Closing Cost Guide: Every Fee Explained and Who Pays It

What closing costs actually pay for

Closing costs are the fees and prepaid items due at the end of a real estate transaction. They break into four buckets: lender fees, third-party fees, prepaids, and government fees. Together they typically run 2–5% of the purchase price on a purchase, and 2–3% on a refinance. On a $400,000 home that's $8,000–$20,000 — large enough that planning matters.

Lender fees

Origination fee: the lender's charge for processing and underwriting your loan, usually 0.5%–1% of the loan amount. Some lenders break this into separate underwriting, processing, and application fees that total roughly the same.

Discount points: optional. Each point is 1% of the loan and reduces your rate by roughly 0.25%. See our mortgage points guide for break-even math.

Credit report fee, flood certification, tax service fee: small line items totaling $75–$200.

Third-party fees

Appraisal: a licensed appraiser produces a written opinion of value. $500–$700 for a typical single-family, more for VA and high-end properties. Required on most loans.

Title search and title insurance: a title company searches public records for liens and ownership history, then issues lender's title insurance (required) and optional owner's title insurance (strongly recommended). $1,000–$2,500 combined depending on state and price.

Survey: required in some states. $300–$600.

Home inspection: technically not a closing cost (paid before closing) but a critical pre-closing expense. $400–$700.

Attorney fees: required in 'attorney states' (NY, MA, GA, SC, and others). $500–$1,500.

Prepaids

Prepaid interest: covers the days between closing and the start of the next month. Close on the 25th, you prepay about 5 days of interest.

Homeowners insurance: lenders require the first year's premium paid at closing, plus 2–3 months of premium funded into escrow.

Property taxes: 2–6 months of tax funded into escrow. Larger if your closing date falls near a tax bill due date.

Government fees

Recording fees: the county records the deed and mortgage. $50–$300 depending on jurisdiction.

Transfer taxes: state and local taxes on the transaction. Vary wildly — Pennsylvania charges 2% of price (split between buyer and seller); California typically charges ~0.11%; Texas charges none.

Seller concessions — let the seller pay closing costs

Seller concessions are negotiated credits in the purchase contract — the seller agrees to pay a portion of your closing costs. Each loan program has a cap: conventional allows 3–9% depending on down payment, FHA up to 6%, VA up to 4%, and USDA up to 6%. In a buyer's market, asking for a 2–3% credit is standard practice. In a seller's market, you may need to choose between concessions and price negotiation.

Average closing costs by state

Without transfer taxes, closing costs are remarkably similar across states. With transfer taxes, they vary widely. New York, Pennsylvania, Delaware, and Maryland are high-cost states (3.5–5% of price). Indiana, Arkansas, and Tennessee are low-cost (1.5–2%). Use the lender's Loan Estimate to see your exact breakdown — by law the lender must provide it within three business days of application.

Closing cost vs. down payment

Closing costs are separate from your down payment. A 3.5% FHA down payment of $14,000 on a $400,000 home does not include the $10,000+ of closing costs. Plan for both. Many first-time buyers run out of cash on closing costs because they only budgeted down payment. The down payment guide explains gift fund rules and DPA programs that can help.