What Buyers Pay at Closing: A Breakdown of Closing Costs

Closing costs catch a lot of first-time buyers off guard, mostly because nobody mentions the number until late in the process. Here's what actually goes into that total and roughly what to expect.

What Closing Costs Actually Cover

Closing costs include lender fees, title insurance, recording fees, prepaid property taxes and insurance, and a handful of smaller line items. None of these are optional, and together they typically run two to five percent of the purchase price.

Who Pays What

Buyers usually cover loan-related fees, title insurance for their lender, and their share of prepaid items. Sellers typically pay their own agent's commission and certain transfer taxes. Some of these costs can be negotiated between buyer and seller as part of the offer.

Ways to Reduce What You Owe

Depending on the loan program, you may be able to roll some costs into the loan or ask the seller to cover part of them through a credit. Shopping your homeowners insurance and comparing lender fees can also trim the total.

Getting an Accurate Number Early

Your lender is required to give you a Loan Estimate within three days of applying, and a Closing Disclosure a few days before closing. I always tell buyers to read both closely and ask questions before they get to the table, not during it.