Closing costs.

In plain English

Closing costs are the fees paid at the closing of a real estate purchase or refinance, separate from the down payment itself. They include lender fees (origination, underwriting, points), third-party fees (title insurance, attorney fees, survey, appraisal, recording fees, transfer taxes), prepaid items (the first year of homeowner's insurance, prorated property taxes), and the funding of an escrow account for future taxes and insurance. Buyers typically pay 2% to 5% of the home's purchase price in closing costs. Sellers usually pay agent commissions, which are separate from the buyer's closing costs.

01Why it matters

Many first-time homebuyers focus on the down payment and underestimate closing costs, then arrive at the closing table $10,000 to $20,000 short. On a $400,000 home, closing costs alone can run $8,000 to $20,000 in addition to the down payment. The TILA-RESPA Integrated Disclosure (TRID) rule requires lenders to provide a Loan Estimate within 3 days of application and a Closing Disclosure at least 3 days before closing, so buyers have time to verify the math before signing.

02The math, step by step

A buyer purchasing a $400,000 home with 20% down ($80,000) might also owe at closing: $4,000 lender origination, $2,500 title insurance (lender + owner), $1,200 attorney fees, $600 appraisal, $1,200 first year of homeowner's insurance, $2,000 prorated property tax escrow, $300 recording fees, plus $1,200 in transfer taxes (varies by state). Total closing costs: about $13,000, or 3.25% of the purchase price. The buyer arrives at closing with $93,000, not $80,000.

03What this is NOT

04Receipts

Every figure on this page is sourced to a primary document. Tap to open the original.