Costs & insurance

Closing costs

The fees and charges due when a mortgage closes — origination, title, escrow, appraisal, prepaids and more — typically 2–5% of the purchase price for buyers.

Sources

What does closing costs mean?

Closing costs are the one-time charges that settle a mortgage, separate from your down payment, and they fall on both sides of the table. A buyer typically pays origination, appraisal, title, recording and prepaid escrow items; a seller usually covers the agent commission and transfer taxes. On a purchase they commonly run 2–5% of the price, so they are worth estimating before you make an offer.

What closing costs are made of

Lender charges — origination fee, discount points, underwriting.

Third-party services — appraisal, credit report, title search and title insurance, survey, settlement agent.

Government fees — recording fees and, in many states, transfer taxes.

Prepaids and escrow deposits — prepaid interest, the first year of homeowners insurance and an initial deposit toward property taxes.

Prepaids are why buyers often hear “2% to 5% of the price”: they are not fees, but they still need cash at closing. Fees alone average far less — about $4,661 including taxes nationally, with wide differences by state.

How to lower them

Compare section A of several Loan Estimates, shop the services the lender lets you choose, and ask about lender credits in exchange for a slightly higher rate.

Sellers can also contribute toward your costs, within program limits — for conventional loans 3% to 9% of the price depending on your down payment, for FHA up to 6%. Any credit must go toward actual closing costs and prepaids, not cash back to you.

Frequently asked

How much are closing costs?

For buyers they typically run 2–5% of the purchase price — roughly $6,000–$15,000 on a $300,000 home — covering origination, appraisal, title, escrow and prepaid taxes and insurance. The exact figure varies widely by state, mostly because of transfer taxes.

Can closing costs be rolled into the loan?

Sometimes. On a refinance you can often finance them into the balance; on a purchase you usually pay them in cash, but you can ask the seller for a credit or take a lender credit in exchange for a slightly higher rate.

Who pays closing costs, the buyer or the seller?

Both, on different items. Buyers pay origination, appraisal, title and prepaids; sellers usually pay the agent commission and transfer taxes. In a buyer’s market you can negotiate a seller concession toward your costs.