Home Buyer Closing Costs: A Complete Fee-by-Fee Guide

If you’re buying a home, you may not realize that your down payment isn’t the only money you’ll need at closing. When you close on a home sale, you will sign all the necessary final documents (closings are typically held at the title company’s office), and you’ll be responsible for a range of fees, also known as “settlement” or “closing” costs. These buyer closing costs can range from 2% to 5% of the loan amount, in addition to the down payment. Knowing what’s in that dollar amount helps you budget with confidence and avoid surprises on closing day.

This fee-by-fee guide walks you through what to expect in a typical buyer closing cost checklist: what each fee covers and who pays it.

Who Pays Closing Costs  

A common question for buyers is: Who pays closing costs? In a real estate transaction, both the buyer and the seller typically pay their own closing costs. As the buyer, your fees are largely loan-related, insurance-related, and tax-related. The seller’s costs mainly consist of agent commissions and title-related fees. That said, you may be able to negotiate for the seller to cover some of your costs as concessions. Ask your real estate agent for guidance on what’s typical in your market. 

What Are Closing Costs for Buyers?

These costs are above and beyond the purchase price of your home and can include:

• Loan fees
• Property taxes
• Insurance premiums
• Inspection reports
• Home warranty and more.

Buyer closing costs can vary depending on several factors, including the:

• Price of your home
• Area where you live (or are moving to)
• Lender you choose
• Type of loan you get.

A closing cost calculator can also be a helpful tool to use when you’re searching for an early estimate. These are usually found on most mortgage lender websites.

For the most accurate figure, however, your lender is your best source. When you apply for a mortgage loan, your lender is required by law to provide a loan estimate that lists the estimated closing costs. This loan estimate, also called a “Good Faith Estimate,” will list the loan terms and estimated costs. This document also shows which fees you can shop around for (such as title services) and which you cannot (like the appraisal, which your lender selects).

Just before closing, your lender is required to provide you with a form like this sample disclosure that shows the actual closing costs, so that you can compare it against the original estimated costs. This way, you can see if anything has changed or if a new fee has been added. Be sure to ask questions about any fees you didn’t expect to see.

We’ll break down the typical buyer closing costs next:

Loan Costs

The fees that your lender charges for your mortgage loan can vary (you can see these fees listed on your loan estimate). Some lenders offer loans with low or no fees but charge higher interest rates; others let you pay upfront “points” to buy down your rate.

If you have a smaller down payment, there are various government loan programs (FHA, VA, and USDA) that also have their own associated fees.

Typical fees for a conventional (non-government) mortgage loan:

• Application fee: Your lender may charge this fee to process your mortgage application.
• Credit report fee: The fee charged by a lender to obtain your credit score.
• Home appraisal fee: A fee for an independent appraiser to assess the value of the property you are buying. The appraiser is usually chosen by the lender.
• Points (discount points): Fees you can pay upfront to get a lower interest rate on your loan.
• Underwriting or origination fee: A fee the lender charges for evaluating your loan application to determine if you’ll be able to repay the loan.
• Private mortgage insurance: If you have a conventional loan and put down less than 20% of the price of your home as a down payment, your lender will require you to have private mortgage insurance (PMI). This protects the lender against a default on the loan. When you reach 20% equity on your home loan, this insurance is no longer required.

FHA Loan Fees

Federal Housing Authority (FHA) loans are often beneficial for first-time buyers due to flexible down payment and credit requirements. These loans, however, require you to pay for upfront and annual mortgage insurance. This is different than the type of private mortgage insurance (PMI) you pay if you have a conventional loan.

• Upfront mortgage insurance premium (UFMIP): This insurance premium fee is required for FHA loans and is paid at closing.
• Annual mortgage insurance premium (MIP): This is an ongoing insurance premium that you will pay for your FHA loan.

Insurance Costs

When you buy a home, there are different types of insurance your lender may require, as well as other insurance you should buy.

Title Insurance

In real estate, “Title” refers to legal ownership of a property. Title insurance protects against  someone suing to say they have a claim against the home. If a previous owner failed to pay taxes or has unpaid debts that result in a lien against the property, these are examples of claims that can be covered by title insurance. Before the title company issues a policy, they will conduct an in-depth search of public records, looking for and, if possible, fixing any issues.

Title insurance at closing typically comes in two forms: one for the lender and one for the owner (buyer).

Lender’s Title Insurance Policy

Your lender will require you to purchase a title insurance policy to protect their interest in the property until your loan is paid or you refinance.

Owner’s Title Insurance Policy

The owner’s policy is optional but is strongly recommended as it protects your ownership rights for as long as you own the home.

Homeowners Insurance

Homeowners insurance protects your home and personal property from damage due to fire, storms, and severe weather, as well as vandalism, accidents, and more. Your lender will require proof of homeowners insurance before funding your loan, and many lenders require you to prepay the first year of homeowners insurance at the closing. After that, your homeowners insurance is often part of a mortgage escrow account.

Learn more about the difference between homeowners insurance and a home warranty, and why you need both.

Mortgage Insurance

If your down payment on a conventional loan is less than 20%, your lender will require private mortgage insurance (PMI). If you get an FHA loan, you will pay different mortgage insurance premiums, one at close (UFMIP) and one annually (MIP), that are just for FHA loans.

Taxes and Other Costs

Property Taxes

Your property taxes are based on your home’s value and the tax rate set by your county or city. What you owe at closing will vary depending on when the taxes were last paid or when they are due next. Going forward, your property taxes are often part of a mortgage escrow account.

Recording Fees

These fees are paid to your local government agency, typically the county, for registering the sale of your home in the public record. Depending on local government requirements, you may also pay fees for recording your deed and your mortgage.

Closing, Settlement, or Escrow Fee

This fee covers the person or company that handles the closing process, such as a title or escrow company, or, if your state requires it, an attorney. In many parts of the country, this fee is part of the title services.

Attorney Fees

In many states, especially in the South and on the East Coast, you are required to hire a real estate attorney when buying a home. In the West, escrow or title agents usually handle the closing process.

Pest Inspection

Some regions and government-issued loans require a pest inspection when you buy a home. This fee covers the inspection of your home for pests such as termites, as well as damage from pests, including dry rot.

Learn more about termite coverage and real estate home warranties.

Home Inspection

While not required by lenders, a thorough home inspection is an essential part of the purchase process. You choose a professional inspector to examine your home and provide you with a detailed report that includes the age and condition of your home’s systems and appliances, and will let you know if anything needs maintenance or repairs. See our complete checklist for home inspections and be sure to ask questions during your inspection.

Home Warranty

A home warranty for home buyers offers protection for many home appliances and systems. Unlike homeowners insurance, which covers damages or losses that hopefully will never happen (such as fire, theft, or storm damage), a home warranty protects systems and major appliances that will inevitably fail over time — often unexpectedly. As a home buyer, you get access to special home warranty coverage and pricing from First American that is just for buyers — plus, you can add this valuable protection for up to 60 days after closing. It’s easy to get a quick quote for a home buyer's warranty in your area.

Why Choose First American Home Warranty?

With more than 40 years of experience protecting home buyers across the nation, First American Home Warranty is built for the moment you're in right now. Our real estate plans are designed specifically for home buyers, with coverage for the home systems and appliances you'll rely on from day one. Plus, special buyer pricing is available for up to 60 days after closing.

As a new home buyer, you also get access to Day 1 Member Benefits: exclusive perks like re-key service, appliance discounts, and more, available as soon as your coverage begins.

If you want to know if a home warranty is the right move, review our Real Estate Plans to see how coverage gives new home buyers peace of mind.

Closing Cost FAQs for Home Buyers

What are closing costs for buyers?

Buyer closing costs are fees and charges due at the close of a real estate transaction, on top of the purchase price and down payment. They typically include loan fees, title insurance, homeowners insurance prepayments, property taxes, recording fees, home inspection, and more. Your lender is required by law to provide a Loan Estimate within three business days of your mortgage application, listing your expected closing costs.

Who pays closing costs: the buyer or the seller?

Both the buyer and the seller typically pay their own closing costs. Buyer closing costs are mainly loan-related fees, insurance, and prepaid items. Seller closing costs are largely commission and title-related fees. However, buyers can negotiate to have the seller cover some or all of the buyer’s costs as a concession. Ask your real estate agent what’s typical in your market.

Can closing costs be negotiated or reduced?

Yes! Some closing costs are fixed (government fees, taxes), but many are negotiable. You can shop around for third-party services like title insurance and home inspections. You can negotiate with your lender on origination fees and points. And you can ask the seller to contribute to your closing costs. Your Loan Estimate will clearly show which fees you can and cannot shop for.

When are closing costs due?

Most closing costs are due on the day of closing, when you sign the final paperwork and ownership officially transfers. You’ll typically bring a cashier’s check or wire funds to cover the total. Some costs, like home inspection and appraisal fees, may be paid before closing day.

What does a home warranty cover for home buyers?

A First American home warranty for buyers covers the repair and replacement of many home appliances and systems you use every day, including plumbing, electrical, kitchen appliances, and more, when they fail due to normal wear and use. Optional coverage can protect HVAC, refrigerators, pools, and more. As a home buyer, you can include a First American home warranty in your closing costs, and you qualify for special buyer pricing and expanded coverage at or within the first 60 days of your closing. See what’s covered in our home warranty plans for home buyers.

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The contents of this article are provided for general guidance only. First American Home Warranty does not assume any responsibility for losses or damages as a result of using this information.