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Closing costs explained

The fees that come due on closing day — what they are, who pays them, and how to check every line.

The short version

Closing costs are the fees it takes to actually transfer a home — lender charges, title work, appraisals, taxes, and prepaids. They typically run 2%–5% of the purchase price, paid on top of the down payment. On a $400,000 home that's roughly $8,000–$20,000.

Range per Bankrate, Zillow, and Fannie Mae's published guidance (accessed 2026-09-23); line-item definitions from the CFPB's Closing Disclosure rules (Regulation Z, §1026.38).

What's inside the number

• Lender fees: origination, underwriting, points if you choose to pay them.
• Appraisal & inspection: the lender's appraisal and your own inspections.
• Title work: title search plus lender's title insurance (owner's policy is optional but worth pricing).
• Taxes & government charges: transfer taxes, recording fees.
• Prepaids & escrow: first year's insurance, property-tax deposits, prepaid interest.

Who pays what

Buyers pay most buyer-side costs; sellers typically carry agent commissions, a title-policy convention that varies by state, and any transfer taxes local custom assigns to them. Everything is negotiable in the contract — seller credits toward closing costs are a common ask in a buyer's market, and since the 2024 rule changes buyer-agent compensation is negotiated openly too (see our commission explainer).

Reading your Closing Disclosure

Three business days before closing you receive the Closing Disclosure — five pages where every charge lives. Compare it line by line against your Loan Estimate: the lender's own fees shouldn't grow, third-party charges can move only within legal tolerance, and the loan terms must match what you locked. Something looks wrong? Ask immediately — the three-day window exists so problems get fixed before you sign.

Five honest ways to lower the total

• Shop the lender fees, not just the rate — they vary far more than third-party charges.
• Ask the seller for a closing-cost credit in the offer.
• Close at the end of the month to trim prepaid interest.
• Price owner's title insurance separately — it's optional and varies by state.
• Question every junk fee: "processing fee" and "email fee" are negotiable by definition.