In a typical home sale, the buyer pays roughly 2% to 5% of the purchase price in closing costs tied to the mortgage, title work, and prepaid items, while the seller pays agent commissions, transfer taxes, and any remaining mortgage balance out of the sale proceeds. That is the default split. Who actually pays closing costs on any given deal depends on local custom, the loan type, and what the two sides write into the purchase contract.
What the Buyer Pays
Most buyer-side charges exist because there is a lender involved. Take the mortgage away and most of them disappear.
Loan Origination and Underwriting
The lender charges an origination fee for evaluating, underwriting, and funding the loan, usually 0.5% to 1% of the loan amount. On a $350,000 mortgage that runs roughly $1,750 to $3,500. The lender also pulls a tri-merge credit report combining data from all three major bureaus; these fees have climbed in recent years and now range from around $50 to over $150 depending on the number of borrowers.
Appraisal
Lenders require an independent appraisal to confirm the home’s market value supports the loan. For a single-family home, appraisal fees typically fall between $300 and $500, though complex or rural properties can cost more.
Private Mortgage Insurance
If the down payment is under 20%, the lender will require private mortgage insurance to cover itself against default.1Freddie Mac. Down Payments and PMI PMI generally runs 0.30% to 1.15% of the loan balance per year, driven by credit score and loan-to-value ratio. On a $300,000 loan, that adds roughly $75 to $290 to the monthly payment.
Escrow Deposits and Prepaid Interest
The lender collects upfront deposits for property taxes and homeowners insurance into an escrow account so it can pay those bills on the borrower’s behalf. Federal rules cap the cushion the lender can hold at no more than one-sixth of the estimated annual escrow payments, roughly two months of reserves.2Consumer Financial Protection Bureau. 1024.17 Escrow Accounts The buyer also prepays the daily interest accruing between closing and the start of the first full mortgage payment period.
Lender’s Title Insurance and Title Search
The buyer almost always pays for the lender’s title insurance policy, which protects the lender if a title defect surfaces after closing. A separate title search fee covers examining public records for prior liens and confirming the seller’s ownership. Together these fees typically run several hundred to over a thousand dollars depending on property value and location.
VA Funding Fee
Veterans and active-duty service members using a VA-backed loan pay a one-time funding fee in place of monthly mortgage insurance. For a first-time VA purchase with less than 5% down, the fee is 2.15% of the loan amount. Putting 5% or more down reduces it to 1.50%, and 10% or more brings it to 1.25%.3U.S. Department of Veterans Affairs. VA Funding Fee and Loan Closing Costs Veterans who have used the benefit before and put less than 5% down pay a higher 3.30% fee. Veterans receiving VA disability compensation, among others, are exempt entirely.
What the Seller Pays
Seller-side costs are fewer in number but larger in total dollars. They come out of the sale proceeds at closing rather than the seller’s pocket, but they reduce the check the seller walks away with.
Real Estate Agent Commissions
Agent commissions are usually the seller’s biggest single closing cost. Total commissions have historically averaged 5% to 6% of the sale price. Following a National Association of Realtors settlement that took effect in 2024, how that compensation gets structured has changed: offers of buyer-agent compensation can no longer be published on the MLS, and buyers must sign a written agreement with their agent specifying compensation before touring homes.4National Association of REALTORS. NAR Settlement FAQs Sellers can still choose to cover part or all of the buyer’s agent fee as a negotiating tool, but the amount is fully negotiable and no longer assumed to follow the old split.
Transfer Taxes
Most state and local governments charge a transfer or excise tax when a property changes hands. Rates vary widely by jurisdiction, from a few cents per hundred dollars of value to several dollars per hundred. Local custom determines whether the seller, the buyer, or both pay it, though sellers pay in most markets.
Owner’s Title Insurance
In many markets the seller pays for an owner’s title insurance policy, which protects the buyer against future claims to the property such as undisclosed liens, forged signatures in the chain of title, or recording errors. This is a separate policy from the lender’s title insurance the buyer purchases. Who pays depends on regional custom and the purchase contract.
Mortgage Payoff and Prorated Expenses
If the seller still owes on a mortgage, the remaining balance plus accrued interest is paid from the sale proceeds at closing, and the lender then records a release of lien in the public records.5Fannie Mae. Satisfying the Mortgage Loan and Releasing the Lien Property taxes and utility bills are prorated so the seller covers their share through the closing date, deducted from net proceeds on the settlement statement. In homes governed by an HOA, the seller typically pays any estoppel or disclosure fee to confirm the account is current and no special assessments are outstanding.
How Negotiation Changes the Split
The categories above are defaults, not rules. A seller concession is a credit written into the purchase contract where the seller agrees to cover some or all of the buyer’s closing costs. This lowers the cash the buyer needs at closing without changing the sale price. Concessions appear on the final settlement statement and become binding once the purchase agreement is signed.6National Association of REALTORS. Consumer Guide – Seller Concessions
Loan programs cap how much a seller can contribute:
- Conventional loans backed by Fannie Mae cap seller contributions at 3% of the sale price when the buyer puts down less than 10%, 6% for down payments between 10% and 25%, and 9% for 25% or more down. Investment properties are capped at 2% regardless of down payment.7Fannie Mae. Interested Party Contributions (IPCs)
- FHA loans allow up to 6% of the sale price. Anything above triggers a dollar-for-dollar reduction in adjusted property value for loan-to-value purposes.8U.S. Department of Housing and Urban Development. What Costs Can a Seller or Other Interested Party Pay on Behalf of the Borrower
- VA loans allow up to 4% of the home’s reasonable value. Credits toward the funding fee, debt payoff, and prepaid hazard insurance count against that limit.3U.S. Department of Veterans Affairs. VA Funding Fee and Loan Closing Costs
- USDA loans allow up to 6% of the sale price. Closing costs and prepaid items paid by the lender through premium pricing, as well as repair escrows, do not count against the limit.9USDA Rural Development. HB-1-3555 Chapter 6 – Loan Purposes
Concessions are most common in buyer-friendly markets where the seller needs to sweeten the deal. In competitive markets with multiple offers, sellers have less reason to give them.
Cash Purchases and Refinances Work Differently
Paying cash eliminates every lender-related charge. There is no origination fee, no lender-required appraisal, no credit report fee, no mortgage insurance, and no escrow deposits collected for a lender’s benefit. The buyer still pays for title work, transfer taxes if local custom assigns them to the buyer, recording fees, and any legal fees. Total closing costs drop significantly and the timeline shortens because there is no underwriting.
In a refinance there is no seller, so the borrower pays every closing cost. Expect a new appraisal, title search, credit report, and lender origination and processing fees that mirror the original purchase, plus recording fees for the new mortgage. Cash-out refinances cost more: Fannie Mae applies loan-level price adjustments that are meaningfully steeper than those on rate-and-term refinances at the same credit score and loan-to-value ratio, which translates into a higher interest rate or larger upfront fees.10Fannie Mae. Loan-Level Price Adjustment Matrix A “no-closing-cost” refinance shifts payment rather than eliminating it: the lender either raises the interest rate to absorb the costs or rolls them into the loan balance.
Seeing the Numbers Before Closing
The federal disclosure forms show the buyer exactly what they will owe. Within three business days of receiving a mortgage application, the lender must provide a Loan Estimate, a standardized form itemizing the projected interest rate, monthly payment, and closing costs.11Office of the Law Revision Counsel. 12 U.S. Code 2604 – Home Buying Information Booklets At least three business days before closing, the lender must deliver a Closing Disclosure with the final figures.12eCFR. 12 CFR 1026.19 – Certain Mortgage and Variable-Rate Transactions Compare the two forms line by line. Certain fees, including lender origination charges, cannot increase between the two documents, and other fees can change only within set tolerances.13Federal Register. Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth In Lending Act (Regulation Z) The seller does not receive these forms but does receive a settlement statement showing every deduction from the sale proceeds, and reviewing it before signing is the seller’s equivalent check.