Important points
Closing costs are the costs associated with buying and selling a home, such as taxes and insurance. Buyers typically pay 2% to 5% of the purchase price in closing costs, but this varies depending on the situation. Closing costs are payable on the closing date when the home is transferred from the seller to the buyer.
When purchasing a home, there are major expenses other than the down payment, and you need to save for closing costs. These fees cover everything from lender fees to title insurance and can add up quickly. This Redfin article details what closing costs are, how much they typically cost, and who pays the bill. Whether you’re buying a home in Reno, Nevada or a condo in Kansas City, Missouri, here’s what you need to know before closing date.
What are closing costs?
Closing costs are the fees and expenses you pay when you complete the purchase of a home. These typically include taxes, title insurance, appraisal fees, and lender fees. For buyers with a mortgage, closing costs are listed on the closing disclosure statement you receive from your lender at least three days before closing.
What are the closing costs for a home?
Closing cost amounts typically range from 2% to 5% of the purchase price, but vary depending on the buyer’s loan program. For example, closing costs on a $300,000 home can range from $6,000 to $15,000. The buyer’s down payment is also due at closing, but is listed separately from the closing costs.
How do you estimate closing costs?
Closing costs vary with each home purchase and can increase or decrease the total depending on certain factors. Costs can vary depending on your financial institution, loan type, and timing of your purchase, so it’s best to be prepared to pay at the high end of your range.
Here are some factors that affect closing costs.
The purchase price of the home The amount of your down payment The type of loan you choose Any adjustments you negotiate with the seller
As mentioned above, closing costs can range from 2% to 5% of the home purchase price. Using the median sales price for single-family homes from March 2026 of $436,705, average closing costs could range from $8,734 to $21,835.
Who pays closing costs: the buyer or the seller?
The buyer usually pays most of the closing costs. However, the seller may have to pay a fee at closing. You can also negotiate with the seller to cover some of your closing costs (also known as a seller concession). Keep in mind that sellers can place caps on closing costs, depending on the buyer’s loan type, down payment amount, and more.
When will closing costs be paid?
For most mortgages, closing costs are due on the closing date, the day the property is officially handed over to the buyer. Some closing costs, such as home inspection fees and land surveying fees, must be paid before closing. In this case, any outstanding closing costs will be paid on the closing date.
What are included in the buyer’s closing costs?
Closing costs include a variety of fees, and not all buyers pay the same fees. Some costs vary depending on the lender, loan type, and state you live in. At least three days before closing, you will receive a Closing Disclosure detailing all fees you will be paying.
The most common closing costs are:
Application fees: Some financial institutions charge application fees, which can exceed $500. This may be a separate fee or a deposit that will be used for other closing costs.
Appraisal Fee: A home appraisal can cost between $300 and $500, depending on location and home value. If you pay for the home appraisal at the time of service, it is not included as part of your closing costs.
Attorney fees: Depending on your state, you may need to hire a real estate attorney. They will prepare the documents for the title transfer and coordinate the closing. These fees vary.
Closing Fee: You pay the closing fee to the escrow company or attorney who holds the closing meeting. These costs vary depending on whether or not a lawyer is present.
Courier fee: The courier fee covers the costs associated with delivering your mortgage documents. Usually around $30.
Credit reporting fee: The credit reporting fee, which ranges from $10 to $100, covers the cost of generating your credit score and report.
Earnest Money Deposit: In most areas, you will pay a deposit of approximately 1% to 3% of the home price when you reach a mutual agreement to purchase the home. The earnest money amount will be credited to your total cash (including down payment and closing costs) up to closing.
Escrow funds: Also known as advances or reserves, escrow holds funds for mortgage insurance, home insurance, and property taxes. Your lender will keep this money in an escrow account and use the funds to pay your mortgage. Depending on your lender, you may need to deposit several months’ worth of expenses into an escrow account.
FHA Mortgage Insurance: If you have an FHA loan, you must pay a Mortgage Insurance Premium (MIP). If you don’t have the 10% down payment, you’ll need to pay an upfront payment and a monthly fee over the life of the loan. Prepayment amounts range from 0.15% to 0.75% of the loan amount.
Flood Certification: If you buy a home in a flood zone, you may have to pay $15 to $25 for a flood certification.
Homeowners Association Dues and HOA Transfer Fees: If the home you purchase has an HOA, you may be required to pay prorated or prepaid dues at closing, depending on the HOA. HOA dues vary by property and cover maintenance and operating costs. There are also HOA transfer fees, which cover the cost of moving HOA fees from the seller to the buyer. The transfer fee is usually paid by the seller, but in some cases the buyer pays this fee.
Home Inspection: The home inspection is usually paid directly and is not included in your closing costs. Inspections typically cost between $300 and $500, depending on the property and local rates.
Homeowner’s insurance: Your annual homeowner’s insurance premium may be included in your closing costs. Most financial institutions require homeowners insurance as part of your loan agreement.
Lead-based paint inspection: Homes built before 1979 may have lead-based paint, which can lead to health problems. Approximately $300, this fee covers the cost of the lead test inspection.
Lender Title Insurance: You must pay lender title insurance, which protects the lender if you lose your home due to a title claim. It typically costs between 0.5% and 1% of the mortgage amount and is a one-time payment.
Loan Discount Points: If you purchase points to lower your interest rate, you pay a one-time fee for those points at closing. Discount points reduce your interest rate by 0.25% to 0.5%. Like interest rates, point prices change daily.
Loan origination fee: Your lender may charge a fee to originate your loan. Not all lenders charge origination fees, so be wary of lenders that charge high fees. Ask your lender the range of fees and whether they are negotiable.
Loan processing fees: Your lender may charge a fee to process your loan. This fee covers any additional costs incurred for the underwriting and services performed to close the loan. As with origination fees, ask your lender what the fees are and whether they can be waived.
Owner Title Insurance: Title insurance is optional, but it can protect against any title claims against your property. Like lender title insurance, it costs about 0.5% to 1% of your mortgage and is a one-time fee.
Pest Inspection: Some states may require you to undergo a pest inspection. If you have any problems during your home inspection, or if the area is prone to termite damage, you may want to consider a pest inspection. The cost is approximately $100.
Daily Prepaid Interest: You may be required 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 a mortgage insurance premium (MIP), and VA loans require a financing fee in lieu of PMI. PMI is typically included as part of your monthly loan payment. However, some loans allow you to prepay private PMI as a one-time fee at closing.
Property taxes: Most lenders require one year’s worth of property taxes to be paid at closing. This may vary depending on your situation, so be sure to ask your lender how much you can expect to pay.
Rate lock: Lenders may charge a rate lock fee to lock in your mortgage rate. Many lenders offer this for free, but fee-based lenders may charge between 0.25% and 0.50% of the loan amount.
Recording fee: approximately $125. Recording fees cover the cost of updating public land ownership records. Fees vary by county as they are paid to local governments.
Survey fees: Some states require a land survey to determine property lines before building a home. The inspection fee includes this cost and can range from $400 to $1,000 depending on the size of the home.
Tax monitoring and tax status review: These fees cover the cost of ensuring your property taxes are accurate.
Title Search: A title search is important because it allows you to identify any liens, unpaid taxes, or bankruptcies before purchasing a home. You can expect to pay more than $200.
Transfer tax: A tax paid to the local government, which allows them to update the title of your home in your name.
VA Financing Fee: If you are a buyer using a VA loan, you will pay an additional closing cost called the VA Financing Fee. This ranges from 0.5% to 3.3% of the loan amount. This fee helps you qualify for a VA loan without any down payment or mortgage insurance requirements.
What closing costs will the seller pay?
Although most of the costs are borne by the buyer, there are still closing costs that are paid by the seller. Here are some common closing costs for sellers.
Real estate commissions: Since the 2024 NAR settlement, real estate commissions are negotiable, but some sellers may still offer to pay the buyer’s agent commission. Property and transfer taxes: The seller typically pays a portion of the property tax in addition to the transfer tax. The amount varies depending on the region. Title insurance: In some areas, the seller typically pays for title insurance.
How to reduce closing costs
There are several ways to reduce closing costs, but it depends on your financial situation. Here are some options to consider.
Compare loans: Certain loan types, such as FHA and VA, have higher fees at closing. Check the breakdown of all fees before deciding on a loan. Choose a lender with low fees: Fees vary by lender. Compare lenders and fees to decide what’s right for you. Negotiate with the seller: You may be able to negotiate with the seller to pay a portion of your closing costs. A real estate agent can help you develop a strategy. Don’t pay to get a lower interest rate: In some situations, you may want to avoid paying points to get a lower interest rate, as it can increase your overall costs. Choose a cheaper home: Make sure the home you buy fits your budget. Just buying a less expensive home will lower your closing costs.
Frequently asked questions about closing costs
What does the closing disclosure include?
The closing disclosure itemizes the loan terms and provides a breakdown of the purchase price, principal, interest, payments, and fees associated with securing the loan. Make sure you understand the price breakdown and double-check the numbers. No matter how professional and experienced a lender’s team is, mistakes can happen.
Are closing costs subject to change?
Yes, closing costs are subject to change at the last minute. For example, a title search may show up a lien on your property, or the interest rate may have increased before you locked in the rate.
Can I get assistance with closing costs?
First-time homebuyer programs help homebuyers with down payments and closing costs. Many of these programs are specifically aimed at first-time homebuyers, but some also help buyers with below-moderate incomes. Check your eligibility to see what programs you can participate in.
Can I use gift money to pay closing costs?
Yes, monetary gifts from friends and family can be used to pay for closing costs. Please note that there are usually gift letter requirements and dollar amount limits. Your lender can give you further insight.
Do I need to pay closing costs with a cash offer?
Yes, you will have to pay certain closing costs, such as property taxes, notary and recording fees, and local or state fees. You may also want to undergo a home inspection and appraisal. Otherwise, you won’t have to pay any mortgage-related closing costs.
