What Are Closing Costs When Buying a Home — and Who Pays Them?

Buying your first home is exciting, but it also comes with some expenses that many buyers don’t expect. One of the biggest surprises? Closing costs. These costs can catch buyers off guard if they’re not prepared, so let’s break down exactly what they are, how much to budget for, and who’s responsible for paying them.

Many first-time homebuyers ask the same question: “Who pays closing costs?” We’ll explain that — and much more — below.

What Are Closing Costs?

Closing costs are the fees paid at the final step of the home buying process — when you “close” on the property and officially become the owner. These costs are in addition to your down payment and are paid separately.

What’s Included in Closing Costs?

Closing costs can vary depending on the type of loan, location, and property. But they typically include:

• Loan origination fee (charged by the lender)
• Appraisal fee
• Credit report fee
• Title insurance
• Title search
• Recording fees
• Escrow fees
• Prepaid taxes and insurance
• VA or FHA funding fees (if applicable)

In short, these costs cover the work it takes to finalize your loan and legally transfer ownership of the home.

How Much Are Closing Costs?

In general, closing costs usually run between 2% and 4% of the home’s purchase price, depending on your local taxes, homeowners’ insurance, and other non-fixed expenses. For example:

• On a $250,000 home, that’s about $5,000 to $10,000 in closing costs.

Who Pays Closing Costs?

Here’s the truth: The buyer usually pays most of the closing costs.
But there’s some flexibility.

The seller can offer to cover part or all of your closing costs through what’s called a seller concession. In competitive markets, this can be more challenging to negotiate. Still, in slower markets or with motivated sellers, it is very possible, especially when working with a skilled real estate agent.

Additionally, some loan programs, such as VA loans, limit the amount the buyer can be charged.

Can You Finance Closing Costs?

Unlike the down payment, closing costs typically can’t be rolled into the loan, but there are exceptions. For example, lender credits allow you to reduce or eliminate upfront costs in exchange for a slightly higher interest rate. It’s a tradeoff, and it’s one we’ll walk through together based on your long-term goals.

How to Prepare for Closing Costs

Here’s how to make sure you’re ready when the time comes:

• Get a Loan Estimate early. It outlines your expected closing costs in detail.
• Ask about seller concessions. Your agent and lender can help negotiate these.
• Budget realistically. Plan for the higher end of the range to be safe.
• Use available programs. First-time homebuyer grants or VA loan benefits may help cover certain costs.

Final Thoughts

Closing costs may not be the most exciting part of buying your first home, but they’re one of the most important. Knowing what to expect gives you an edge, helps you avoid surprises, and makes the entire process smoother.

As your mortgage guide, I’ll ensure you understand every fee before you sign any documents. If you’re considering buying a home soon, let’s discuss your options and create a plan that works for you, including strategies for managing closing costs.

👉 Thinking about buying your first home? Let’s walk through your numbers together.
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