In a typical home sale, both the buyer and the seller pay closing costs, but they cover different line items. Buyers usually spend 2% to 5% of the purchase price on lender fees, insurance, prepaid reserves, and recording charges. Sellers usually pay more in total, closer to 6% to 10%, because real estate commissions take the largest bite. Almost none of this is fixed by law. Nearly every line item is negotiable inside the purchase agreement, and one side can agree to pick up costs that normally belong to the other.
What the Buyer Pays at Closing
Most of the buyer’s closing costs exist because a lender is involved. If you’re financing the purchase, expect these on your settlement statement:
- Loan origination fee. Usually 0.5% to 1% of the loan amount. On a $350,000 mortgage, that’s $1,750 to $3,500. It covers processing, underwriting, and funding.
- Appraisal fee. Typically $315 to $425 for a standard single-family home. The lender orders it to confirm the property is worth what you’re borrowing.
- Credit report fee. Mortgage lenders pull a tri-merge report from all three bureaus. Fees have climbed and now run anywhere from $50 to over $175 per borrower.
- Private mortgage insurance. Required if your down payment is under 20%. You may owe an upfront premium at closing on top of the monthly charge.
- Title search and lender’s title insurance. The search confirms nobody else has a legal claim on the property. The lender’s policy protects its interest in the loan.
- Recording fees. The county recorder charges to file the new deed and mortgage. These vary widely by location but generally fall in the $125 to $500 range.
- Flood zone determination. Lenders can charge you to determine whether the property sits in a federally designated flood zone. If it does, you’ll also need flood insurance.
Cash buyers skip most of this list. No lender means no origination fee, no PMI, no appraisal requirement, no lender’s title insurance, and no escrow reserve funding. You still owe for the title search, owner’s title insurance, recording fees, transfer taxes, and the settlement agent. Cash purchases generally run around 1% to 2% of the price in closing costs rather than 2% to 5%.
Prepaids and Escrow Reserves
Buyers are often caught off guard by prepaids. They aren’t strictly “closing costs,” but they show up on the settlement statement and require cash at the table. Prepaids cover expenses coming due soon, paid upfront so the lender and insurer are protected from day one.
The main ones: your first year of homeowners insurance (or at least several months of premium), property taxes covering the gap between closing and your first escrow payment, and per-diem mortgage interest from your closing date through the end of that month.
On top of prepaids, the lender opens an escrow account and requires an initial cushion. Federal rules allow a maximum cushion of two months’ worth of escrow payments beyond what’s needed for upcoming bills.
What the Seller Pays at Closing
The seller’s largest expense, by a wide margin, is agent compensation. The average total commission in 2025 was about 5.4% of the sale price, typically split between the listing agent and the buyer’s agent. On a $400,000 home, that’s roughly $21,600 before any other costs.
Other seller-side costs include:
- Owner’s title insurance. In most transactions, the seller pays for the policy that protects the buyer against undiscovered title problems from before the sale, such as old liens or ownership disputes.
- Transfer taxes. Many state and local governments charge a one-time tax when property changes hands. Rates vary significantly by location.
- Deed preparation. An attorney or title company drafts the deed transferring ownership, usually a few hundred dollars.
- HOA transfer and estoppel fees. If the property is in a homeowners association, the seller typically pays for an estoppel certificate confirming all dues and assessments are current. Transfer fees to update HOA records range from nothing to $350 or more depending on the association.
- Prorated property taxes. The seller reimburses the buyer for any property taxes covering the period before closing that haven’t been paid yet.
How Commissions Work After the 2024 NAR Settlement
Since August 2024, the rules around agent compensation have shifted in ways that affect both sides of the transaction. Commissions are still fully negotiable, but listing agents can no longer advertise a specific commission for the buyer’s agent on the Multiple Listing Service. Sellers no longer automatically commit to paying the buyer’s agent a set percentage when they list the property.
Buyers must now sign a written agreement with their own agent before touring homes. That agreement has to spell out exactly what the agent will be paid, whether that’s a flat fee, a percentage, or an hourly rate. It can’t be open-ended. Sellers can still offer to cover the buyer’s agent commission, but it happens through direct offers or buyer concessions rather than through the MLS listing.
Seller Concessions: When One Side Pays for the Other
Sellers can agree to cover some or all of the buyer’s closing costs through seller concessions. This is common when the buyer is tight on cash or when the seller wants to close quickly. The dollar amount or percentage goes directly into the purchase agreement and shows up as a credit to the buyer on the settlement statement.
Lenders cap how much the seller can contribute, because they don’t want the buyer walking away from closing with cash in pocket. The limits depend on the loan type and, for conventional loans, the down payment:
- Conventional loans. 3% of the sale price with less than 10% down, 6% with 10% to 25% down, and 9% with more than 25% down.
- FHA loans. Up to 6% of the sale price or appraised value, whichever is lower.
- VA loans. Up to 4% of the sale price, plus the lender can allow the seller to cover normal loan-related costs on top of that cap.
- USDA loans. Up to 6% of the sale price.
If you’re buying with a small down payment on a conventional loan, the 3% cap can feel tight. Asking the seller to cover title fees or prepaid taxes rather than loan-related costs sometimes stretches the concession further, since the cap applies to the total credit rather than specific cost categories.
How to Reduce What You Pay
Closing costs aren’t a single bill from a single company, so there are several places to trim them:
- Compare multiple lenders. Origination fees, discount points, and processing charges vary meaningfully from one lender to the next. Get at least three Loan Estimates and compare the total cost of each offer, not just the interest rate.
- Shop your own service providers. Your Loan Estimate names specific companies for title searches, inspections, and other third-party services. With few exceptions, you’re free to shop for lower prices on anything in the “Services You Can Shop For” section.
- Ask about lender credits. Some lenders will cover part of your closing costs in exchange for a slightly higher rate. If you don’t plan to keep the loan for decades, the higher rate can cost less over time than the upfront fees.
- Negotiate seller concessions. As above, the seller can credit money toward your closing costs. This works especially well in buyer-friendly markets.
- Consider a no-closing-cost mortgage. The lender rolls fees into your loan balance or absorbs them through a rate increase. You pay less at the table but more over the life of the loan. The trade-off makes sense when you expect to refinance or sell within a few years.
Sellers have less room to cut, since commissions are the bulk of the bill. The lever there is the listing agreement itself. Commissions are negotiable, and the post-settlement rules mean buyers’ agent compensation is now an item to work through rather than a fixed line on the MLS.