Buying a home doesn’t just mean saving for a down payment. You’ll also need to cover closing costs — the one-time fees and prepaid expenses that finalize the sale. On average, buyers should expect to pay 2–5% of the purchase price in closing costs, though this varies widely by state, lender, and loan program.

Related Articles in This Series

Want to explore the full picture of home buying costs, benefits, and smart mortgage decisions? Check out the rest of our series:

• How Much Are Closing Costs? A Buyer’s Guide in 2025 — Learn what to expect at the closing table and how much you’ll need to budget.
• What Are the Tax Benefits of Owning a Home in 2025? — Understand deductions, exemptions, and long-term tax savings for homeowners.
• Should I Refinance My Mortgage in 2025–2026? — Find out when refinancing makes sense, how much you could save, and potential pitfalls to avoid.
• The Complete Guide to Home Buying Costs, Tax Benefits, and Mortgage Readiness — Our comprehensive pillar article that ties everything together.

For example, on a $300,000 home, your closing costs might range from $6,000 to $15,000, depending on where you buy, what loan program you use, and what credits you receive from your lender or the seller.

This guide will:

• Explain every common closing cost line item in plain English.
• Show you how seller credits and lender credits can reduce what you bring to the table.
• Give you an interactive calculator to estimate your own cash-to-close.
• Answer common questions about liens, impounds, and property tax credits.
• Share real-world examples, including a special VA loan scenario.

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📑 Understanding the ALTA Combined Settlement Statement

When you buy or sell real estate, one of the most important documents you’ll see at closing is the ALTA Combined Settlement Statement. This form is issued by the closing agent (title company or attorney) and provides a detailed, line-by-line breakdown of all debits and credits for both buyer and seller.

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🔍 What to Expect Before Closing

• A draft copy of the ALTA statement is usually provided to both the buyer and seller a few days before closing.
• This gives each party time to carefully review the charges, confirm that all credits (such as deposits, seller concessions, or prorations) are applied correctly, and ask questions before signing.

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🖊 Signing at Closing

• At the closing appointment, both buyer and seller will be asked to sign the final ALTA Combined Settlement Statement.
• A signed copy is then included in each party’s closing package for their permanent records.
• This signed version becomes the official record of all financial details of the transaction.

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💼 Why It Matters for Taxes

• If the property is an investment or rental property, it’s critical to provide a copy of the ALTA statement to your tax preparer or CPA.
• Many of the costs and adjustments on the form may affect tax reporting, including:
  • Loan origination fees (points)
  • Title insurance
  • Recording fees
  • Property tax prorations
  • Seller credits and buyer concessions
• Correctly reporting these items can impact your deductions and capital gains calculations.

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📜 From HUD-1 to ALTA

• Before October 2015, most real estate closings used the HUD-1 Settlement Statement, a government-mandated form.
• After regulatory changes (TRID rules under the CFPB), the HUD-1 was retired for most consumer mortgage transactions.
• Today, the ALTA Settlement Statement, created by the American Land Title Association, is the industry standard. It’s clearer, easier to read, and comes in separate versions for buyer, seller, lender, or combined use.

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✅ Key Takeaway: The ALTA Combined Settlement Statement is the final word on the financial side of your closing. Review the draft carefully, sign the final version at closing, and keep a copy for your records — and for your tax preparer if the property is an investment.

Example of the Closing Statement form

🔎 What Are Closing Costs?

Closing costs are the fees and expenses — beyond the down payment — that you pay when finalizing a real estate transaction. They include:

• Lender fees (processing, underwriting, appraisal, flood, tax service)
• Title and escrow charges (search, insurance, CPL, wire fees)
• Government recording and transfer taxes
• Prepaid interest and escrow “impounds” for property taxes and insurance
• Program-specific fees (like FHA’s upfront mortgage insurance or VA’s funding fee)
• Optional inspections (general, termite/WDIR, specialty)

Some of these costs are paid upfront before closing (like inspections), while others are collected at the settlement table and shown on your Closing Disclosure.

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💰 Interactive Closing Costs Calculator

Want to see how much your closing costs might be? Try our calculator below. You can adjust every line item, add seller credits, and even export the results.

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📖 Closing Costs Glossary: Explanation of Terms

Here’s a complete breakdown of what each line item means — expanded to reflect what shows up on real settlement statements:

Real Estate Commissions

• Buyer’s Agent Fee – Paid to the buyer’s agent (often 2.5–3%). May be covered by the seller, concessions, or negotiated.
• Listing / Seller’s Agent Fee – Paid to the seller’s agent (often 2.5–3%). Together with the buyer’s agent fee, this is usually the largest cost in a transaction.

Lender & Loan-Related Fees

• Origination / Underwriting Fee – Lender’s charge to evaluate and approve the mortgage.
• Processing Fee – Covers back-office loan file preparation.
• Discount Points – Optional, paid upfront to lower your interest rate (1 point = 1% of the loan). May be tax-deductible.
• Lender Credit (Negative Points) – A credit from the lender that reduces your upfront costs in exchange for a higher rate.
• Seller Credit (Seller Concessions) – A credit from the seller to reduce your closing costs. Loan programs cap the maximum:
  • Conventional: 3–9% depending on down payment (2% for investment properties).
  • FHA: up to 6%.
  • VA: all normal costs plus 4% in additional concessions.
  • USDA: up to 6%.
• Flood Determination Fee – Lender-required fee to check if the home is in a flood zone.
• Tax Service Fee – Fee lenders charge to monitor property tax payments.

Title & Settlement Fees

• Settlement / Closing Fee – Charged by escrow, title company, or attorney for handling funds and documents.
• Title Search / Abstract – Research into ownership and liens.
• Title Examination – Review by an attorney or title officer to confirm clear ownership.
• Title Insurance Binder – A preliminary report showing the title insurance company’s commitment to issue a policy.
• Closing Protection Letter (CPL) – Provides protection against fraud or mishandling of funds by the closing agent.
• Title Insurance
  • Lender’s Policy – Required, protects the lender.
  • Owner’s Policy – Optional but recommended, protects the buyer.
• Recording Service Fee – Administrative charge for submitting documents to the county recorder.
• Wire Fee – Cost for wiring funds during closing.
• E-Recording Fee – Fee for electronically recording documents.
• Recording Fees (Government) – Official county fees to record the deed and mortgage.
• Transfer Taxes / Deed Stamps – Government taxes on property transfers.

Valuation & Verification Fees

• Appraisal Fee – Independent valuation of the home for the lender.
• Credit Report Fee – Small pass-through cost for your credit file.

Prepaids & Escrows (Impounds)

• Prepaid Interest – Interest collected from the closing date until the month-end.
• Impounds (Escrow Reserves) – Money collected upfront to seed your escrow account for taxes and insurance.
• Homeowners Insurance Premium – Often the first year’s premium, paid at closing.
• HOA Dues – Some HOAs collect one or more months in advance.
• Aggregate Adjustment – Balancing adjustment ensuring the lender doesn’t over-collect escrow funds.
• Property Tax Credit (Proration) – Seller credits the buyer for their share of taxes accrued from January 1 through closing. Buyer uses this credit toward the full tax bill when due.

Inspections

• Inspection Fee – General home inspection ($300–$600), paid upfront.
• WDIR Fee (Wood Destroying Insect Report) – Termite inspection, usually $75–$150. Required for FHA/VA/USDA loans.

Program-Specific Fees

• FHA Upfront Mortgage Insurance Premium (UFMIP) – 1.75% of the loan amount, usually financed.
• VA Funding Fee – One-time VA program charge (varies by down payment and first vs. subsequent use).
• USDA Guarantee Fee – About 1% of the loan amount.

Liens

• Liens – Legal claims (mortgages, tax liens, mechanic’s liens, judgments) that must be cleared before transfer. Title searches and title insurance protect buyers.

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How Much Are Closing Costs?

A practical guide to what buyers and sellers pay, what’s included, and how to estimate your total before you sign.

What Are Closing Costs?

Closing costs are the fees and prepaids due when a home changes hands. They include lender charges, title and escrow, government recording and transfer taxes, and “prepaid” items like property taxes and homeowner’s insurance. Both buyers and sellers have costs, though which party pays what can vary by state, contract, and negotiation.

Rule of thumb: Buyers typically pay about 2%–4% of the purchase price in closing costs (excluding down payment). Sellers can expect roughly 5%–8%, driven largely by agent commissions and transfer taxes.

Buyer vs. Seller: Who Pays What?

Common Buyer Costs

• Lender fees (origination, underwriting, credit report)
• Discount points (optional, to lower your rate)
• Appraisal & inspections
• Title insurance (lender’s policy), escrow/settlement
• Recording fees, transfer taxes (varies by state/county)
• Prepaid interest (from closing to month-end)
• Homeowner’s insurance & initial escrow reserves

Common Seller Costs

• Broker commissions (if applicable)
• Owner’s title insurance (in many states)
• Transfer taxes & recording fees (varies by state)
• Seller concessions negotiated with buyer (optional)
• HOA transfer / resale package (if applicable)
• Outstanding liens, prorations, and property taxes

Your contract and local custom determine the split. Always review the Closing Disclosure (buyers) or Settlement Statement (sellers) before signing.

Closing Cost Estimator (Buyer)

This quick estimator itemizes typical buyer costs. It’s a starting point — your lender and title company will provide exact figures.

Purchase Price ($) Down Payment (%) Loan Type Conventional FHA VA USDA Discount Points (%) State (for transfer tax est.) Average CA TX FL NY IL WA PA GA OH NC

Appraisal ($) Inspections ($) Title + Escrow ($) Home Insurance (annual $) Month Closing In Mid-month Early month Month-end

Estimate Buyer Costs

Down Payment

$0

Estimated Closing Costs

$0

Cash to Close (est.)

$0

Category	Estimate	Notes

Estimates only. Your lender/title will provide final figures on the Closing Disclosure.

Seller Net Sheet (Quick Estimate)

Get a rough idea of what you’ll net after commissions, payoff, and typical seller costs.

Sale Price ($) Mortgage Payoff ($) Commission (%) Seller Costs Flat ($) Concessions to Buyer (%)

Estimate Seller Net

Gross Proceeds

$0

Total Costs

$0

Net to Seller (est.)

$0

What’s Included in Closing Costs?

Line Item	Who Usually Pays	What It Covers
Lender Fees	Buyer	Origination, processing, underwriting, credit report
Discount Points	Buyer (optional)	Upfront fee to buy down interest rate
Appraisal	Buyer	Third-party valuation for the lender
Title & Escrow/Settlement	Both (varies)	Title search, closing agent, settlement
Title Insurance	Buyer/Lender & Seller/Owner (varies)	Lender’s policy and (in many states) owner’s policy
Recording & Transfer Taxes	Both (varies by state)	Government fees and transfer taxes
Prepaid Interest	Buyer	Interest from closing date to month-end
Escrow Reserves	Buyer	Initial property tax & insurance reserves
Agent Commissions	Seller	Listing & buyer agent compensation (if applicable)
HOA Fees/Docs	Both (varies)	Resale certificate, transfer, prorations

How to Reduce Closing Costs

• Shop your lender: Compare APRs, points, and lender fees across at least 2–3 quotes.
• Negotiate credits: Ask the seller for closing credits in lieu of repairs (market-dependent).
• Pick your day: Month-end closings reduce prepaid interest (but confirm logistics).
• Review the CD carefully: Dispute unexpected fees before you sign, not after.
• Ask about title/escrow bundles: Some markets allow competitive shopping.

FAQ

Are closing costs the same everywhere?

No. They vary by state, county, lender, and even by transaction type. Transfer taxes can differ widely, and who pays which title fees can be local custom.

Can I roll closing costs into my mortgage?

Sometimes. Many buyers roll certain costs into the loan via lender credits or by accepting a slightly higher rate. Your lender can show trade-offs in writing.

Do VA/FHA loans change closing costs?

Yes. VA loans charge a funding fee (often financed). FHA loans have an upfront and annual mortgage insurance premium. Sellers can also contribute up to certain caps.

What’s on the Closing Disclosure?

The CD itemizes every cost, credit, tax, and prorated item. Buyers must receive it at least 3 business days before closing — review it line by line.

Bottom line: Plan for buyer costs of about 2%–4% of price (plus down payment) and seller costs of about 5%–8% (largely commissions and transfer taxes). Use the estimators above for a tailored snapshot before you lock dates.

📊 Example Closing Statement Scenario

Here’s how a real-world settlement statement might look when all the pieces come together:

Property Sale Price: $219,000
Loan Amount: $199,000
Buyer Deposit (Earnest Money): $1,000
Seller Credit: $7,000
Lender Credit: $15

Selected Closing Costs Paid by Buyer:

• Flood Determination Fee: $4.50
• Tax Service Fee: $75.00
• Prepaid Interest: $200.34
• Homeowners Insurance Escrow (3 months): $991.80
• Title Fees (search, binder, insurance, CPL, recording, wire): $2,768.00

Credits Applied:

• Seller Credit: $7,000
• Aggregate Adjustment (escrow balancing): $1,306.04
• Lender Credit: $15

Final Cash to Close (Buyer): $11,209.47

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🎖 Example: VA Loan for a 100% Disabled Veteran

For veterans with a VA loan and a 100% disability rating, the numbers can look very different:

• Zero VA Funding Fee – Normally, VA loans include a funding fee (1.25–3.3% of the loan), but this is waived for disabled veterans.
• No Property Taxes – In many states, veterans with a 100% disability rating are exempt from paying property taxes. This means:
  • No property tax impounds at closing.
  • No proration of property taxes between buyer and seller.

Result: A 100% disabled veteran buying the same $219,000 property with a VA loan would save thousands in upfront costs. Their cash-to-close would mostly include:

• Title fees
• Prepaid interest
• Homeowners insurance escrow (if required by lender)
• Minor lender/title charges

This special scenario shows how loan type and veteran benefits can dramatically lower closing costs compared to a conventional or FHA buyer.

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❓ Liens and Closing Costs: 10 Common Questions

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✅ Key Takeaways

• Closing costs are usually 2–5% of the home price, but vary by loan program and state.
• They include lender fees, title charges, flood/tax verification fees, escrow reserves, prepaids, inspections, and program-specific costs.
• Seller credits and lender credits can significantly reduce the amount of cash you bring to closing.
• Property tax credits (prorations) and aggregate adjustments are balancing tools that can change your cash-to-close.
• Special loan types, like a VA loan for a 100% disabled veteran, can eliminate thousands of dollars in typical closing costs.
• Always review your Loan Estimate and Closing Disclosure line by line, and ask your lender or title company about any charges you don’t recognize.

Related Articles in This Series

Want to explore the full picture of home buying costs and benefits? Check out the rest of our series:

• How Much Are Closing Costs? A Buyer’s Guide in 2025 — Learn what to expect at the closing table and how much you’ll need to budget.
• What Are the Tax Benefits of Owning a Home in 2025? — Understand deductions, exemptions, and long-term tax savings for homeowners.
• The Complete Guide to Home Buying Costs, Tax Benefits, and Mortgage Readiness — Our comprehensive pillar article that ties everything together.