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Learning CenterClosing costs: what to expect and who pays
Closing costs typically include lender fees, appraisal, title and escrow, recording and any local taxes, plus prepaid insurance and taxes—often about 2–5% of the loan amount. Who pays what depends on local custom and your contract, and seller credits, lender credits, or assistance can cover a large share.
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How much are closing costs?
Nationally, buyers' closing costs often land around 2–5% of the loan amount, before credits.
Closing costs
Your Loan Estimate itemizes every cost within three business days of applying, and your Closing Disclosure confirms final numbers at least three business days before signing.
What do closing costs include?
| Category | Examples |
|---|---|
| Lender charges | Origination, underwriting, processing, optional discount points |
| Third-party services | Appraisal, credit report, flood certification, survey (if required) |
| Title and escrow | Lender's and owner's title insurance, title search, settlement or escrow fee |
| Government | Recording fees and any state or local transfer taxes |
| Prepaids and escrow deposits | Homeowners insurance, property tax reserves, interest to month-end |
| Other | HOA transfer or document fees, home warranty, inspection (often paid before closing) |
Illustrative: $300,000 purchase, $289,500 loan
At 2–5% of the loan amount, closing costs might run roughly $5,800–$14,500 before seller or lender credits. Illustrative only, not a commitment to lend.
Who typically pays which closing costs?
Customs vary by state and even by county, and almost everything is negotiable in the purchase contract. Commonly:
Buyer often pays
Lender fees, appraisal, lender's title policy, recording of the new mortgage, prepaids and escrow deposits, and a share of the escrow fee.
Seller often pays
Real estate commissions as negotiated, payoff of their loan, and in many areas the owner's title policy, transfer taxes, and a share of escrow.
Your agent knows local custom; your loan officer confirms what the loan allows.
What do title and escrow companies do?
The title company searches public records to confirm the seller can transfer clean ownership and issues title insurance that protects against hidden claims. The escrow or settlement agent holds funds, collects signatures, pays off the old loan, distributes money, and records documents. In some states an attorney handles part of this. Fees vary, so ask for estimates early.
How do seller credits and lender credits work?
Seller credits
The seller agrees in the contract to pay part of your closing costs and prepaids. Each loan program caps the amount (usually a percentage of the price), and credits can't exceed your actual costs or typically go toward the down payment.
Lender credits
You accept a slightly higher interest rate, and the lender credits money toward your closing costs. Good if you need cash now or may not keep the loan long; costs more over time if you do.
Down payment assistance programs can also cover some closing costs—see the homebuying guide and first-time buyer programs.
What else should buyers know?
Ready to see your numbers? Learn how buying works or estimate costs with the affordability calculator.
How can I lower my closing costs?
- Compare Loan Estimates from two or three lenders on the same day, focusing on lender charges in Section A.
- Negotiate seller credits in your offer, within program limits.
- Ask about assistance—some local programs cover closing costs, not just down payment.
- Shop services you're allowed to shop (listed in Section C of the Loan Estimate), like some title services.
- Pick your closing date thoughtfully; it changes prepaid interest timing.
- Consider a lender credit if you'd rather keep cash than get the lowest rate.
a loan officer can walk through your Loan Estimate line by line so you know which numbers are fixed and which can move.
Frequently asked questions
How much are closing costs?
Often about 2–5% of the loan amount nationally, before credits. Local taxes and title customs change the number; your Loan Estimate shows exact figures.
Who pays closing costs, buyer or seller?
Both typically pay some. Who pays what depends on local custom and the purchase contract, and much of it is negotiable.
Can closing costs be rolled into my mortgage on a purchase?
Generally not on a purchase, but seller credits, lender credits, and assistance programs can cover them.
What is the difference between a seller credit and a lender credit?
A seller credit comes from the seller and is negotiated in the contract. A lender credit comes from a slightly higher rate.
When will I know my final closing costs?
Your Closing Disclosure arrives at least three business days before closing with the final figures.
What is cash to close?
The total you bring to closing: down payment plus closing costs and prepaids, minus earnest money already paid and any seller credits, lender credits, or assistance. It is shown on your Loan Estimate and Closing Disclosure.
Educational answers only—not a loan offer or commitment to lend. Examples are illustrative only, not a commitment to lend.
See your exact closing costs
We will itemize your costs and show how credits and assistance lower cash to close. Call a loan officer at (480) 233-7897.