Closing Costs: What Are They and How Much Will You Pay?
10 Min Read | Oct 10, 2025

Key Takeaways
- Closing costs are fees buyers and sellers pay to finalize a home sale.
- Buyer costs include the inspection, appraisal, loan, insurance, taxes and agent fees.
- Seller costs cover title fees, taxes and agent fees.
- Buyers typically pay 3–4% of the home price in closing costs—sellers pay 1–3%.
- Agent commissions are usually an additional 3% of the home price.
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.

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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 buyer.
But don’t worry. We’ve covered everything you need to know about closing costs, including who and what you’ll be paying on closing day, whether you’re the buyer or the seller. Let’s get started!
What Are Closing Costs?
Simply put, closing costs are the fees the buyer and seller of a home pay to various third parties on closing day to finalize the deal.
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
- Fees to cover the commission for your buyer’s agent
The amount you pay in closing costs depends on a few different factors like the home’s location and the fees set by your mortgage lender.
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
- Fees to cover the commission for your listing agent—more on that later
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?
Closing costs usually run about 3–4% of the home’s purchase price for buyers and 1–3% for sellers.1 But that doesn’t include agent commissions—those can be another 3% or so for each agent. Traditionally, sellers have picked up the tab for both agents. The 2024 National Association of REALTORS® settlement made that negotiable. But in most deals today, sellers still choose to cover agent commissions.
Let’s see how that plays out in real numbers:
Potential Closing Costs and Agent Commissions for a $300,000 House
Who Pays |
Closing Costs (Percent of Home Price) |
Agent Commission (Percent of Home Price) |
Total Dollar Amount |
Buyer |
3–4% |
3% |
$9,000–21,000 |
Seller |
1–3% |
3% (possibly 6% if covering both agents’ fees) |
$3,000–27,000 |
Keep in mind that closing costs vary from state to state. Each state has its own laws about real estate deals and property taxes. For example, closing costs in New York and Washington, D.C., are usually higher than those in South Dakota or Iowa.
Types of Closing Costs for Buyers
You can avoid surprises at closing when you understand the costs ahead of time. Here are the main types of closing costs you’ll come across when you’re buying a house.
Home Inspection Fee
A home inspection costs about $300–500, depending on the size of the house.2 You’ll actually pay this fee before closing day. It covers the cost of hiring a home inspector to check the condition of the entire house and flag any issues so you can raise them with the seller. Then they’ll make the agreed-upon repairs before closing day.
Application/Processing Fee
The loan application fee typically costs a few hundred dollars but can vary greatly depending on your 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 1% of the total amount of the loan. 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.
Prepaid Interest on Your Mortgage
On closing day, you’ll prepay the interest portion of your monthly mortgage payment to cover the interest on your mortgage from the date of closing to your first scheduled payment. Tip: Close toward the end of the month so you’ll only pay a few days’ worth of interest compared to a few weeks’ worth if you close at the beginning of the month!
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Appraisal Fee
A home appraisal costs around $300–500.3 This is a fee to a third-party company to determine the value of the house you’re about to buy. They’ll make sure it isn’t wildly overpriced or underpriced in the current housing market.
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 your property taxes. This service makes sure your taxes are paid on time and that there aren’t any unpaid bills hanging around (even before your 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.
Private Mortgage Insurance
If your down payment is less than 20% of the home’s value, you’ll have to pay private mortgage insurance (PMI). That’s why we recommend you put down at least 20%! PMI usually costs less than 2% of your annual loan balance, and that amount gets split into monthly payments and added to your monthly mortgage payment.
In a nutshell, PMI is insurance that keeps your lender from losing money if you can’t keep up the monthly payments and default on your mortgage. On closing day specifically, you’ll pay one month’s worth of mortgage insurance up front.
Homeowners Insurance Premium
The average annual cost of home insurance is about $1,600.4 This part of your closing costs is required by law. And on closing day, you’ll make a payment to cover the first year of your home insurance premiums.
Property Taxes
Each local government—like your county or city—sets its own property tax rate. On average, property taxes cost just under 1% of your home’s assessed value each year.5 That means if your home has an assessed value (which is different from the appraised value) of $300,000, you’ll likely pay less than $3,000 a year in property taxes.
On closing day, you’ll pay your share of property taxes for the rest of the year. That money (along with your home insurance payment) will go into your escrow account to cover future bills when they’re due.
Homeowners Association Fees
If you’re buying a home in a community with a homeowners association (HOA), you’ll pay a processing fee to set up your membership on closing day. Then you’ll pay ongoing HOA fees to maintain your membership. The average HOA fee is around $300 per month—but can vary greatly depending on the neighborhood.6
Buyer’s Agent Costs
Sometimes, sellers offer to pay for the buyer’s agent as a thank-you for finding a buyer. That doesn’t always happen, though, so buyers should be prepared to foot the bill themselves. Luckily, before you begin working with an agent, you’ll sign an agreement that lays out exactly how—and how much—they’ll get paid.
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Types of Closing Costs for Sellers
Now, don’t think sellers get off any easier. Selling a house comes with closing costs too! The biggest chunk of your payment on closing day will be paying for your real estate agent.
Seller’s Agent Costs
Like we mentioned earlier, some sellers offer to pay for the buyer’s real estate agent as a way of sweetening the deal. But either way, you’ll at least be paying for your agent. Agents may charge a commission, an hourly rate or a flat fee—you and your agent will agree on how they’ll get paid before they list your house.
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 Tax Fee
The seller usually pays the costs of transferring the title of their home to the new owner. There may also be additional title fees or recording fees based on the title company. The cost depends on which state (and sometimes which county) you live in. In some states, there’s no transfer tax at all. In others, it’ll end up adding thousands to your closing costs.
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?
The good news is, you won’t be slapped with a huge bill on closing day without any notice!
You’ll get an estimate of your closing costs from your mortgage lender early in the application process. This document—called a loan estimate—will also have a breakdown of how much your mortgage payment will be each month and what it covers.
And then, at least three business days before closing, your lender is required by law to send you a closing disclosure.7 This form lists all 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 to you and answer any questions you may have. The mortgage experts at Churchill Mortgage can help you calculate the costs and show you how to purchase a home the smart way, saving the most money over the life of the loan.
Can I Save Money on My Closing Costs?
This is the question everyone wants answered! And if you don’t ask, you’ll never know! When you’re looking at mortgage lenders, why not ask them if there’s any wiggle room to reduce their closing fees?
And don’t feel shy about asking the seller, either. If they’ve been trying to sell their house for months and want a quick sale, you might get them to agree to pay some or all of your closing costs because you hold the upper hand in the deal.
Keep on Top of Closing Costs With a Real Estate Professional
Navigating the world of home buying or selling is complicated, especially when it comes to closing costs. But a qualified real estate professional will give you confidence at every step of the process. For a quick and easy way to find the best agents near you, try our RamseyTrusted® program. The agents in our network have been vetted by our team to make sure they have high standards of customer service and excellence in the marketplace.
Next Steps
- Calculate the total dollar amount of your potential closing costs.
- Make sure you have enough cash to cover those closing costs.
- Partner with a RamseyTrusted real estate agent to get the ball rolling.
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