Last Updated June 2026
- Both buyers and sellers typically pay closing costs, though buyers generally pay more.
- Closing costs usually run 2% to 5% of the home’s purchase price, in addition to your down payment.
- Who pays what can shift depending on the purchase agreement, local customs, market conditions and loan type.
- Negotiating seller concessions or lender credits can reduce the cash you need at closing.
Both the buyer and the seller typically pay closing costs — but not the same ones. Buyers generally cover the larger share, including most lender, appraisal and title fees. Sellers usually pay transfer-related costs. The exact split depends on how the deal is negotiated, where the home is located and what type of loan the buyer is using. Sellers also typically pay real estate agent commissions at closing, but those aren’t counted as closing costs.
If you’re buying a home for the first time, understanding closing costs can help you budget more accurately and avoid surprises at the closing table.
What are closing costs?
Closing costs are the fees and expenses paid at the end of a real estate transaction to finalize the sale and transfer ownership. They’re separate from your down payment — though both are typically due at closing.
Most buyers can expect to pay between 2% and 5% of the home’s purchase price in closing costs. On a $300,000 home, that’s roughly $6,000 to $15,000.
Closing costs generally fall into a few categories:
- Lender fees: Charges from your mortgage lender to process and underwrite the loan
- Third-party service fees: Appraisal, title search, title insurance and settlement services
- Prepaids and escrow: Upfront payments for homeowners insurance, property taxes and prepaid interest
- Government fees: Recording fees and transfer taxes charged by state or local governments
For a full breakdown of fees in each category, see “What’s included in closing costs.”
Real estate buyers or sellers: Who pays?
As a general rule, buyers pay more in closing costs than sellers, but both sides contribute. Here’s how it typically breaks down:
| What buyers typically pay | What sellers typically pay |
|---|---|
|
|
These are general guidelines, but customs around who pays which costs vary by state and transaction. Your real estate agent can tell you what’s typical in your market.
Location can make a difference when it comes to who pays title insurance. In 18 states, including Texas and Illinois, it’s customary for the seller to pay for the buyer’s title insurance policy, according to the American Land Title Association. In 24 states, including New York and Virginia, it’s the buyer. In Hawaii, Ohio, Nebraska and South Dakota, buyer and seller split the cost. In California and three other states, it’s county by county. Your real estate agent can tell you what’s typical in your area.
Market conditions matter too. In a seller’s market — where demand is high and homes move fast — buyers may offer to cover more of the closing costs to make their offer more competitive. In a buyer’s market, sellers may be more willing to pitch in.
A note on real estate agent commissions: While also paid at closing, fees paid to agents for the buyers and sellers aren’t part of the 2% to 5% closing cost estimate — they're a separate expense. Typically, they add up to 5% to 6% of the sale price ($15,000-$18,000 on a $300,000 home). Historically, sellers paid commissions for both agents. That changed after a 2024 National Association of Realtors settlement, which made buyer’s agent compensation a separate negotiation rather than an automatic seller obligation.
Strategies for negotiating closing costs
Closing costs aren’t always fixed. Several types of negotiation can shift who pays what:
- Seller concessions (also called seller credits). The seller agrees to contribute a set amount toward the buyer’s closing costs. This reduces the cash the buyer needs at closing. Seller concessions are more common in a buyer’s market, though they can happen in any market — especially if a home has been sitting or if issues come up during inspection.
- Lender credits: The lender agrees to cover some closing costs in exchange for a higher interest rate. This can lower your cash-to-close but increases what you pay over the life of the loan.
- Comparison-shopping third-party services: For title services and home inspections, you’re generally allowed to shop around. Comparing providers can help lower costs.
One thing to keep in mind: Seller concessions reduce the cash you need at closing, but they don’t reduce the home’s purchase price. In some cases, a seller may agree to concessions in exchange for a slightly higher purchase price — meaning you’re effectively financing your closing costs. Run the numbers with your lender before deciding which approach works best for you.
How state laws and loan type can affect who pays
Closing cost customs can differ significantly by state. Who pays transfer taxes, whether an attorney must be present at closing and how title insurance is handled can all vary by location. It’s worth asking your real estate agent what’s standard in your market. For example, Texas has no transfer tax, and title insurance rates are set by the state, keeping costs more predictable. New York, by contrast, imposes a state transfer tax, a mortgage recording tax and attorney requirements — with additional surcharges in New York City — all of which add up.
The type of loan you’re using also affects how much sellers can contribute toward buyer closing costs:
| Loan type | Seller concession limits | Good to know |
|---|---|---|
| Conventional | 2%–9% of purchase price (depends on down payment) | Higher down payment = higher concession limit allowed |
| Federal Housing Administration (FHA) | Up to 6% of purchase price or appraisal value | Limit is on the lower of the purchase price or appraisal value. |
| Veterans Affairs (VA) | Up to 4% of purchase price (concessions only) | Seller can pay all standard closing costs with no cap; the 4% limit applies only to extras like the funding fee or rate buydowns |
Closing costs in practice: three scenarios
Scenario 1: First-time buyer using seller concessions
A first-time buyer purchases a $280,000 home with a 5% down payment. Estimated closing costs come to $7,500. Buyer and seller negotiate $5,000 in seller concessions, reducing buyer’s cash-to-close from roughly $21,500 (down payment + closing costs) to about $16,500. The seller agrees, in part because the home has been on the market for 45 days.
Scenario 2: Competitive market, buyer covers more
In a hot market with multiple offers on a $400,000 home, a buyer offers to cover all closing costs — estimated at $10,000 — to make their offer stand out. They waive the request for seller concessions entirely. The seller accepts their offer over two slightly higher-priced offers that included concession requests.
Scenario 3: Inspection issue leads to a credit at closing
A home inspection reveals a roof that needs replacing soon. Rather than renegotiating the purchase price, the buyer asks for a $4,000 credit at closing. The seller agrees. The credit is applied to the buyer’s closing costs, reducing the cash they need to bring to closing by $4,000. The buyer can put those freed-up funds toward a new roof after moving in.
Before you sign: a closing cost checklist
| ☐ | Compare loan estimates from at least two or three lenders — small fee differences add up. |
| ☐ | Ask for a fee worksheet or itemized lender fee breakdown. |
| ☐ | Confirm title and escrow fees and which party pays which. |
| ☐ | Budget for prepaids — homeowners insurance, property taxes and prepaid interest can increase cash due at closing. |
| ☐ | If an inspection turns up issues, consider asking for a credit at closing rather than a price reduction — it can reduce your cash-to-close. |
| ☐ | Compare your closing disclosure to your loan estimate before closing day. Check that your interest rate, lender fees and cash-to-close figure match what you were quoted. Some fees can’t change at all; others can increase only up to 10%. If something looks off, contact your lender or closing agent right away. |
FAQs
Can the seller pay all closing costs?
In theory, yes — if both parties agree and the loan type permits it. But seller contributions are typically capped by the loan program (see the table above). A seller paying all costs is unusual and more likely in slow markets or as part of a distressed sale like a foreclosure.
Can closing costs be rolled into the loan?
In most cases, closing costs can’t be directly added to your mortgage balance for a purchase loan. However, lender credits (which raise your interest rate) effectively let you finance closing costs over time. Some loan programs also allow certain costs to be financed. Ask your lender what’s permitted for your loan type.
Do closing costs differ for new construction?
Yes. New construction can come with additional costs — builder fees, HOA setup fees and sometimes a higher transfer tax. Builders sometimes offer closing cost incentives to use their preferred lender, though you should compare rates before agreeing.
Is homeowners insurance part of closing costs?
Your first year’s homeowners insurance premium is typically paid at closing as a prepaid. If your loan includes an escrow account, you’ll also likely be asked to fund several months of insurance upfront to establish the account. Budget for this as part of your total closing costs.
How long does it take to close after costs are settled?
Most home purchases close 30 to 60 days after an accepted offer. For more on the timeline, see how long it takes to buy a house.
Where can I find reliable information about closing costs?
Several government and industry organizations publish free guidance on closing costs for buyers and sellers:
Consumer Financial Protection Bureau (CFPB). Offers plain-language explainers on closing, including an interactive closing disclosure tool.
Fannie Mae: Publishes homebuyer education resources including a closing cost calculator and what to expect at closing.
U.S. Department of Housing and Urban Development (HUD): Provides resources on settlement costs and your rights as a homebuyer.
National Association of Realtors (NAR): Offers buyer and seller guides including information on transaction costs and recent commission rule changes.
Freddie Mac: Publishes a homebuyer guide that covers closing costs and how to budget for them.
The information contained in this page is provided for general informational purposes only. Read our editorial standards for Insurance Questions and other content. We make no representations or warranties of any kind, express or implied. This does not refer to any specific insurance policy and nothing herein is intended to replace or modify any terms in your actual policy.
Farmers may also provide information on topics that are not directly about insurance policies or coverage that we believe could be helpful to you. Information in such articles is not meant as professional advice, and any reliance you place on such information is therefore strictly at your own risk.
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