Both sides pay closing costs, but they pay for different things. The short answer to whether the buyer or seller pays closing costs: buyers typically cover 2% to 5% of the purchase price in loan-related fees, prepaid escrow, and third-party services, while sellers typically owe 6% to 10% once real estate commissions, transfer taxes, and title-clearing expenses come out of the sale proceeds. Every line is negotiable, and the final split is written into the purchase agreement.
On a $400,000 home, a buyer might bring $8,000 to $20,000 to the table, while a seller could give up $24,000 to $40,000 — mostly to agent commissions. Federal rules require your lender to send a Loan Estimate within three business days of your mortgage application, so you see an itemized preview of the buyer-side costs early.1Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs
What the Buyer Pays
Loan-Related Fees
The biggest chunk of buyer costs comes from the mortgage itself. A loan origination fee generally runs 0.5% to 1% of the loan amount, so a $350,000 mortgage carries $1,750 to $3,500 in origination charges. The lender also orders a professional appraisal to confirm the home is worth what you are borrowing; single-family appraisals usually cost $300 to $425.
A credit report fee covers pulling your credit history. It is the only fee a lender can charge before giving you a Loan Estimate.2Consumer Financial Protection Bureau. How Much Does It Cost to Receive a Loan Estimate If your down payment is less than 20%, the lender will add private mortgage insurance, either as a monthly premium or a lump sum at closing. You may also choose to buy discount points to lower your interest rate; each point costs 1% of the loan amount.3Freddie Mac. What You Need to Know About Discount Points
Prepaid Items and Escrow
Lenders require you to fund an escrow account at closing for upcoming property taxes and homeowners insurance. You typically prepay several months of both so the account has a cushion when the first bills come due. Most lenders also require proof that you have bought a homeowners insurance policy covering the full value of the property before they will fund the loan.4Fannie Mae. What To Expect at Closing on a House These are not fees you lose. They go toward bills you would owe anyway, but they raise the cash you need on closing day.
Inspection and Survey
A home inspection is a buyer expense, though it usually happens during the contract period and does not appear on the settlement statement. Most inspections cost $300 to $500 depending on the size of the home. If your lender or the property’s location requires a boundary survey, expect $500 to $1,200 for a standard residential lot.
What the Seller Pays
Real Estate Agent Commissions
Agent commissions are usually the single largest closing cost in the whole transaction. Historically, sellers paid a combined 5% to 6% of the sale price, split between the listing agent and the buyer’s agent. That model shifted in August 2024 after a major industry settlement changed how buyer-agent compensation works. Listing agents can no longer advertise a commission split to buyer’s agents through the Multiple Listing Service, and buyers may now negotiate their own agent’s fee separately.
In practice, many sellers still offer compensation to attract buyers, and total commissions average roughly 5% to 5.5% of the sale price. On a $400,000 home, that is $20,000 to $22,000. Whether you are buying or selling, the purchase agreement should spell out exactly who is paying each agent and how much.
Transfer Taxes
Most states, and some municipalities, charge a transfer tax when real estate changes hands. The rate varies widely, from a flat fee per document to a percentage of the sale price. Transfer taxes are calculated on the purchase price and paid when the deed is recorded with the county. Who pays depends on local custom and negotiation, though the burden usually falls on the seller.
Title Clearing and Prorated Costs
Before a sale can close, the seller must deliver a clear title, meaning no outstanding liens, judgments, or unpaid debts attached to the property. Paying off a remaining mortgage balance, settling contractor liens, and resolving tax arrears all come out of the seller’s proceeds. Property taxes are prorated so the seller covers the portion of the tax year they owned the home, and any delinquent homeowners association dues or transfer fees are deducted before the buyer takes ownership.
In some areas, sellers also pay for the owner’s title insurance policy, which protects the buyer against hidden title defects for as long as they own the home. In other areas, that cost falls on the buyer. Your purchase agreement and local custom decide it.
Costs Often Split or Negotiated
Several closing costs do not automatically belong to one side. Local custom, the purchase contract, and the relative bargaining power of the parties determine who picks up each of these.
- Escrow or settlement fees. The escrow company or attorney managing the exchange of funds and documents charges a fee that varies by location and property value. It is frequently split between buyer and seller.
- Recording fees. County offices charge to record the new deed and mortgage. The cost per document varies by jurisdiction, and the parties often divide the expense, with the seller paying to record the deed and the buyer paying to record the mortgage.
- Title insurance. The buyer nearly always pays for the lender’s title insurance policy. Who pays for the owner’s policy varies by region and is negotiable.
- Notary fees. Charges for notarizing signatures on closing documents are modest, often just a few dollars per signature, and can be assigned to either party.
- Wire transfer fees. Moving large sums between financial institutions carries a small fee, typically charged to whichever party is sending the funds.
If a specific fee is not addressed in the contract, local custom fills the gap. You can negotiate any line item before signing.
Seller Concessions Shift Buyer Costs to the Seller
A seller concession is an agreement where the seller covers some or all of the buyer’s closing costs, reducing the cash the buyer needs at the table. The concession is written into the purchase contract as a dollar amount or a percentage of the sale price. Sellers often agree to concessions to close a deal faster, especially in a buyer’s market. Every major loan program caps how much the seller can contribute.
Conventional Loans (Fannie Mae and Freddie Mac)
For conventional loans backed by Fannie Mae, the cap depends on the buyer’s down payment and the property type:
- Down payment under 10% (LTV above 90%): up to 3% of the sale price
- Down payment of 10% to 25% (LTV 75.01%–90%): up to 6%
- Down payment above 25% (LTV 75% or less): up to 9%
- Investment properties: up to 2% regardless of down payment
Freddie Mac follows a similar tiered structure.5Fannie Mae. Interested Party Contributions (IPCs)
FHA Loans
FHA loans allow seller concessions of up to 6% of the sale price. The funds can cover origination fees, discount points, prepaid items, and other closing costs, but they cannot be applied to the buyer’s minimum required down payment.6U.S. Department of Housing and Urban Development. What Costs Can a Seller or Other Interested Party Pay on Behalf of the Borrower Any concession that exceeds the buyer’s actual closing costs triggers a dollar-for-dollar reduction to the adjusted property value before the loan-to-value ratio is calculated.
VA Loans
The VA draws a line between ordinary closing costs and seller concessions. A lender can let the seller pay the buyer’s normal closing costs without a cap, but items the VA classifies as concessions, including credits toward the VA funding fee, debt payoff, or prepayment of hazard insurance, are limited to 4% of the home’s reasonable value.7Veterans Affairs. VA Funding Fee and Loan Closing Costs
USDA Loans
USDA-guaranteed loans cap interested-party contributions at 6% of the sale price. Real estate agent commissions paid by the seller do not count toward that limit.8USDA. HB-1-3555 Chapter 6 – Loan Purposes
Confirm the Split Before You Sign
Federal law requires your lender to deliver a Closing Disclosure at least three business days before closing. This document is the final, itemized accounting of every cost, both buyer-side and seller-side, along with the loan terms.1Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs Compare it line by line against the Loan Estimate you received earlier so you can spot any charge that jumped or moved from one column to the other.
Your lender can make minor corrections up to the day of closing, but three specific changes trigger a new three-day waiting period before you can close: the APR changes beyond the allowed tolerance, the loan product changes (for example, switching from a fixed rate to an adjustable rate), or a prepayment penalty is added. Any other corrections, such as an adjusted escrow deposit or a revised recording fee, can be delivered at or before closing without restarting the clock.1Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs If a cost you negotiated to the other side has drifted back to yours, catch it here.