Closing costs

Closing costs are the fees and charges paid at the closing of a real estate transaction, separate from the down payment and the property price. They include lender charges, title and recording fees, government taxes, and prepaid items, all rolled together into the cash required at closing. Buyer closing costs typically run 2–5% of the home price; seller closing costs typically run 6–10%, mostly because sellers historically paid both real estate commissions.

How it works: closing costs come from many sources. Lender fees (origination, application, underwriting, credit report) come from the lender and are mostly negotiable across lenders. Title fees (lender's and owner's title insurance, title search, recording) come from the title company. Government taxes (transfer tax, mortgage tax) come from state and local authorities. Prepaid items (property tax escrow setup, prepaid interest, insurance reserves) are advance funding of recurring costs. The Loan Estimate itemizes the buyer's full list; the settlement statement shows the seller's at the actual closing.

Why it matters: closing costs are real money on top of the down payment, often surprising first-time buyers who budgeted only for the down payment. On a $400,000 home with 10% down, the buyer typically needs $40,000 down plus another $8,000 to $20,000 in closing costs. The closing-costs estimator at /tools/closing-costs models the line items by state and loan program.

Common gotcha: most buyer closing costs aren't negotiable, but a few categories are. Lender fees vary across lenders (which is why comparing Loan Estimates matters). Title insurance in non-promulgated states can sometimes be shopped. Seller concessions can shift some buyer closing costs to the seller in negotiation. Most other items (transfer tax, recording fees, government charges) are fixed.