Most buyers spend months planning for their down payment—but closing costs? Those can fly under the radar until the very end.
From loan processing to title work to last-minute “surprise” fees, closing costs can add thousands of dollars to the true price of buying a home. And while some charges are spelled out in your paperwork, others can sneak in late in the game—leaving buyers scrambling to come up with more cash than expected.
So how much should you expect to pay in closing costs? What do these fees actually cover? And how can you avoid being blindsided at the closing table? Here’s what to know about the real—and not-so-obvious—cost of closing on a home.
What are closing costs?
Closing costs are the collection of fees and expenses you pay when finalizing a real estate transaction—right at the point when the home becomes officially yours. While many of these costs are related to securing a mortgage, such as loan origination and underwriting fees, others cover necessary services like the appraisal, title search, and legal filings.
The exact number and type of closing costs can vary based on your mortgage type, state and local regulations, and the specific details of the home sale.
How much are closing costs?
Closing costs are typically 2% to 7% of a home’s purchase price. So, on a nationally median-priced home of $449,000, closing costs could range from $8,980 to $31,430.
Both buyers and sellers typically have their own set of closing costs, and who pays for what can be negotiated as part of the purchase agreement.
Keep in mind that closing costs are an additional expense on top of a down payment, which is usually around 10% to 20% of a home’s purchase price and is also due at closing. So, for a nationally median-priced home, buyers could need as much as $53,880 to $121,230 in liquid cash to close the deal.
What’s included in closing costs? A line-by-line breakdown
When you buy a house, you’re not just paying for the property, you’re also paying for the services that facilitate the purchase. You might be surprised to learn about all of the labor that goes into a home sale, and even more shocked to see the sticker price.
Common buyer closing costs:
- Application fee
- Appraisal fee
- Attorney fees
- Buyer’s agent commission
- Credit report fee
- Escrow fees
- Inspection fee
- Loan origination fee
- Prepaid property taxes and homeowners insurance
- Processing fee
- Recording fees
- Title search and insurance
- Underwriting fee
Common seller closing costs:
- Attorney fees
- Mortgage payoff
- Property taxes
- Seller’s agent commission
- Seller concessions
- Transfer taxes
Are closing costs tax-deductible?
Most closing costs for buyers aren’t tax-deductible, but many of the other costs of homebuying are.
Mortgage interest, discount or mortgage points, and property taxes are all tax-deductible and can lead to huge savings for homebuyers if itemized on their tax returns. These savings can be especially helpful in the first years of homeownership, as homeowners pay a greater amount toward interest in the early years of their mortgage.
New homeowners should consult a tax professional to see if they qualify for any homebuying-related tax deductions.
The hidden and overlooked fees no one tells you about
Even if you’ve reviewed your loan estimate closely, some real estate transactions come with surprise fees that surface only late in the process, sometimes just days before closing.
Some agents might recommend planning for “buffer” costs—miscellaneous fees not itemized early on—that inflate your final bill. These hidden closing costs can cover myriad expenses, from move-in charges to management fees, and rush expenses for preparing necessary documents.
And then there’s the issue of junk fees—vague or excessive charges (think document prep or processing fees) that are worth questioning. If something doesn’t make sense or seems inflated, ask your lender or agent for a breakdown.
Special considerations: Co-ops, condos, and HOAs
If you’re buying into a co-op, condo, or HOA-governed community, be prepared for extra closing costs that don’t typically apply to single-family home purchases.
In a co-op sale, for example, you’ll often need to budget for board application fees, which can range from a few hundred to over a thousand dollars. Some co-ops also charge flip taxes—a percentage of the sale price or profit paid by the seller (and occasionally negotiated with the buyer). Move-in and move-out deposits are also common and may be refundable, but they can still tie up cash in the short term.
Condos and townhomes typically come with HOA transfer fees or document preparation fees, which cover the cost of onboarding a new owner and updating community records. These charges can vary widely depending on the size and management of the association.
In short, if you’re buying into a shared community or managed building, closing costs tend to run higher—and it’s crucial to ask your agent for a full fee schedule upfront to avoid any unwelcome surprises.
What if you can’t afford closing costs?
If closing costs are putting homeownership out of reach, there are several ways to reduce them. One common strategy is to negotiate seller concessions, where the seller agrees to cover part of your closing costs as part of the deal. Another option is to explore lender credits—sometimes called “no closing cost” mortgages—where the lender covers some upfront costs in exchange for a slightly higher interest rate.
First-time homebuyers might also qualify for closing cost assistance programs, which offer grants or low-interest loans to help cover expenses. Each of these options has pros and cons, and the right choice depends on your budget, loan type, and long-term financial goals.
The key is to explore all available resources and work closely with your real estate agent to find the best path forward.
How to prepare for closing without surprises
The best way to avoid sticker shock at closing is to ask early, often, and in writing about all of the costs you’ll be on the hook for at closing—from all the parties involved.
And no matter how solid your numbers look, it’s wise to keep a financial cushion in your budget. Even in “no closing cost” deals, some expenses may still crop up along the way.
Recent Comments