Closing Costs: What Are They and How Much Will You Pay?

Buying a house can feel like a long slog. From the viewings to negotiating a home deal through to closing day, it can all feel pretty stressful. And then there are the closing costs. Wait a second. What closing costs? These fees can be a nasty surprise if you’re not up to speed—especially if you’re new to it all as a first-time home buyer.

What Are Closing Costs?

Closing costs are separate from your down payment and cover the services needed to finalize a home sale. If you’re the buyer, your closing costs go toward several things:

• Fees that cover home insurance and property taxes
• Fees that cover the costs of getting a mortgage, like processing fees and appraisal fees
• Potential buyer’s agent compensation, depending on your agreement

The amount you pay in closing costs depends on a few different factors, including the home’s location and the fees set by your mortgage lender.

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If you’re the seller in this deal, your closing costs go toward things like:

• Fees to transfer the title of the house to the buyer
• Potential seller’s agent compensation, depending on your agreement

Who Pays Closing Costs?

It’s pretty typical for both the buyer and the seller to pay closing costs. The buyer usually pays more in closing costs than the seller. But in some situations, the seller might offer to pay some or all of the buyer’s closing costs to sweeten the deal.

How Much Are Closing Costs?

Buyer closing costs usually run about 2–5% of the mortgage amount.⁴ Seller fees and taxes often run about 2–4% of the home’s sale price.⁵

Those estimates may not include agent compensation. Agent fees are negotiable and may be paid by the buyer, seller or listing broker. An agent might charge around 3% of the sale price. If the seller agrees to cover compensation for both the listing and buyer’s agents, the total could be around 6%.⁶ Depending on the agreement and who pays it, agent compensation may appear as a closing cost on the final closing disclosure. We list it separately because it’s negotiated and varies by deal.

To put those percentages into perspective, recent home buyers reported a median of $7,306 in total closing costs in Ramsey Solutions’ Real Estate Report 2025.

Let’s see how that plays out with a real-world example. It assumes the buyer makes a 20% down payment on a $300,000 house, which results in a $240,000 mortgage.

Potential Closing Costs and Agent Compensation for a $300,000 House

Keep in mind that closing costs vary by location because of differences in transfer taxes, recording fees and other local charges. For example, closing costs in New York and Washington, D.C., are usually higher than those in South Dakota or Iowa.¹⁰

How Do Closing Costs Vary by Loan Type?

Closing costs on a conventional loan typically run 2–5% of the mortgage amount.¹¹ That’s the only type of loan we recommend—specifically, a 15-year, fixed-rate conventional mortgage. FHA and VA loans can come with extra up-front fees on top of standard closing costs.

Our advice is to skip FHA and VA loans. Their extra fees and long-term costs aren’t worth it. A 15-year, fixed-rate conventional mortgage with 20% down saves you the most over time.

What Are the Common Closing Costs for Buyers?

Buyer closing costs generally fall into four categories: lender fees, taxes and insurance, property-related fees, and agent compensation. Understanding what each cost covers can help you plan ahead and avoid surprises at closing.

Lender Fees

Application/processing fee: The loan application fee varies by lender. This fee covers the cost to your lender for reviewing your mortgage application, running a credit check, pulling your credit score, and completing other related tasks.

Origination fee: A loan origination fee generally costs about 0.5–1% of the total amount of the loan.¹⁵ Mortgages come with lots of paperwork! An origination fee covers the lender’s costs of creating a mortgage for you and processing all that paperwork so you can get your loan in time. You also might have to pay loan-level price adjustment fees in the form of a slightly higher interest rate.

Underwriting fee: An underwriting fee covers the cost of the lender’s underwriter reviewing your income, your credit and the home to approve your loan. Some lenders include it in the origination fee, so check your loan estimate (a document that outlines your loan terms and estimated costs) to see if you’re being charged twice.

Credit report fee: A credit report fee covers the cost of your lender pulling your credit reports and scores. If it’s not already part of your application fee, it’ll show up as a separate charge on your loan estimate.

Discount points: Discount points are an up-front fee you pay your lender in exchange for a lower interest rate. One point costs 1% of your loan amount—$1,000 for every $100,000 you borrow.¹⁶

Courier fee: A courier fee covers the cost of sending documents between you, your lender and the title company, usually by overnight delivery.

Prepaid interest on your mortgage: At closing, you’ll prepay daily interest from your closing date through the end of that month. Closing later in the month usually means fewer days of prepaid interest.

Appraisal fee: A home appraisal costs around $300–500.¹⁷ This is a fee to a third-party company to determine the value of the house you’re about to buy. The appraiser helps confirm that the home’s value supports the loan amount.

Tax service fee: Don’t worry—a tax service fee probably won’t even cost you as much as a Benjamin. If it’s not already included in your application fee, your lender will charge you for a third party to keep an eye on the home’s property taxes. This service makes sure the taxes are paid on time and that no unpaid tax bills are left over from before closing day. Why? Because if property taxes go unpaid, the local government could step in, place a lien on the home, and jump ahead of the lender’s claim.

Taxes and Insurance

Private mortgage insurance: With a conventional mortgage, a down payment below 20% typically requires private mortgage insurance (PMI). PMI protects the lender if you stop making payments and is usually added to your monthly mortgage payment. Some loans also charge an up-front PMI premium at closing.

Homeowners insurance premium: Homeowners insurance costs vary by location, home value and coverage. Your lender will usually require you to pay the first 6–12 months of premiums at or before closing.

Property taxes: At closing, you may have to prepay property taxes and make an initial deposit into an escrow account. Your lender uses that account to pay future property tax and homeowners insurance bills when they’re due.

Property Fees

Home inspection fee: A home inspection costs about $300–500, depending on the size of the house.¹⁸ You’ll typically pay this fee before closing day. It helps you identify potential issues so you can raise them with the seller. If the seller agrees to make repairs, they should be completed before closing day.

Homeowners association fees: If you’re buying a home in a community with a homeowners association (HOA), you may pay a one-time transfer fee or setup fee at closing, plus ongoing monthly dues. Ask the HOA for its current fee schedule before you buy.

Transfer taxes, title and recording fees: Depending on state law, local custom and the purchase contract, you may pay transfer taxes, title fees or recording fees. Some states charge no transfer tax, while in others, these costs can add thousands of dollars to the purchase.

Buyer’s Agent Costs

Sellers might agree to pay the buyer’s agent as part of the purchase negotiations. That doesn’t always happen, though, so buyers should be prepared to pay their agent themselves. Before you begin working with an agent, you’ll sign an agreement that explains how—and how much—they’ll be paid.

Types of Closing Costs for Sellers

In many home sales, real estate agent compensation is one of the largest costs associated with selling, but the amount and who pays it are negotiable.

Seller’s Agent Costs

When you sell a home, you’ll agree upfront on how your listing agent will be paid. Agents may charge a commission, an hourly rate or a flat fee, and the amount is negotiable. You may also agree to cover some or all of the buyer’s agent compensation as part of the deal.

Since this is one of the largest fees paid at closing, it can sometimes overshadow the seller’s other closing costs. Let’s cover those next so they don’t catch you off guard.

Transfer Taxes, Title and Recording Fees

Like buyers, sellers may pay transfer taxes, title fees and recording fees. Who pays depends on state law, local custom and the purchase contract. In some places, these costs can add thousands of dollars to the sale.

Attorney Fee

If you hire an attorney to help you sell your home, their fees will be due on closing day too. The cost varies depending on the attorney.

When Will I Know How Much I’ll Pay for Closing Costs?

You’ll get a loan estimate from your mortgage lender within three business days of applying for a mortgage. This document estimates your closing costs and also breaks down your monthly mortgage payment and what it covers.

Then, at least three business days before closing, your lender is required by law to send you a closing disclosure.¹⁹ This form lists the final terms of your loan (including closing costs) and the details about who pays and receives money on closing day.

It’s super important to look over the closing disclosure and compare it with your loan estimate. If something doesn’t match up, now’s the time to ask your lender why.

Make sure you’re working with a mortgage lender who takes the time to explain everything and answer your questions. The experts at Churchill Mortgage can help you calculate your closing costs and show you how to buy a home the smart way, so you save the most money over the life of the loan.

Can I Save Money on My Closing Costs?

The best way to save is to avoid paying interest on your closing costs by paying them in cash. You can also ask your mortgage lender if there’s any wiggle room to reduce their closing fees. And don’t be shy about asking the seller, either. If the home has been on the market for a while and the seller wants to close quickly, they may agree to pay some or all of your closing costs.

Should I Roll Closing Costs Into My Mortgage?

You should never roll closing costs into your mortgage. Adding them to your principal means you’ll pay interest on one-time fees for the life of the loan—15 years on a 15-year mortgage.

Frequently Asked Questions