Closing costs are the various fees and charges required to complete a real estate transaction, paid at closing on top of the down payment and purchase price. They cover services and obligations from lenders, title companies, government agencies, and other parties.
For buyers, closing costs commonly include loan origination fees, appraisal and credit report fees, title insurance, recording fees, and prepaid items like property taxes and homeowners insurance. They often total roughly two to five percent of the loan amount. Sellers typically pay real estate commissions and, in many areas, transfer taxes.
Who pays which costs can be negotiated in the contract. Buyers sometimes ask sellers for a closing cost credit, known as a seller concession, to reduce their upfront cash needs.