What Are Closing Costs?

Buyer closing cost examples

Buyers have their own set of closing costs, many of which are tied to the mortgage process and property ownership transfer. Some of the most common buyer closing costs include:

• Loan origination fees: Charged by the lender for processing the mortgage application, underwriting the loan, and funding the loan amount. These fees typically include administrative costs and are calculated as a percentage of the loan.
• Discount points: Optional fees buyers can pay upfront to lower their mortgage interest rate. Each discount point typically costs 1% of the loan amount and reduces the rate by a set percentage.
• Appraisal fee: The cost of hiring a professional appraiser to assess the home’s market value. Lenders require an appraisal to ensure the home is worth the loan amount.
• Credit report fee: A charge for pulling the buyer’s credit history, which lenders use to evaluate their creditworthiness. This fee is usually small but required for loan approval.
• Title search and lender’s title insurance: The title company conducts a search to verify that the property has no outstanding liens or ownership disputes. Buyers also pay for lender’s title insurance, which protects the lender in case of title issues.
• Escrow and closing fees: These cover the administrative costs of closing, including document preparation, signing, and fund transfers. The escrow company or closing attorney typically handles these processes.
• Prepaid property taxes and homeowners insurance: Lenders often require buyers to prepay property taxes and the first year of homeowners insurance at closing to fund an escrow account that will cover these ongoing costs.
• Home inspection fees: If the buyer chooses to have a home inspection, they will pay for the inspector’s services. A home inspection provides an assessment of the property’s condition, identifying any potential issues before closing.

Is earnest money a closing cost?

Earnest money is not considered a closing cost. Instead, it is applied toward your down payment at closing, essentially reducing the amount you need to pay at closing, making it a part of the purchase price rather than an additional fee associated with the transaction itself.

If the deal falls through due to a contingency outlined in the contract, the buyer may get their earnest money back. However, if they back out for reasons not covered by the contract, the seller may be entitled to keep the deposit.

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How much are home seller closing costs?

Seller closing costs typically range between 6% to 10% of the home’s sale price, with the largest portion going toward real estate agent commissions. The commission alone often accounts for around 3% to 6%, while the remaining 3% to 4% covers title insurance, escrow fees, prorated taxes, and other seller-paid expenses.

If a seller does not cover the buyer’s agent commission — an option that is more common due to changes in commission structures — then their closing costs may fall toward the lower range. However, sellers should still budget for the full potential costs to avoid last-minute surprises.

Seller closing cost examples by home price

The table below provides estimated seller closing costs based on 3%, 6%, and 8% closing cost rates for various home prices. Actual costs may vary depending on location, negotiated fees, and market conditions.

How much are buyer closing costs?

Buyer closing costs typically range from 2% to 5% of the loan amount. Unlike sellers, who pay closing costs based on the home’s sale price, buyers’ expenses are primarily tied to their mortgage loan amount.

For example, on a $300,000 loan, buyer closing costs could range from $6,000 to $15,000. The total depends on lender fees, prepaid expenses, and whether the buyer chooses to pay discount points to lower their mortgage rate. Some costs, such as title insurance and escrow fees, are standard, while others may be negotiated or reduced through lender promotions.

Buyer closing cost examples by loan amount

The following table provides estimated buyer closing costs based on 2%, 3%, and 5% closing costs for various loan amounts. These figures assume the buyer is financing the home purchase with a typical loan amount.

When are closing costs due?

Closing costs are due at the closing of the home sale, typically when all parties sign the final paperwork and ownership is officially transferred. At this point, funds are distributed to the appropriate parties, and the transaction is completed.

For sellers, closing costs are deducted directly from their sale proceeds, meaning they usually don’t need to bring money to the closing table — unless their remaining mortgage balance and expenses exceed the sale price.

For buyers, closing costs typically must be paid upfront. The total amount due is outlined in the Closing Disclosure, which buyers receive at least three business days before closing. Buyers typically pay their closing costs via a wire transfer or cashier’s check, as personal checks are not usually accepted.

How long does it take to close a home sale?

The time it takes to close a home sale depends on market conditions and whether the buyer is financing the purchase or paying in cash.

• Mortgage-backed purchases: On average, it takes 30 to 45 days to close when a buyer is using a mortgage. The process includes loan approval, an appraisal, and final underwriting before the lender clears the buyer to close.
• Cash purchases: If a buyer is paying in cash, closing can happen much faster — sometimes within one to two weeks — since there’s no lender involvement.

Delays can occur due to financing issues, title problems, or inspection-related negotiations, so buyers and sellers should be prepared for potential timeline adjustments.

Do all-cash buyers pay closing costs?

Yes, all-cash buyers still have closing costs, but they typically pay less than buyers who finance a home purchase. Without a mortgage, cash buyers avoid lender-related fees such as loan origination charges, underwriting costs, and mortgage insurance.

However, cash buyers are still responsible for other standard closing expenses, including:

• Title search and title insurance (optional but recommended)
• Escrow and attorney fees
• Property taxes and HOA fees (if applicable)
• Home inspection and appraisal fees (if desired)

Since they aren’t dealing with a lender, cash buyers may have more flexibility to negotiate closing costs with the seller or choose to waive certain expenses, such as an appraisal.

How can sellers save on closing costs?

Sellers looking to reduce their closing costs have a few key strategies:

• Negotiate real estate commissions: With changing commission structures, some sellers may have flexibility in choosing what they offer for buyer’s agent compensation or negotiating lower listing agent fees.
• Shop for title and escrow services: In some states, sellers can compare title insurance and escrow fees to find lower-cost providers.
• Avoid unnecessary repairs and concessions: While offering buyer incentives can help a home sell faster, being strategic about concessions can prevent sellers from paying more than necessary.
• Time the sale strategically: Selling when demand is high can lead to stronger offers with fewer seller-paid costs, such as closing cost assistance for the buyer.

How can buyers save on closing costs?

Buyers can reduce their closing costs through several smart approaches:

• Negotiate with the seller: In some cases, buyers can request that sellers cover part of their closing costs as part of the purchase agreement.
• Shop for lender fees: Not all lenders charge the same fees. Comparing loan estimates from multiple lenders can help buyers secure lower origination fees and other costs.
• Use lender credits: Some lenders offer credits in exchange for a slightly higher interest rate, which can help reduce upfront expenses.
• Check for first-time homebuyer programs: Many state and local programs offer closing cost assistance for eligible buyers, particularly first-time buyers.

Start with a top real estate agent

One of the best ways to navigate closing costs — whether you’re selling or buying — is to work with an experienced real estate agent. A top agent can help you negotiate costs, connect you with reputable service providers, and identify opportunities to save money at closing.

If you’re selling, an agent can help you price your home competitively while minimizing unnecessary expenses. If you’re buying, they can guide you through lender options, closing cost negotiations, and financial assistance programs.

Closing costs are part of every home transaction, but with the right guidance, you can approach them confidently and strategically.

If you plan to sell or buy in the future, HomeLight’s free Agent Match tool can connect you with the top-rated real estate agents in your market. If you’re buying and selling at the same time, check out HomeLight’s Buy Before You Sell program, which can streamline the entire process so you only move once. See this short video to learn how it works.

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