Costs

Closing costs, explained

Educational guide · Updated 2026

Closing costs are the fees due when your home purchase is finalized — separate from your down payment. They often surprise first-time buyers because they're not a single line item but a collection of charges from several parties. Typically they run 2–5% of the purchase price.

What's included

Closing costs usually cover lender fees (origination, underwriting), title insurance and a title search, escrow or settlement fees, recording fees charged by the county, an appraisal fee, and prepaid items like the first chunk of property taxes and homeowners insurance placed into escrow.

Who pays what

Buyers cover most of their own closing costs, but some are negotiable. In certain markets and situations, sellers contribute toward the buyer's costs — called seller concessions — though there are limits on how much. Transfer taxes vary by state and are sometimes paid by the seller, sometimes the buyer, sometimes split.

Prepaids aren't really "fees"

A chunk of your closing costs is prepaid taxes and insurance going into an escrow account. These aren't fees you're losing — they're your own money, set aside to cover bills that are coming. It's worth separating these in your head from true costs like lender and title fees.

How to keep them in check

Your Loan Estimate (provided within three business days of applying) itemizes expected closing costs, and you can compare it against the final Closing Disclosure you get before closing. Shopping lenders, and in some cases title providers, can reduce the total. Significant unexplained changes between the two documents are worth questioning.

This article is educational and general in nature. Specifics vary by lender, loan program, and location. Confirm details with a licensed professional.