# Closing costs

> Closing costs are the fees and taxes buyers and sellers pay to complete a home sale beyond the price itself, such as lender charges, title insurance, settlement and recording fees and transfer taxes. Who pays which depends on the contract and local custom.

Also called: settlement costs, closing fees, settlement charges. Topic: Closing costs and taxes.

Closing costs are separate from the [down payment](https://brokerandagent.com/glossary#down-payment) and, for sellers, from commissions and the mortgage payoff. A buyer sees them first on the [Loan Estimate](https://brokerandagent.com/glossary/loan-estimate), then in final form on the [Closing Disclosure](https://brokerandagent.com/glossary#closing-disclosure) or [settlement statement](https://brokerandagent.com/glossary#settlement-statement).

## What do buyers pay at closing?

A buyer with a mortgage pays the lender’s charges (origination fees, any [discount points](https://brokerandagent.com/glossary#discount-points), the appraisal and credit report), the [lender’s title policy](https://brokerandagent.com/glossary#lenders-title-insurance), a settlement or escrow fee, and recording fees for the deed and mortgage. Some states add taxes on the mortgage itself, like Florida’s documentary stamps on the note and intangible tax.

Buyers also pay prepaid items: interest from closing to the end of the month, the first year of homeowners insurance, and deposits to start the [escrow account](https://brokerandagent.com/glossary#escrow-account) for taxes and insurance. These aren’t fees, but they’re due at closing and can add thousands to the cash a buyer needs.

## What do sellers pay at closing?

Sellers’ closing costs are usually smaller but vary more from state to state. The main items are any [transfer tax](https://brokerandagent.com/glossary/transfer-tax) the seller customarily pays, the owner’s title policy where sellers buy it, the seller’s share of the settlement fee, fees to release the old mortgage and, in some states, a closing attorney.

Commissions, the loan payoff and the [property tax proration](https://brokerandagent.com/glossary/property-tax-proration) also come out of the seller’s proceeds, though they’re usually counted apart from closing costs.

## Who decides who pays what?

The contract, state law and local custom. In Texas, for example, sellers customarily pay for the owner’s title policy; in New York, the buyer usually does. A buyer can also negotiate [seller concessions](https://brokerandagent.com/glossary/seller-concessions), a credit from the seller toward their costs. The CFPB notes that a seller who agrees to a credit will often want a higher price to cover it.

## How can you lower closing costs?

Compare Loan Estimates from more than one lender, since lender charges vary the most. Ask which title and settlement services you’re allowed to shop for; the Loan Estimate lists them. You can also ask for a seller credit or a lender credit, keeping in mind that a lender credit usually comes with a higher interest rate.

## Example: closing costs on a $400,000 home in Florida

| | |
| --- | --- |
| Seller: documentary stamp tax on the deed (0.70%) | $2,800 |
| Seller: owner’s title insurance (state-set rate) | $2,075 |
| Seller: settlement and recording fees (estimates) | $700 |
| Seller total, before commissions and the payoff | $5,575 |
| Buyer: lender fees and appraisal (estimates) | $3,900 |
| Buyer: stamps on the note and intangible tax on a $320,000 loan | $1,760 |
| Buyer: lender’s title policy, settlement and recording | $875 |
| Buyer total with 20% down, before prepaids | $6,535 |

The taxes and title premium are Florida’s own rates; the fees are national estimates. Sellers usually pay the owner’s title policy in Florida, except in a few counties such as Miami-Dade, where buyers usually do. Prepaid interest, insurance and escrow deposits add about $4,200 more for this buyer.

## Common mistakes

- Budgeting only for the down payment. Closing costs and prepaids are due at closing too.
- Assuming the buyer pays everything. Sellers have their own closing costs, and custom shifts some items between the two.
- Comparing lenders on interest rate alone instead of the full Loan Estimate.
- Treating a lender credit as free money. It’s usually paid for with a higher rate.

## Questions

### How much are closing costs?

It depends on the state, the price and the loan. Across all 50 states and DC, a typical seller pays about $2,500 and a typical buyer with 20% down about $6,130 on a $400,000 home, before commissions and prepaids, per the closing costs by state dataset linked on this page.

### Can closing costs be rolled into the mortgage?

On a purchase, usually not directly, though a seller credit or lender credit can cover some of them. Some loans let you finance specific charges, such as FHA’s upfront mortgage insurance premium or the VA funding fee.

### When do I find out the exact amount?

Your lender must give you the Closing Disclosure at least three business days before closing. Compare it with your Loan Estimate and ask about anything that changed.

Calculator: [Closing cost calculator](https://brokerandagent.com/tools/closing-cost-calculator)

Data: [Closing costs by state](https://brokerandagent.com/research/closing-costs-by-state)

## Related terms

- [Loan Estimate](https://brokerandagent.com/glossary/loan-estimate): A Loan Estimate is the standard three-page form a lender must give you within three business days of a mortgage application, showing the estimated rate, monthly payment, closing costs and cash to close so you can compare offers.
- [Closing Disclosure](https://brokerandagent.com/glossary#closing-disclosure): A Closing Disclosure is the five-page form showing your mortgage’s final terms, monthly payment and closing costs. Your lender must get it to you at least three business days before closing so you can compare it with your Loan Estimate.
- [Transfer tax](https://brokerandagent.com/glossary/transfer-tax): Transfer tax is a tax a state, county or city charges when real estate changes hands, usually a percentage of the sale price. Rates and who customarily pays vary by state, and some states charge none.
- [Title insurance](https://brokerandagent.com/glossary/title-insurance): Title insurance protects against losses from problems with a property’s ownership history, such as unknown liens, forged signatures or recording errors, that weren’t found before the sale. You pay a one-time premium at closing.
- [Seller concessions](https://brokerandagent.com/glossary/seller-concessions): Seller concessions are costs a seller agrees to pay for the buyer, most often a credit toward the buyer’s closing costs, prepaid items or repairs. They lower what the seller nets without changing the contract price.
- [Settlement statement](https://brokerandagent.com/glossary#settlement-statement): A settlement statement is the itemized record of every charge and credit for the buyer and seller at closing, ending in the cash each brings or receives. Most mortgage closings use the Closing Disclosure; many others use an ALTA statement.

## Sources

- [CFPB: What fees or charges are paid when closing on a mortgage?](https://www.consumerfinance.gov/ask-cfpb/what-fees-or-charges-are-paid-when-closing-on-a-mortgage-and-who-pays-them-en-1845/)
- [CFPB: Loan Estimate explainer](https://www.consumerfinance.gov/owning-a-home/loan-estimate/)
- [CFPB: Closing Disclosure explainer](https://www.consumerfinance.gov/owning-a-home/closing-disclosure/)
- [ALTA Home Closing 101: Closing costs explained](https://www.homeclosing101.org/the-closing-process/closing-costs-explained/)

Checked 2026-10-02 by the Broker & Agent team. General information, not legal, tax or lending advice.

Source: https://brokerandagent.com/glossary/closing-costs