What Are Closing Costs and How Much Will You Pay?

Key takeaways

• Closing costs are fees associated with buying and selling a home, like taxes and insurance.
• Buyers usually pay 2% – 5% of the purchase price in closing costs, but this varies.
• Closing costs are due on closing day when the home is transferred from seller to buyer. 

When buying a home, there’s one big expense beyond your down payment that you’ll need to save for – closing costs. These fees cover everything from lender charges to title insurance and can add up quickly. In this Redfin article, we’ll break down what closing costs are, how much they typically run, and who foots the bill. Whether you’re buying a house in Reno, NV, or a condo in Kansas City, MO, here’s what you need to know before closing day.

What are closing costs?

Closing costs are the fees and expenses you’ll pay when finalizing a home purchase. They typically include taxes, title insurance, appraisal fees, and lender charges. For buyers taking out a mortgage loan, closing costs are listed on the closing disclosure statement, which you’ll receive from the lender at least three days before closing.

How much are closing costs on a house?

Closing cost amounts typically range from 2% – 5% of the purchase price, but vary depending on the buyer’s loan program. For example, closing costs on a $300,000 home could range from $6,000 to $15,000. The buyer’s down payment must also be paid at closing, but it’s listed separately from the closing costs. 

How do you estimate closing costs?

Closing costs vary from one home purchase to the next, and certain factors can increase or decrease the total amount. It’s a good idea to prepare to pay at the higher end of the range, since costs can vary based on your lender, loan type, and timing of the purchase.. 

Here are some factors that impact your closing costs:

• The purchase price of the home
• Your down payment amount
• The type of loan you choose 
• Any adjustments you negotiate with the seller 

As mentioned above, closing costs run between 2% – 5% of the home’s purchase price. Using the median sale price for a single-family home from March 2026, $436,705, the average closing costs could range anywhere from $8,734 – $21,835.

Who pays closing costs – buyer or seller?

Typically, buyers pay most of the closing costs. However, there are instances when the seller may have to pay some fees at closing too. You can also negotiate with the seller to cover some of the closing costs, also called seller concessions. Keep in mind that the seller can only offer so much in closing costs, depending on the buyer’s loan type, down payment amount, and more.

When are closing costs due?

With most home loans, closing costs are due on closing day, the day the property is officially transferred to the buyer. Some closing costs are due prior to closing, such as home inspection and land survey fees. In that case, any unpaid closing costs will be paid on the closing date.

What is included in closing costs for buyers?

Closing costs include a variety of fees, and not every buyer pays the same fees. Some costs differ by lender, loan type, and the state you live in. Prior to closing, at least 3 days before, you’ll receive a closing disclosure that details all the fees you’ll be expected to pay. 

Here are the most common closing costs:

Application fee: Some lenders charge an application fee, which can be upwards of $500. It may be a standalone fee or a deposit used toward other closing costs. 

Appraisal costs: Home appraisals can cost $300 – $500, depending on your location and home price. If you pay for the home appraisal at the time of service, it won’t be included as part of your closing costs.

Attorney fees: Depending on the state you live in, you may need to have a real estate attorney. They draw up the paperwork for a title transfer and coordinate the closing. These fees vary.

Closing fees: You’ll pay closing fees to the escrow company or attorney that holds the closing meeting. These fees vary depending on whether an attorney is present.

Courier costs: Courier fees cover the costs associated with delivering mortgage documents. It’s usually around $30. 

Credit reporting fee: Between $10 – $100, credit reporting fees cover the cost of generating your credit score and report. 

Earnest money: In most areas, you will pay an earnest money deposit, about 1% – 3% of the home’s price, when you reach mutual acceptance on your home purchase. Your earnest money amount will be credited toward your total cash to close (including your down payment and closing costs).

Escrow funds: Also called prepaids or reserve funds, escrow holds funds for mortgage insurance, home insurance, and property taxes. Your lender holds this money in an escrow account and uses the funds toward your mortgage payments. Depending on the lender, you may need to put a few months of expenses into the escrow account. 

FHA mortgage insurance: If you have an FHA loan, you’ll need to pay a mortgage insurance premium (MIP). Unless you have a 10% down payment, you’ll need to pay an upfront amount and a monthly fee for the duration of the loan. The upfront payment is anywhere from 0.15% – 0.75% of your loan amount. 

Flood certification: If you’re buying a home in a flood zone, you’ll likely need to pay $15 – $25 for a flood certification.

Homeowners association dues and HOA transfer fee: If the home you’re purchasing has an HOA, you may be required to pay prorated or upfront dues at closing, depending on the HOA.. HOA dues vary by property and cover maintenance fees and operations costs. There’s also an HOA transfer fee, which covers the cost of moving the HOA fees from the seller to the buyer. The seller usually pays the transfer fee, but sometimes the buyer will pay this cost. 

Home inspection: Home inspections are typically paid in person and aren’t included in closing costs. Inspections typically cost between $300 – $500, which varies based on the property and your local rates.

Homeowners insurance: Your homeowners insurance premium for the year may be included in your closing costs. Most lenders require you to have homeowners’ insurance as part of your loan agreement. 

Lead-based paint inspection: Homes built before 1979 may have lead-based paint, which can cause health problems. About $300, this cost covers the inspection costs for lead testing.

Lender’s title insurance: You’ll have to pay for your lender’s title insurance, which protects the lender if you lose your home to a title claim. It usually costs 0.5% – 1% of the mortgage amount, and is a one-time payment. 

Loan discount points: If you purchased points to lower your interest rate, you’ll pay a one-time fee for them at closing. A discount point can lower your interest rate by 0.25% –0 .5%. Just like interest rates, the price of points changes daily.

Loan origination fee: Your lender may charge you a fee for creating your loan. Not every lender charges an origination fee, so be wary of lenders who charge high fees. Ask your lender what the fee covers and if it’s negotiable.

Loan processing fee: Lenders may charge a fee for processing your loan. This fee covers any additional costs incurred for underwriting or services performed to finalize your loan. Similar to the origination fee, ask your lender what the fees cover and if they can be waived.

Owners’ title insurance: While optional, title insurance can protect you against any title claims against your property. Like the lender’s title insurance, it costs about 0.5% – 1% of the mortgage and is a one-time fee.

Pest inspection: Some states may require you to have a pest inspection. You may want to consider a pest inspection if there were issues during the home inspection or if the area is prone to termite damage. The cost is around $100. 

Prepaid daily interest: You may need to pay interest that accrues on your loan between closing and the date of your first mortgage payment. 

Private mortgage insurance (PMI): Private mortgage insurance is required for conventional loans if your down payment is less than 20%. FHA loans require mortgage insurance premiums (MIP), and VA loans require a funding fee instead of PMI. PMI is typically included as part of your monthly loan payment. However, some loans allow you to pay your private PMI upfront as a one-time fee at closing. 

Property taxes: Most lenders require you to pay a year’s worth of property taxes at the time of closing. This can vary, so be sure to ask your lender what you’re expected to pay.

Rate lock: Your lender may charge you a rate lock fee to lock in your mortgage rate. Many lenders offer this for free, but for those that charge, it can be 0.25% – 0.50% of the loan amount. 

Recording fee: Around $125; a recording fee covers the cost of updating public land ownership records. It’s paid to your local government, so the fee varies from county to county.

Survey fee: Some states require a land survey before closing on a home to determine the property lines. The survey fee covers this cost and can range from $400 – $1,000 depending on the size of the home. 

Tax monitoring and tax status research: These fees cover the cost of verifying that your property taxes are accurate.

Title search: A title search is important because it can identify liens, unpaid taxes, or bankruptcies against the home before buying. You can expect to pay upwards of $200. 

Transfer tax: Paid toward your local government, transfer taxes allow them to update your home’s title to your name. 

VA funding fee: For buyers using a VA loan, you’ll pay an additional closing cost called a VA funding fee, which ranges from 0.5% – 3.3% of the loan amount. This fee helps keep VA loans available with no down payment or mortgage insurance requirements.

What closing costs do sellers pay?

There are still closing costs that a seller may pay for, even though most fall to the buyer. Here are some of the common closing costs for sellers:

• Real estate commission: While real estate commissions are negotiable since the 2024 NAR settlement, some sellers still may offer to pay the buyer’s agent commission.
• Property and transfer taxes: Sellers usually pay a share of the property taxes in addition to transfer taxes. The amount depends on the area. 
• Title insurance: In some areas, it’s common for sellers to pay the title insurance costs. 

How to reduce closing costs

There are a few ways to reduce closing costs, but it depends on your finances and more. Here are some options to consider:

• Compare loans: Certain loan types, such as FHA and VA, charge higher fees at closing. Before you decide on a loan, get a breakdown of all fees.
• Choose a lender with low fees: Fees vary from lender to lender. Compare lenders and fees to decide what’s right for you.
• Negotiate with the seller: Sometimes you can negotiate with the seller to pay a portion of your closing costs. Your real estate agent can help you come up with a strategy.
• Don’t pay to lower your interest rate: Depending on your situation, you may want to avoid paying for points to lower your rate since it can increase overall costs. 
• Opt for a less expensive home: Make sure the home you buy fits your budget. Simply buying a less expensive home will lower your closing costs.

FAQs about closing costs

What does a closing disclosure include? 

A closing disclosure itemizes your loan terms and breaks down the purchase price, principal, interest, payment amounts, and any fees associated with securing your loan. You want to ensure you understand the fee breakdown and double-check the numbers. No matter how professional and experienced your lender’s team is, mistakes can happen.

Is it possible for closing costs to change? 

Yes, your closing costs can change at the last minute. For example, a title search could show a lien on the property, or interest rates could have risen before you locked in your interest rate.

Can I receive assistance for closing costs?

First-time homebuyer programs can assist homebuyers with down payments and closing costs. Many of these programs specifically serve first-time homebuyers, but some also help buyers with moderate and lower incomes. Check the qualifications to see what programs you may qualify for.

Can I use gift money to pay for closing costs?

Yes, you can use monetary gifts from friends and family to pay for closing costs. Note, there are usually gift letter requirements and limits on amounts. Your lender can give you additional insight.

Do I still pay for closing costs with a cash offer?

Yes, you’ll need to pay for certain closing costs like property taxes, notary and recording fees, and local or state fees. You also may still want to get a home inspection or appraisal done. Otherwise, you don’t need to pay for any mortgage-related closing costs.

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