What’s Included In Real Estate Closing Costs

Buying or selling a home is exciting, but when closing day rolls around, the final numbers can catch you off guard, especially closing costs. These are the extra fees and expenses that come with finalizing the deal, and they can add up fast.

So, what exactly are you paying for? How much should you budget? Closing costs cover things like lender fees, title insurance, home inspections, and taxes (some of which are negotiable). Whether you’re a first-time buyer or are committed to selling your home ASAP, understanding these costs upfront can help you avoid last-minute surprises and make smarter financial decisions.

Let’s break it all down so you know what to expect and maybe even how to save some cash in the process.

What Are Closing Costs?

Closing costs are the extra expenses you pay when finalizing a home sale. You should be ready to pay this fee on top of the purchase price. You can think of closing costs as the price of sealing the deal. 

They cover everything needed to legally transfer property ownership, including lender fees, title services, home inspections, taxes, and prepaid expenses like homeowners insurance.

Closing fees must be paid on the closing day, once you sign the final real estate documents and before you officially get the keys to your new property (cheers!). They are unavoidable, so knowing exactly what they include can help you budget and plan to avoid sticker shock.

How Much Will You Pay in Closing Costs?

Closing costs aren’t a one-size-fits-all number. They depend on where you’re buying, your loan type, and even your negotiation skills. However, as a general rule, buyers should expect to pay around 2% to 5% of the home’s purchase price in closing costs.

For example, if the home you buy costs $450,000, expect closing costs to range from approximately $9,000 to $22,500, depending on the specific fees involved. Sellers often cover real estate commissions and other small expenses. Some costs are negotiable; you might even get the seller to chip in in specific markets.

Closing Costs Breakdown: What’s Included?

Now, let’s get into the real numbers. What exactly goes into closing costs? Below, we’ll break down the expenses, from lender fees to taxes and insurance, so you know what to expect when finalizing your dream home purchase:

What Buyers Pay at Closing

If you’re buying a home, expect to cover the following:

1. Loan-Related Fees

These fees come from your mortgage lender and are tied to processing your loan.

• Application Fee: This is a fee the lender charges to process your loan application. 

• Loan Origination Fee: Charged by the lender to cover the administrative costs of processing your mortgage (usually 0.5% - 1% of the loan amount, so if the home costs $450,000, you’ll pay between $2,250 - $4,500).

• Discount Points: Optional upfront payment to lower the interest rate on your mortgage.

• Credit Report Fee: This covers the cost of pulling your credit report (usually $18–$150).

• Underwriting Fee: Paid to the lender to assess your risk and approve your loan ($400–$900).

2. Administrative And Processing Fees

These fees cover the behind-the-scenes work that ensures the transaction is executed correctly.

• Attorney Fee (if required): Some states require an attorney to oversee the closing ($500–$1,500).

• Notary Fee: Paid to a notary for verifying signatures on official documents ($50–$200).

• Document Preparation Fee: This covers the cost of drafting and processing legal documents ($50–$500).

• Courier or Wire Transfer Fees: These cover securely transferring funds between parties ($25–$50).

3. Title & Escrow Fees

These fees secure the legal transfer of the property to your name.

• Title Search Fee: Confirms no outstanding claims or liens on the property—costs change by state, but an average of $200-$500.

• Title Insurance (Lender’s Policy): Protects your lender if title issues arise (from 0.5% to 1% of your home sale price, depending on the state).

• Title Insurance (Owner’s Policy): Optional but recommended; protects your ownership rights (between 0.1% and 2% of the property's purchase price, depending on location).

• Escrow or Closing Fee: Charged by the title company or attorney handling the transaction. They vary by state.

4. Government And Legal Fees

These cover the legal recording of your home purchase.

• Recording Fees: Charged by the county to officially document the sale. They start at $10 for the document's first page, with an added cost of $8.50 for each subsequent page.

• Transfer Taxes: A state or local tax on property transfers (varies by location).

5. Prepaid Costs (Escrow Reserves)

These are upfront payments for future homeowner expenses.

• Property Taxes: Usually, buyers must prepay 6 - 12 months of taxes at closing.

• Homeowners Insurance: Typically, one full year’s premium is due upfront.

• Mortgage Insurance (if applicable):  If your down payment is less than 20%, you owe one month of private mortgage insurance (PMI) at closing.

6. Home-Related Fees

These fees ensure the home is in good condition and worth the price you will pay.

• Home Appraisal Fee: Required by lenders to verify the home’s fair market value ($300–$600 for a single-family home).

• Home Inspection Fee: Optional but highly recommended to check for major issues ($300–$500 depending on the house size and condition). Specialized inspections, like lead-based paint or pest inspection, should also be paid on the closing day. 

• Survey Fee: If required, this confirms property boundaries ($300–$800).

What Sellers Pay at Closing

If you’re selling your home, here’s what you’re responsible for:

1. Real Estate Agent Commissions

• The most significant seller closing cost (typically 5% to 6% of the home’s sale price) is split between the buyer’s and seller’s agents.

2. Title & Transfer Fees

• Title Insurance (Owner’s Policy): Often paid by the seller, depending on state tradition.

• Transfer Taxes & Recording Fees: These vary by location but can be a few hundred to several thousand dollars.

3. Mortgage Payoff & Related Costs

• Outstanding Mortgage Balance: The remaining balance is settled from the sale proceeds.​

• Prepayment Penalties: Some mortgages include penalties for early payoff; reviewing your loan terms is essential to determine if this applies.

4. Seller Concessions (if applicable)

• If, during negotiations, you agreed to cover certain buyer closing costs or offered credits for repairs, these amounts will be deducted from your sale proceeds.

Tips to Lower The Closing Costs

Closing costs can be frustrating when buying a home, especially if you didn’t budget for home-buying. The good news is that you might not have to pay as much as you just read about. You can reduce some of these fees or even avoid them with the right approach. Here’s how to keep more money in your pocket.

Negotiate With The Seller

In a buyer’s market, where homes are sitting longer, and sellers are eager to close, you may be able to negotiate for the seller to cover some or all of your closing costs. This is called a seller concession and is often used to help buyers afford the upfront expenses of a home purchase. Sellers might be more open to this if they need to move quickly or if their home has been on the market for a while.

Shop Around for Services

Not all closing costs are set in stone; some fees, like lender costs, title insurance, and homeowners insurance, vary per provider. It’s worth getting quotes from multiple lenders and title companies to find the best deal. Even minor differences in fees can save you hundreds or thousands of dollars at closing.

Ask About Lender Credits

Many lenders offer credits in exchange for a slightly higher interest rate. This means that while your monthly mortgage payment may increase slightly, you’ll owe less upfront at closing. This can be a great option if you're short on cash but still want to purchase your home. Just be sure to weigh the long-term cost of a higher interest rate against the immediate savings on closing day.

Use First-Time Homebuyer Programs

If you’re a first-time buyer, you may qualify for down payment and closing cost assistance programs offered by state and local governments and nonprofit organizations. These programs can provide grants, low-interest loans, or even forgivable loans to help cover your upfront costs. Check with your state’s housing authority or a local lender to see what programs are available in your area.

Last Words: What’s Included in The Closing Costs

Closing costs are an unavoidable part of any real estate transaction, and if you're a first-time homebuyer, they can feel overwhelming. But understanding what’s included, like lender fees, title charges, prepaid expenses, and taxes, helps you navigate them confidently. While these costs can add up, there are often ways to reduce them.

By shopping around, negotiating with the seller, and exploring assistance programs, you can lower closing expenses and avoid unnecessary fees. The more informed you are, the better prepared you’ll be when it’s time to close. Ask questions, compare options, and make sure every dollar spent is justified.

About the Author: Preston Guyton is the founder of ez Home Search. He has been a real estate leader for over 20 years. Starting with a focus on South Carolina, he has helped coach and empower real estate professionals to achieve their full potential by meeting the needs of their local community.