How Much Are Closing Costs? Buyer & Seller Guide

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Closing costs are part of any real estate transaction, and yet many buyers forget to include them in their budget. Closing costs are the fees and expenses due at the end of a real estate transaction. Whether you’re buying or selling a home, you need to know how to estimate your closing costs. Understanding these costs upfront can help you plan more effectively and avoid last-minute stress. The home-buying process involves several steps, and understanding how closing costs fit into this process is essential for avoiding unexpected expenses.

Both buyers and sellers are responsible for specific fees at closing, and the total amount can vary widely depending on location, price point, and the deal’s structure. Some of these costs are tied to the loan. Others come from services such as title searches, inspections, or state-required taxes. It’s important to understand your estimated closing costs early in the home-buying process, as lenders provide loan estimates that outline these expenses so you can prepare accordingly.

This guide breaks down average closing costs, who typically pays them, and how much buyers and sellers can expect to spend based on their state and situation. You’ll also learn how closing costs vary by state, how to spot ways to save, and how a good real estate agent can help you avoid surprises.

What Are Closing Costs?

Closing costs is the term used to collectively describe all fees, taxes, commissions, and service charges paid at the end of a real estate transaction. These costs are required to transfer ownership, finalize the loan, and ensure the legal and financial integrity of the sale. They are separate from the down payment and must be settled before the buyer takes legal possession of the property.

While the exact charges vary by location and transaction type, most closing costs fall into a few common categories.

Common Closing Costs:

Appraisal fees: Lenders require a professional appraisal to confirm the home’s market value before approving the loan. This fee covers the cost of the appraisal service.

Title insurance: Protects both the buyer and the lender in the event of a title issue or a claim of ownership by someone other than the buyer.

Escrow or Settlement Fees: Charges for managing the disbursement of funds and legal documents during the transaction are charged by an escrow company. The escrow fee covers the handling of funds and documents.

Attorney fees: In some states, a real estate attorney must review or oversee the closing. These fees cover their services.

Recording and transfer fees: Counties charge fees to transfer property ownership and record the new deed legally.

Loan origination fees: Lenders charge loan origination fees, typically 0.5-1% of the loan amount, to cover the costs of setting up a mortgage.

Application fee: A charge by lenders to process loan requests, which may vary in amount and sometimes be applied toward closing costs.

Prepaid taxes and insurance: Buyers often need to pay the first few months of property taxes and homeowners’ insurance up front.

Real estate agent commissions: Seller’s agents typically charge their clients 5-6% commissions based on the purchase price. They usually split this amount with the buyer’s agent.

This is just a basic list of closing costs; others are specifically assigned to buyers or sellers. These expenses are typically due at the end of the transaction, but who pays what can depend on local customs and the terms negotiated in the purchase agreement.

Buyers often take on more line items, but sellers usually pay the larger fees.

Lender fees, which home buyers typically pay, can include origination, underwriting, and other charges that are important to understand and budget for. Certain closing costs may be negotiable or vary depending on the location and property type. Knowing what each fee covers, such as what is included in the appraisal or escrow fee, helps clarify the total amount due at closing.

Understanding what these costs cover helps buyers and sellers prepare for what’s ahead and avoid surprises on closing day.

Average Closing Costs Nationwide

Closing costs in the United States typically range from 2% to 5% of the home’s purchase price, with costs varying by state and deal. These percentages apply to the buyer’s side of the transaction. While sellers also pay closing costs, their primary expense is usually the real estate commission, which averages between 5% and 6% of the sale price, split between the buyer’s and seller’s agents.

To estimate these expenses more accurately, buyers can use a closing cost calculator. This tool helps buyers project what they might pay in closing costs based on location, loan type, and other factors, and is often available on mortgage websites or through lenders.

Closing costs do not include a down payment. For most homes, down payments range from 5% to 20% of the purchase price. Most buyers prefer to pay at least 20% to avoid private mortgage insurance. When saving to buy a house, many buyers focus on the down payment but forget to include closing costs, which they should expect to pay in addition to the down payment.

While down payments are often larger in total, closing costs represent a separate financial obligation that must be paid at settlement. These funds are required in addition to the down payment and cannot typically be rolled into the loan (unless using specific programs like FHA or VA). As a result, buyers need to be prepared to pay closing costs with cash savings.

Sample Closing Cost Breakdown by Home Price

Closing costs are typically estimated as a percentage of the home’s purchase price, but the total varies depending on location, lender, and the services required to complete the transaction. Even at the lower end of the 2-5% range, closing costs can add up to several thousand dollars.

To better understand how closing costs affect a homebuyer’s overall cash requirements, consider a home priced at $250,000. With a 10% down payment, the buyer would need to provide $25,000 upfront. At 2% closing costs, the total would be an additional $5,000; at 5%, it would rise to $12,500. In this scenario, the buyer’s total out-of-pocket amount at closing would range from $30,000 to $37,500, depending on the final closing costs. These upfront expenses represent the cash a buyer must have available at closing. In addition, certain loans, such as FHA loans, require an upfront payment for the mortgage insurance premium (MIP) at closing, which is separate from ongoing monthly fees.

Now, if you’re buying a $500,000 house, the 10% down payment would be $50,000. Closing costs would then be estimated at $10,000 to $25,000. So the buyer should prepare to have between $60,000 and $75,000 in cash at closing. These examples show just how quickly closing costs and a down payment can add up.

While sellers should also account for closing costs, these are typically deducted from their proceeds at settlement. The most significant expense for sellers is usually the real estate commission.

While percentages provide a general benchmark, actual costs can vary substantially based on location, lender, and contract terms. Ask your real estate agent for their estimate of closing costs. Request a breakdown of each of the common closing costs and which of them will be your responsibility.

Closing Costs for Buyer

Buyers are responsible for a wide range of expenses at closing, many of which are tied directly to the mortgage loan and property transfer process. Many closing costs are associated with the type of home loan chosen, and different types of home loans can significantly affect the total closing costs. The specific loan type influences which costs apply, such as insurance premiums or guarantee fees. Mortgage closing costs include fees for the loan origination, appraisal, title insurance, and more, all related to the mortgage process. Paying closing costs is typically the buyer’s responsibility, in addition to the down payment, and is required to complete the transaction and secure ownership of the home.

Appraisal Fee

The lender requires an independent home appraisal to verify the property’s market value. An appraisal protects both the buyer and the lender by ensuring the home is worth the amount being borrowed. Appraisal fees typically range from $400 to $700, depending on property type and location.

Home Inspection

While not always mandatory, a professional home inspection is strongly recommended. It helps the buyer identify any structural, mechanical, or safety issues before finalizing the purchase. If these issues are found, buyers may have the option to re-negotiate with sellers or walk away from the property. Home inspections generally cost $300 to $550, and additional specialty inspections (such as sewer, radon, or termite) will increase the total cost.

Mortgage Origination Fees

Mortgage origination fees are charged by the lender for processing and underwriting the loan. Origination costs can vary but are usually 0.5% to 1% of the loan amount. They may include application fees, underwriting fees, and document preparation. Discount points are another upfront cost you can pay to lower your mortgage interest rate over the life of the loan. In addition to origination and application fees, mortgage insurance premiums may be required for certain loan types.

For example, a conventional loan typically requires private mortgage insurance (PMI) if your down payment is less than 20%, while an FHA loan requires its own specific mortgage insurance premiums regardless of down payment. Mortgage insurance PMI is specific to conventional loans, whereas FHA loans have their own mortgage insurance requirements and premiums. To limit these expenses, ask your mortgage broker or loan officer for a breakdown of their costs upfront.

Homeowners Insurance

Lenders require proof of an active homeowners’ insurance policy before closing. A buyer typically pays the first year’s premium upfront. Nationwide, the average homeowners’ insurance cost is $2,100. However, in areas at high risk of natural disasters, like Florida, that cost can exceed $8,000.

Escrow and Prepaid Property Taxes

Most lenders require buyers to prepay several months of property taxes and homeowners’ insurance into an escrow account. Property tax is typically calculated based on the assessed value of the home and the local tax rate, and it plays a significant role in determining your closing costs. This ensures funds are available when those bills come due. Prepaid property taxes and insurance are collected at closing to cover the period before your first mortgage payment is due.

These prepaid items are then factored into your overall mortgage payment process, ensuring that future property tax and insurance obligations are met through your monthly payments. The amount depends on local tax rates and the timing of the purchase, but it often adds a few thousand dollars to closing costs.

How to Negotiate Seller Concessions to Reduce Closing Costs

Just because buyers are meant to pay most of the closing costs doesn’t mean they necessarily have to. Buyers work with their real estate agent to negotiate a deal structure that works with their finances. For example, a buyer can offer the full purchase price but request that the seller cover part of their closing costs.

These seller concessions can significantly reduce the amount of cash a buyer needs to bring to closing. They are particularly effective in buyer’s markets where homes sit longer or buyers have more leverage. However, in competitive markets, sellers are less likely to agree to these terms unless it benefits the sale overall.

While seller concessions can be a great tool, there are limits on how much a seller is allowed to contribute that are set by the type of loan the buyer is using:

• Conventional loans: Up to 3% with less than 10% down, 6% with 10–25% down, and 9% with more than 25% down.
• FHA loans: Up to 6% of the home’s purchase price.
• VA loans: The seller may cover all closing costs, but only 4% can be applied to extras such as debt payoff or prepaid expenses.
• USDA loans: Up to 6% of the purchase price.

Parties must write all seller concessions into the purchase contract. Buyers will need to have those concessions approved by the lender. If a contract’s terms exceed the program limits, closing may get delayed or the load could be denied entirely. If you’re planning to leverage seller concessions, make sure to discuss the amount with both your real estate agent and lender before submitting the offer.

Closing Costs for Seller

Sellers are responsible for a different set of closing expenses, most of which are deducted directly from the sale proceeds. While buyers typically cover more line-item fees, sellers often pay a larger share of total transaction costs, primarily due to agent commissions and government-mandated transfer charges.

The largest cost for most sellers is the real estate commission, which usually ranges from 5% to 6% of the sale price and is split between the buyer’s and seller’s agents. Beyond that, sellers may also be responsible for:

Title insurance (owner’s policy)

A title insurance policy protects the lender if a title issue is uncovered after closing, for example, if someone else claims an ownership interest. The seller often pays them in states where it’s customary. Lender’s title insurance is a separate policy that protects the lender from title claims and is typically paid by the buyer, unlike the owner’s policy, which protects the buyer.

Transfer taxes and recording fees

Transfer tax is a local government fee required to transfer legal ownership of the property, and the amount varies by location. Recording fee is a separate administrative cost paid to local authorities to update and maintain public land ownership records, and its price also varies by area.

Escrow or settlement fees

Escrow companies or closing attorneys handle the exchange of documents and funds during the transaction. In some states, these fees are shared between buyer and seller, while in others, the seller is responsible for a fixed portion or the full amount.

HOA fees and prorated dues

If the home is part of a homeowners association, the seller is typically required to pay their share of any outstanding dues up to the closing date. Some associations also charge a homeowners’ association transfer fee when a property changes hands, which is often paid by the seller but can be negotiated depending on HOA policies and market conditions.

Outstanding liens or mortgage loan payoff

The seller must pay off any existing mortgage loan or property liens before the title can transfer to the buyer. The title company will coordinate the payoff and ensure the balance is settled from the seller’s proceeds.

Seller concessions (if negotiated)

In some cases, sellers agree to cover part of the buyer’s closing costs to help finalize the deal. This is more common in slower markets or when a buyer requests concessions as part of their offer.

Sellers should plan to spend 6% to 10% of the home’s sale price on closing costs, with most of that allocated to agent commissions. The exact amount depends on local tax rates, negotiated terms, and whether seller-paid services like title insurance or transfer fees are customary in that state.

Closing Costs by State

Closing costs vary from one state to another due to differences in local tax laws, title insurance practices, and required legal services. Some states have transfer taxes, and others require attorney involvement in every transaction. These factors all contribute to how much buyers and sellers ultimately pay at closing.

For example, states like Delaware, New York, and Florida tend to have some of the highest closing costs in the country because of transfer taxes, title fees, and higher insurance premiums. In Delaware, total closing costs can exceed 5% of the home’s purchase price. New York buyers may encounter mortgage recording taxes and legal fees that add thousands to their final settlement costs. Florida commonly includes state documentary stamp taxes and other local fees that increase the total.

By contrast, low-cost states such as Missouri, Indiana, and West Virginia typically have minimal transfer taxes and more affordable title insurance premiums. In these states, total closing costs may range from 1% to 2% of the purchase price, especially in transactions without unusual requirements or delays.

For buyers and sellers planning a move, it’s important to research the norms for closing costs in your specific state or county. Working with a real estate agent who understands local practices can help clarify what to expect and identify potential ways to save.

Who Pays What? Negotiating Closing Costs

Closing costs are typically split between the buyer and seller, but the split isn’t fixed. Who pays closing costs can depend on local customs, state regulations, and the terms negotiated in the contract. While some expenses are traditionally assigned to one party, many items are negotiable and can shift depending on the terms of the offer and local customs.

In most transactions, buyers pay for the majority of lender-related fees, including the loan origination fee, appraisal, credit report, escrow deposits, and title insurance for the lender’s policy.

Sellers usually pay the real estate agent commissions, transfer taxes, title insurance for the buyer’s policy (in some states), and any outstanding liens or mortgage payoff balances.

Negotiating who is responsible for paying closing costs is a common strategy, and your real estate agent can help you determine which costs can be shifted or shared during negotiations.

Negotiating Closing Costs

Many closing costs can be negotiated at either the offer stage or during the inspection and repair process. Buyers may request seller concessions to offset some or all of their closing costs. These concessions are more common in slow markets because sellers are motivated to negotiate.

Even outside of concessions, buyers and sellers can negotiate:

• Who pays for title insurance
• Whether transfer taxes are split or assigned
• How escrow and settlement fees are split
• Whether the seller will cover prepaid costs like property taxes or insurance

Market Conditions Matter

The local housing market strongly influences negotiation power. In a seller’s market, buyers often absorb more costs to make their offers more appealing. In a buyer’s market, sellers may offer credits or cover closing costs to attract offers or help deals move forward.

Understanding local norms and what’s possible within your loan limits helps set realistic expectations and strengthens your negotiating position. An experienced real estate agent can advise on what’s typical in your area and help craft a strategy that protects your interests.

How to Reduce Closing Costs

Closing costs can add thousands of dollars to a real estate transaction, but there are several ways to reduce them with the proper planning and support. Comparing mortgage lenders is crucial, as different lenders may offer lower fees or assistance programs that can help reduce your closing costs. Whether you’re a buyer or seller, understanding where you have control can make a meaningful difference in your final costs.

1. Compare Lenders

Not all lenders charge the same fees. Some may offer competitive rates but build in higher origination or underwriting costs. Buyers should request Loan Estimates from multiple lenders and carefully compare line items. Even small differences in fees can translate to significant savings at closing.

2. Shop for Title and Escrow Services

Buyers are often allowed to choose their title company and settlement provider, especially when paying for the lender’s title insurance policy. Title insurance premiums and escrow fees can vary, even within the same region. Comparing quotes from approved providers can lower total costs without affecting loan terms.

3. Request Seller Credits

If market conditions allow, buyers can negotiate for the seller to cover part of their closing costs. These seller-paid credits are written into the purchase contract and applied directly at settlement. While not always available in competitive markets, seller credits are common in slower conditions or on properties that have been listed for an extended period.

4. Watch for Junk Fees

Some lenders or third-party providers may include unnecessary or excessive charges labeled as processing, courier, or administrative fees. These are sometimes negotiable or avoidable. Ask for an explanation of each fee and request clarification or removal where appropriate.

5. Consider Closing at Month-End

Buyers who schedule closing near the end of the month may reduce prepaid interest charges. Because mortgage interest begins accruing the day after closing, fewer days remaining in the month means fewer days of prepaid interest due at settlement.

Common Mistakes Buyers & Sellers Make With Closing Costs

Closing costs often catch buyers and sellers off guard, not because the fees are hidden, but because they’re underestimated or misunderstood. Working with experienced real estate agents can help you avoid common mistakes and ensure a smoother transaction. Knowing where people go wrong can help you prepare and avoid delays.

Underestimating Expenses

One of the most common mistakes is assuming closing costs will be minimal or folded into the down payment. Buyers who don’t budget separately for closing costs may find themselves scrambling to cover additional expenses just days before settlement. Sellers can also make the mistake of miscalculating their net proceeds by overlooking transfer taxes, title fees, or agent commissions.

Overlooking Prepaid Expenses and Escrow

Buyers frequently forget to account for prepaid items such as property taxes, homeowners’ insurance, and interest through the end of the month. These amounts are collected at closing and can add thousands to the total due. Escrow deposits, which fund future payments, are often another surprise for first-time buyers.

Failing to Shop for Services

Many buyers assume they must use the lender’s recommended title company, inspector, or settlement agent. In many cases, you’re allowed to choose your providers, which can help you save money. The same applies to lenders. Comparing offers is one of the most effective ways to reduce costs.

Skipping Negotiation Opportunities

Sellers sometimes agree to pay a portion of the buyer’s costs, especially in slower markets. Buyers who don’t ask for concessions or assume they’re off the table may miss out on meaningful savings. Similarly, sellers who don’t verify closing cost estimates can miss details that reduce their net.

How FastExpert Agents Help Buyers & Sellers Save on Closing Costs

Closing costs are part of every real estate transaction, but they don’t have to catch you off guard or be higher than necessary. Working with an experienced agent can make a measurable difference in how much you spend and how smoothly the process unfolds.

FastExpert connects buyers and sellers with top-performing agents who understand local closing practices, state-specific fees, and the negotiation strategies that lead to real savings. Whether it’s identifying areas where costs can be reduced, negotiating concessions, or helping you avoid overpaying for services, the right agent is essential to keeping closing costs under control.

Agents in the FastExpert network bring proven experience with closing cost estimates, net proceeds analysis, and local vendor recommendations. Connect with an agent who will make sure you’re not surprised at the settlement table and can walk away with more money in your pocket.