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How to use Credit Karma’s closing costs calculator
When you take out a mortgage, you’ll need more than just a down payment. You’ll also need to pay closing costs. This refers to a range of fees and charges you pay — typically between 2% and 5% of the sales price — when you buy the home.
The good news is that by estimating your closing costs, you can get some idea of how much you’ll need to pay long before you have to write a check. Our closing costs calculator considers these factors:
- Home price
- Down payment
- Loan amount
- Estimated interest rate
- Date of closing
- Property tax (annually)
- Homeowner insurance (annually)
Home price
This is the total amount you plan to spend on your home before factoring in your down payment or closing costs. If you haven’t made an offer on a house yet, put in your best estimate.
Down payment
How much money can you afford to put down on your new home? A larger down payment means you may qualify for a better interest rate, but you’ll want to make sure you still have a financial cushion for your closing costs and any emergency expenses that pop up.
You also may qualify for a government-backed program like an FHA loan, VA loan or USDA loan that offers low down payment options.
Loan amount
This is the amount that you plan to borrow from your lender after subtracting your down payment.
Estimated interest rate
Your interest rate is the cost of borrowing money, expressed as a percentage. If you want to get an idea of potential interest rates, the Consumer Financial Protection Bureau offers an interest rate tool that lets you compare current mortgage rates by state.
Make sure to shop around and compare rates from several lenders for a better chance of getting a competitive rate.
Date of closing
Your closing is the date your home purchase will become final after you sign all required documents. If you don’t have a firm date yet, do your best to estimate.
Property tax (annually)
This is a cost of homeownership that you pay to government. It’s factored into your monthly mortgage payment. If you’re not sure about this number, you can search your local municipality’s website for the rate you’ll pay.
Homeowner insurance (annually)
You’ll pay a premium for this type of insurance, which protects you if something unexpected — like a fire or tornado — damages your home. Your lender will likely require proof that you’ve purchased home insurance.
How much are closing costs?
Closing costs often add up to about 2% to 5% of the purchase price of the home. That equates to between $5,000 and $12,500 on a $250,000 mortgage and comes on top of the down payment you make.
Closing costs will vary from state to state, and can vary from lender to lender — so it’s worthwhile to shop around and choose the best mortgage for you. Closing costs can also differ based on the type of loan.
Your lender will provide an estimate of the closing costs you’ll pay after you apply for the loan on a form known as the loan estimate. You’ll get this within three days of submitting your application. Then you’ll get a final tally of the closing costs you’ll pay on the closing disclosure form, which you receive at least three business days ahead of your closing date.
What are common closing costs?
There are some standard fees when buying a home that you can expect that we’ve included in our Credit Karma closing costs calculator.
- Loan origination fee: This is a fee the lender charges for issuing you a loan and covers the cost of underwriting and processing the loan. This fee can be negotiable. Specific types of loans may require other processing fees. For example, VA loans typically charge a VA funding fee at close unless you meet specific requirements. Ask your lender what’s included in the loan origination fee.
- Credit report fee: When you apply for a loan, your lender will typically perform an inquiry to check your credit reports.
- Appraisal fee: This covers the cost of the home appraisal your lender will order before agreeing to lend to you. This appraisal puts a dollar amount on how much the home is worth.
- Flood certification: Your lender may run a search to determine if your home is located in a flood hazard area.
- Home inspection: You’ll usually want to verify the condition of your home before purchase, and an independent home inspector can help. You should plan to pay this fee directly to the inspector.
- Title search fee and insurance: This pays for a review of the title to the home to make sure there are no liens, judgments or other legal proceedings that would prevent you from having clear ownership of the home.
- Recording fee: You may need to pay a transfer tax or recording fee to your local government.
- Prepaid expenses: These costs include things like homeowner insurance, property taxes, homeowners association dues and interest.
Keep in mind you may have other costs associated with your mortgage loan. For example, you may opt to purchase “points,” which you pay for upfront in exchange for a lower interest rate. They’re not required, but they can help you save money in interest in the long run if you have the cash to buy them at closing.
Will I always pay closing costs?
Not necessarily — at least not directly. Some lenders advertise no-closing-cost mortgages to help cover closing costs. With these loans, you may not pay any cash at closing, but you’ll probably pay for it in the long run. Usually, the lender will either roll the closing expenses into the overall balance of the loan or charge you a higher interest rate. Either way, your monthly payment will be higher than it would be otherwise.
You may also negotiate with the seller of the home you’re buying for a credit that will offset the closing costs you pay. Generally, though, you make up for it by paying a higher price for the home.
When do I find out my final closing costs
Our closing costs calculator gives you an estimate. At least three business days before closing, you’ll get a closing disclosure form from your lender that will outline your closing costs and all the cash you’ll need to bring to the closing table. Take a close look at this form and see how it lines up with the loan estimate you originally received. If there are significant differences, be sure to ask your lender why.
Some closing costs may change by any amount, some are limited to an increase of 10%, and others can’t increase at all. Costs such as lender fees and transfer taxes are not allowed to increase between the loan estimate and closing disclosure. Recording fees or required services provided by a company the lender recommends can only increase by up to 10%. Anything you shop for on your own can go up by any amount.
If your costs are expected to change, your lender should provide you with an updated loan estimate. If your lender does not follow the rules, you may be owed a refund.