What Are Real Estate Closing Costs?
When buying a home, most people focus on the down payment and monthly mortgage. But there’s another important expense every buyer should prepare for: closing costs.
Closing costs are the additional fees and expenses paid at the end of the home buying process—when ownership officially transfers from the seller to the buyer. At this stage, taxes, lender charges, and service fees tied to the transaction are assessed. Typically, closing costs range from 3% to 6% of the home’s purchase price, though the exact amount can vary depending on location, loan type, and negotiated terms.
Why Closing Costs Exist
Closing costs cover everything necessary to finalize the sale outside of the actual purchase price of the home. For example, lenders usually charge an origination fee (often about 1% of the loan amount) to set up the mortgage. That’s just one of many services that fall under closing costs, ensuring that the home’s title, financing, and legal documentation are properly handled.
Common Closing Costs for Homebuyers
Here are some of the most common expenses you’ll see itemized at closing:
Property appraisal fees – Required by lenders to confirm the home’s value.
Real estate agent fees – Typically paid by the seller, but sometimes negotiated.
Loan origination – Charged by the lender for creating your mortgage.
Survey fee – Verifies property boundaries and easements.
Credit report fee – Covers the cost of pulling your credit history.
Home inspection fees – Ensures the property is safe and structurally sound.
Title search & insurance – Confirms the seller has legal ownership and protects against future claims.
Recording fees – Paid to the county to record the new deed and mortgage.
Taxes – Property transfer taxes or taxes on the loan amount.
Escrow deposit – Funds held to cover future taxes and insurance.
Mortgage points – Optional prepaid interest to lower your interest rate.
Private Mortgage Insurance (PMI) – Required if the down payment is less than 20%.
Who Pays Closing Costs?
Both buyers and sellers may pay different portions of closing costs, depending on the contract. In many cases, buyers shoulder the majority of fees related to the mortgage and inspections, while sellers often cover agent commissions and title transfer fees. Sometimes, buyers can negotiate with sellers for a closing cost credit to help offset expenses.
Final Thoughts
Closing costs are a necessary part of any real estate transaction. While they can feel like an added burden, understanding what they include—and planning for them—helps buyers avoid surprises at the closing table. By reviewing your Loan Estimate and Closing Disclosure documents carefully, you’ll know exactly where your money is going and can budget with confidence.
Cost-Saving Tips for Buyers and Sellers
Closing costs can add up quickly, but there are ways to reduce them:
Shop Around for Lenders – Fees vary by lender, so getting multiple loan estimates can save thousands.
Negotiate with the Seller – Buyers can request that sellers contribute to closing costs as part of the purchase agreement.
Consider a No-Point Loan – Paying upfront mortgage points isn’t always the best deal—compare long-term costs before deciding.
Ask About Discounts – Some lenders reduce fees for repeat clients, veterans, or first-time buyers.
Avoid Unnecessary Add-Ons – Review your Closing Disclosure carefully and question any fees that seem vague or redundant.
Choose Flat Fee Real Estate Services – Traditional commissions can take up a large portion of closing expenses. By listing with a Flat Fee MLS service like Mountain Lake Realty, sellers can save thousands of dollars in commission costs, keeping more equity in their pocket.
