Last Updated April 2026
- Closing costs typically include lender fees, appraisal and home inspection fees, title search and insurance, escrow or attorney fees, pre-paid items like property taxes and home insurance, recording fees and transfer taxes.
- You pay closing costs to complete your home purchase and, if you’re financing, your mortgage.
- Costs vary based on loan type, location, home price and third-party services such as title search and inspections.
- Expect to pay 2% to 5% of the home’s purchase price (for example, $6,000-$15,000 on a $300,000 home).
Closing costs cover expenses for work required to buy a home. Typically, they include fees for things like loan processing, title search and other title services, an appraisal, and prepayments for home insurance and property taxes. They generally range from 2% to 5% of the home’s purchase price — a substantial amount on top of your down payment. Knowing how closing costs break down can help you budget realistically as you prepare to buy a home.
Understanding closing costs
Closing costs are the expenses you pay at the end of your home-buying marathon to finalize the purchase and transfer ownership of the home. These costs are separate from your down payment. Most closing costs are paid by the buyer, but some are paid by the seller.
Typical closing costs include:
- Fees your lender charges to set up and finalize your mortgage, such as loan processing or underwriting fees.
- Services that confirm the home’s value and ownership, like an appraisal, title search and title insurance.
- Upfront payments, such as the first year of homeowners insurance premiums or several months of property taxes.
Common misconceptions
- “Closing costs are the same as the down payment.” A down payment is money that goes toward the home price. Closing costs are fees for services needed to complete the deal, plus prepayments of taxes and insurance if required.
- “Closing costs are non-negotiable.” Some fees are set or controlled, but you may be able to reduce other costs by shopping around or negotiating.
- “I won’t know my closing costs until closing day.” Your mortgage lender is required to provide estimated costs within three business days of your loan application, and to confirm actual costs at least three days before closing.
Components of closing costs
Loan origination fees
The lender charges these fees to generate your mortgage. Depending on your lender and loan type, they can include:
- Underwriting or processing fees
- Application-related fees
- Administrative costs such as document preparation or funding fees
Title insurance, search and settlement fees
These are costs related to making sure the seller has the legal right to sell the property and the buyer will receive a clear title. Typically, a title company searches public records to verify ownership and unearth any liens against the property or other issues that may need to be resolved.
Title insurance — a one-time, upfront cost — is designed to help protect against title-related problems such as errors in public records or mistakes in property lines. There are two kinds.
- Lender’s title insurance protects the lender’s interests and is often required by the lender.
- Owner’s title insurance protects the homebuyer’s interests and is often optional but is commonly purchased.
Settlement services are tied to coordinating the paperwork, payments and legal transfer of the property.
Title and settlement services are an area where you may be able to shop around for better prices.
Home appraisal and inspection fees
These two costs often get lumped together, but they’re different.
- Appraisal. Mortgage lenders commonly require an appraisal to help confirm the home’s value.
- Inspection. A home inspection is usually optional but can help buyers understand the condition of the property.
Some of these costs may be paid before closing but still are rolled into the closing costs conversation.
Insurance and property taxes
You may need to cover upcoming costs like property taxes and homeowners insurance. It’s not uncommon for buyers to pay the first year’s premium and two to six months of property taxes at closing.
Other costs you may see
- Discount points (mortgage points): Optional fees you may pay to your lender at closing to lower your interest rate.
- Government or recording fees and transfer taxes: Charges from state or local governments to record the property sale and update ownership records.
- Homeowners association (HOA) transfer fees or dues: May apply if the home is in a community with an association.
Freddie Mac, the federal government–backed mortgage support agency, estimates that closing costs can range between 2% and 5% of the home’s purchase price. Every transaction is different, but here’s a high-level example of how closing costs often break down.
| Category | What’s typically included | Percentage of total closing costs | If you’re buying a $300,000 home (Total closing costs ~$5,000-$15,000) |
|---|---|---|---|
|
Lender fees |
Loan origination, underwriting, credit report, processing | ~20% | ~$1,200-$3,000 |
| Title and settlement | Title search, settlement services, title insurance | ~35% | ~$2,100-$5,200 |
| Prepaids and escrow setup | Homeowners insurance, property taxes, prepaid interest | ~25% | ~$1,500-$3,750 |
| Other | Recording fees, local taxes, attorney fees (if applicable), miscellaneous | ~20% | ~$1,200-$3,000 |
- What’s typically included: Loan origination, underwriting, credit report, processing
- Percentage of total closing costs: ~20%
- If you’re buying a $300,000 home (Total closing costs ~$5,000-$15,000): ~$1,200-$3,000
- What’s typically included: Title search, settlement services, title insurance
- Percentage of total closing costs: ~35%
- If you’re buying a $300,000 home (Total closing costs ~$5,000-$15,000): ~$2,100-$5,200
- What’s typically included: Homeowners insurance, property taxes, prepaid interest
- Percentage of total closing costs: ~25%
- If you’re buying a $300,000 home (Total closing costs ~$5,000-$15,000): ~$1,500-$3,750
- What’s typically included: Recording fees, local taxes, attorney fees (if applicable), miscellaneous
- Percentage of total closing costs: ~20%
- If you’re buying a $300,000 home (Total closing costs ~$5,000-$15,000): ~$1,200-$3,000
SOURCE: Estimated percentages based on a Consumer Financial Protection Bureau (CFPB) sample closing disclosure.
Who pays closing costs?
Typically, closing costs are paid mostly by the buyer, but the seller covers some as well. The details depend on your purchase agreement and how your deal is structured.
| What buyers usually pay | What sellers usually pay |
|---|---|
|
|
Can you negotiate?
In some markets, you can ask the seller or your lender about options, including:
- Seller concessions or seller credits, where the seller agrees to pay some of the closing costs, more common in a buyer’s housing markets. Seller credits can reduce the cash you need at closing but may be offset elsewhere in the deal, such as through a higher purchase price or other negotiated terms.
- Lender credits, where the lender agrees to pay some of the closing costs, typically in exchange for a higher interest rate.
- Changes to which party pays certain fees, where allowed. For example, a seller might agree to cover part of the title fees, or a buyer might take on a transfer tax depending on local rules and negotiations.
Your real estate agent and lender can help you understand what’s typical where you’re buying and what a seller may consider.
State and local considerations
Some states have requirements that affect closing costs, such as how transfer taxes must be paid. In some states, an attorney needs to be involved in how transfer taxes are applied. Ask about any such regulations where you’re buying so you know what to expect.
How to estimate closing costs
There are several ways to plan ahead for closing costs and find reliable numbers to help you budget.
Use a closing costs calculator
Online calculators can be a helpful starting point, especially early on, before you’ve even found the home you want but have a general cost in mind. Calculators require that you enter a lot of information about expected costs, so first-time home buyers may find it’s simpler, at first, to estimate closing costs as a percentage of purchase price.
Review your loan estimate and closing disclosure
Once your offer on a home has been accepted and you’ve applied for a loan, documents provided by your lender are your guide to closing costs.
- Loan estimate: Your lender is required to provide it within three days of receiving your loan application. It gives a preview of the estimated costs of the loan you applied for.
- Closing disclosure. Provided at least three days before closing, this lists actual costs associated with your loan.
When are closing costs due?
Many closing costs are paid at the closing table, but some expenses can show up earlier in the process.
| What’s typically due before closing? | What’s typically due at closing? |
|---|---|
|
|
If your lender sets up an escrow account, part of the money collected at closing may be used to fund that account, which helps cover future property tax and homeowners insurance payments as they come due.
A closing cost timeline
Timelines vary by lender, market and transaction, but many home purchases close about 30-45 days after an offer is accepted, though some take up to 60 days. Here’s a simple timeline to help you connect when the major steps happen and when costs can show up.
- Day 1 — Offer accepted
- Right away — File loan application
- Within 3 days — Receive and review loan estimate
- Next few days — Arrange for an inspection (may take a week or more)
- Within first 2 weeks — Request appraisal
- 2-6 weeks — Underwriting and final approvals
- 3 days before closing — Receive and review closing disclosure
- 30-60 days — Closing (signing and funding)
Tips for managing closing costs
Even before you’ve applied for a loan, taking these steps may help you lower your closing costs.
- Compare lenders. Shop around for interest rates and terms. Use the same loan type and terms (such as points). Small differences in lender fees can add up.
- Review your loan estimate early on. It summarizes key loan terms and includes estimated closing costs.
- Shop third-party services. Typically, you can shop for title services and inspections but not appraisals.
- Ask about discount points. Paying points — usually cash up front — to your lender will raise your closing costs but may reduce your interest rate enough to offset the upfront cost over time.
- Review prepaids and escrow carefully. They can increase the amount of cash due at closing.
- Ask questions while there’s time to adjust. If a fee seems high or unclear, ask your lender or settlement agent what it covers and whether alternatives exist.
- Compare your closing disclosure to your loan estimate. Ask questions before you reach the closing table.
The information contained in this page is provided for general informational purposes only. The information is provided by Farmers® and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to this article or the information, products, services, or related graphics, if any, contained in this article for any purpose. The information is not meant as professional or expert advice, and any reliance you place on such information is therefore strictly at your own risk.
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