Closing costs in real estate are the fees and charges that finalize a home purchase, and they typically run between 2% and 5% of the purchase price. On a $350,000 home, that works out to roughly $7,000 to $17,500 on top of your down payment. Buyers and sellers each pay a different portion, and some of it is negotiable.
What Closing Costs Actually Cover
The total is made up of a dozen or so separate line items. They fall into a few groups.
Lender Fees
Your mortgage lender charges for processing, underwriting, and funding the loan. The origination fee, sometimes called a loan origination charge, usually runs 0.5% to 1% of the loan amount: $1,500 to $3,000 on a $300,000 mortgage. A credit report fee covers pulling your history from all three major bureaus through a specialized tri-merge report; recent increases have pushed this charge anywhere from $50 to over $175 per borrower.
Discount points are optional. Each point equals 1% of the loan amount and buys down your interest rate by a fraction of a percentage point. They pay off only if you stay in the home long enough for the monthly savings to exceed what you paid upfront. Points are separate from the origination fee even when both appear as percentage-based charges on your Loan Estimate.
Appraisal and Inspection
An independent appraisal confirms the home is worth at least what the lender is financing. Appraisals generally cost $350 to $550, more for larger or complex properties. A home inspection, typically $300 to $500, checks for structural, mechanical, or safety issues. Lenders don’t always require an inspection, but skipping it means any expensive surprises become yours after closing.
Title Services and Insurance
A title search examines public records to confirm the seller holds clear ownership and that the property isn’t encumbered by unpaid liens, judgments, or other claims. Title insurance protects against problems the search misses. There are two separate policies covering two different people:
- The lender’s policy protects the lender’s financial interest up to the remaining loan balance. Most lenders require it, and the buyer usually pays.
- The owner’s policy protects your full investment for as long as you or your heirs own the home, including legal defense if someone later challenges your ownership. In many markets the seller customarily pays for this, though it’s negotiable.
Government Fees
Recording fees are charged by the county to file the new deed and mortgage in the public record; some counties charge a flat fee per document, others charge per page. Transfer taxes are assessed by state or local governments when property changes hands. Rates range from nothing in some states to more than 1% of the sale price in others, so this line may not appear at all depending on where you buy.
Attorney and Notary Fees
Some states require an attorney to oversee closing; in others a title company or escrow agent handles it. Where an attorney is used, fees typically run $500 to $1,500 for a straightforward residential transaction. Notary fees for witnessing signatures tend to be modest, from a few dollars to around $30 per signature depending on your state, with possible add-ons for remote online notarization.
Prepaid Items and Escrow
A chunk of your closing costs isn’t fees at all. It’s money paid in advance for expenses that haven’t come due yet, and it catches first-time buyers off guard because it can add thousands to what’s owed at the table.
Prepaid interest covers the daily interest that accrues between your closing date and the end of that month. Close near the end of the month and you owe only a few days; close on the 5th and you owe roughly 25.1Consumer Financial Protection Bureau. What Are Prepaid Interest Charges?
Your lender also collects an initial deposit for your escrow account, which will pay property taxes and homeowners insurance across the year. Federal regulations cap the cushion at one-sixth of the estimated annual escrow payments.2eCFR. Part 1024 Real Estate Settlement Procedures Act (Regulation X) In practice, most lenders collect two to three months of taxes and insurance premiums at closing to seed the account.
Who Pays: Buyer and Seller
What the Buyer Usually Pays
Buyers generally cover everything tied to getting the mortgage: origination fees, credit report fees, appraisal, discount points if any, lender’s title insurance, prepaid interest, and the initial escrow deposit. These account for the bulk of the 2% to 5% range.
What the Seller Usually Pays
Sellers typically cover the owner’s title insurance policy and any transfer taxes required in their jurisdiction. Historically, sellers also paid both real estate agents’ commissions, their own and the buyer’s, often totaling 5% to 6% of the sale price combined. That changed after a 2024 legal settlement involving the National Association of Realtors. Since August 2024, sellers no longer automatically pay the buyer’s agent. Buyers negotiate compensation directly with their own agent through a written agreement, and the seller independently decides whether to offer any contribution. Many sellers still offer something to attract offers, but the amount is no longer preset on the listing.
Seller Concessions
Whoever customarily pays a given fee, the two sides can negotiate seller concessions, where the seller agrees to cover a portion of the buyer’s closing costs. Lenders cap the contribution, and the limit depends on the loan type:
- Conventional loans: 3% of the sale price if the down payment is under 10%, 6% from 10% to 24.99%, and 9% at 25% or more.3Fannie Mae. Interested Party Contributions (IPCs)
- FHA loans: up to 6% of the sale price regardless of down payment.
- VA loans: no limit on closing cost credits, but seller concessions covering items beyond standard closing costs (such as paying off the buyer’s debts) are capped at 4% of the appraised value.4U.S. Department of Veterans Affairs. VA Funding Fee and Loan Closing Costs
The caps exist to stop artificially inflated sale prices. If a seller agrees to pay $15,000 of your closing costs, the worry is the price was bumped by $15,000 to make up for it, leaving the lender financing more than the home is worth.
Where You See the Numbers
Federal law requires your lender to put every dollar in writing at two points in the process. Both forms come from the TILA-RESPA Integrated Disclosure rule, which combined the Truth in Lending Act and Real Estate Settlement Procedures Act requirements into a single pair of documents.5Office of the Law Revision Counsel. 12 USC Ch. 27 – Real Estate Settlement Procedures
Loan Estimate
Within three business days of receiving your application, each lender must send a Loan Estimate.6Consumer Financial Protection Bureau. Review Loan Estimates It shows your projected interest rate, monthly payment, estimated closing costs, and features like whether the rate adjusts or carries a prepayment penalty. The format is identical across lenders, so Loan Estimates from different companies can be compared line by line.
Closing Disclosure
At least three business days before closing, your lender must deliver the Closing Disclosure, a five-page document with the final itemized fees.7Consumer Financial Protection Bureau. Closing Disclosure Explainer A “Cash to Close” figure tells you the exact amount to bring, netting out your down payment, all closing costs, credits, and any deposits already made. Compare it against your most recent Loan Estimate. If anything jumped, ask the lender to explain the change before you sign.
How to Reduce What You Pay
Closing costs aren’t entirely fixed. A few strategies lower the bill in meaningful amounts.
- Compare Loan Estimates from at least three lenders. Origination fees, point pricing, and service charges vary, and the standardized format makes the differences easy to see. Use the lowest quotes to negotiate with your preferred lender.
- Shop for third-party services. Your Loan Estimate lists the services you’re allowed to shop, usually title insurance, surveys, and pest inspections. Your own quotes can save hundreds.
- Negotiate seller concessions. In a buyer’s market, sellers often agree to cover part of your closing costs. The loan-type caps are the ceiling, not the floor.
- Ask about lender credits. Your lender may cover some or all of your closing costs in exchange for a slightly higher rate. The math works best if you plan to sell or refinance within a few years, because the higher rate costs less over a shorter window.8Consumer Financial Protection Bureau. How Should I Use Lender Credits and Points?
- Close near the end of the month to cut your prepaid interest.
How You Pay at Closing
The Cash to Close figure on your Closing Disclosure is the total you’ll bring: down payment plus closing costs, minus any earnest money already deposited and any credits. Most closing agents require a wire transfer or cashier’s check because both represent guaranteed, immediately available funds. Personal checks are almost never accepted since they can’t be verified on the spot.
Wire transfers are standard for larger amounts, and they carry a serious fraud risk. Real estate wire fraud has cost victims over a billion dollars in recent years, usually through schemes where criminals intercept or impersonate email communications and send buyers fake wiring instructions. A few habits protect you:
- Verify wiring instructions by phone, using a number you already have for the closing agent or title company. Not a number pulled from an email.
- Treat any last-minute change to the wiring instructions as suspicious, especially one arriving by email or voicemail.
- Confirm receipt right after sending by calling your closing agent at the known number.
Once the closing agent verifies the funds have landed, you sign the final mortgage documents and the deed. The agent then pays out the seller, lender, and third-party providers and records the new deed with the county. At that point the transaction is legally complete and the home is yours.