between the sale price of the home and the original purchase price.  

How much a home seller owes in capital gains taxes depends on a few factors, like their geographical area, tax bracket, and filing status. You can estimate how much you’d owe using Titus’ capital gains calculator. Titus’ tool uses a 15 percent federal rate in calculations. Your actual rate may be higher based on your filing status and tax bracket. And you’ll want to read up on state capital gains tax requirements, as well.

Sellers: Close higher with help from Titus

Maximize your home’s attractiveness and value before putting it on the market with a zero-interest closing line of credit (CLoC) from Titus.

Titus doesn’t charge anything upfront or ask you for out-of-pocket funds, which is good news if you’re saving up for your next home. A CLoC also won’t appear on your credit report, damaging your chances of a home loan on your next property (or causing you to get hit with a higher interest rate). Learn about the perks and how it works here.