Closing Costs

Closing costs are the collection of fees that both buyers and sellers pay at the end of a real estate transaction. They cover everything from lender fees and title insurance to government recording fees and prepaid insurance.

For buyers, closing costs typically run between 2% and 5% of the loan amount, though the exact number depends on your location, lender, loan type, and what's been negotiated in the contract. For sellers, the largest cost is usually the real estate commission, though sellers may also pay for title work and other fees depending on local custom and what's been agreed upon.

Closing costs don't include your down payment; they're a separate line item you'll need to plan for.

Buyers who don't account for closing costs are often surprised at the closing table. If you've saved exactly enough for a down payment but haven't planned for closing costs, you may not have enough to close.

Similarly, sellers who don't understand their net proceeds (their sale price minus commissions, fees, and any concessions) sometimes get a surprise when they see the actual payout.

Knowing closing costs in advance helps both parties plan and negotiate more effectively.

A buyer purchases a home for $310,000 with a conventional loan. Their closing costs come to approximately $7,200, including lender origination fees, title insurance, prepaid homeowners insurance, prepaid property taxes, and recording fees. They've planned for this and have the funds ready at closing. The earnest money ($3,000) they deposited earlier is credited toward closing costs, reducing the amount they need to bring.

"The seller always pays closing costs."

Both buyers and sellers have closing costs. What changes is what each side typically pays, and that's often negotiable. A buyer can ask a seller to pay a portion of the buyer's closing costs as a seller concession; this is common and worth understanding before making an offer.