In a typical home sale, the buyer pays most of the fees tied to the mortgage and the closing process, while the seller pays the real estate agent commissions and several costs tied to transferring the title. So when you’re asking who pays closing costs, buyer or seller, the short answer is both — just for different items. Buyers generally owe 2% to 5% of the purchase price at the closing table on top of their down payment,1My Home by Freddie Mac. 5 Tips to Help You Save on Closing Costs which on a $400,000 home works out to $8,000 to $20,000. Sellers see their biggest hit come out of their sale proceeds in the form of agent commissions. The exact split depends on the loan type, what you negotiate into the purchase agreement, and what’s customary where the property sits.
What the Buyer Usually Pays
Most of the buyer’s closing costs come from the lender and the third parties the lender relies on to approve the loan.
The lender charges an origination fee, generally 0.5% to 1% of the loan amount, to process and underwrite your application.2My Home by Freddie Mac. What Are Closing Costs and How Much Will I Pay? On a $320,000 mortgage, that’s $1,600 to $3,200. A separate credit report fee, usually under $100, covers pulling your credit history.
Third-party evaluations fall to the buyer as well. An appraisal — required by virtually every mortgage lender to confirm the home’s value supports the loan — runs $300 to $600, with larger or more complex properties costing more. A home inspection isn’t always required by the lender but typically costs $300 to $500 and covers the roof, HVAC, plumbing, and electrical systems.
PMI and Discount Points
If your down payment on a conventional loan is under 20%, you’ll pay for private mortgage insurance.3Consumer Financial Protection Bureau. What Is Private Mortgage Insurance? PMI protects the lender, not you, and generally costs 0.58% to 1.86% of your loan balance per year depending on credit score and down payment.4Fannie Mae. What to Know About Private Mortgage Insurance Some lenders collect an upfront PMI premium at closing, others charge monthly, and some do a mix of both.
Discount points are optional. One point equals 1% of the loan amount and typically lowers your rate by about 0.25%, though the exact reduction varies by lender.5My Home by Freddie Mac. What You Need to Know About Discount Points On a $300,000 loan, one point costs $3,000.
Lender’s Title Insurance and Escrow Deposit
Lender’s title insurance is almost always a buyer expense. The one-time premium protects the lender’s financial interest if a title defect surfaces later, and the cost is calculated as a small percentage of the loan amount that varies by state.
The lender also collects an initial escrow deposit to seed the account that will pay future property taxes and homeowner’s insurance. Federal rules cap the cushion a lender can require at two months’ worth of escrow payments above what’s needed for upcoming bills,6Consumer Financial Protection Bureau. Regulation 1024.17 – Escrow Accounts which usually translates to two to four months of taxes and insurance combined at closing.
What the Seller Usually Pays
Agent Commissions
Agent commissions are usually the single largest closing cost in a sale. The total has historically run 5% to 6% of the sale price, split between the listing agent and the buyer’s agent. On a $400,000 home, that’s $20,000 to $24,000 off the top of the seller’s proceeds.
A 2024 settlement involving the National Association of Realtors changed how commissions are structured. Buyers now sign written agreements with their agents that spell out compensation, and listing agents can no longer advertise a set buyer-agent commission through the MLS. Many sellers still offer to cover the buyer’s agent fee to attract more offers, but the amount is now openly negotiated. Buyers should be ready for the possibility of paying some or all of their own agent’s fee, which would add to their side of the closing costs.
Transfer Taxes, Deed Preparation, and Payoffs
Government transfer taxes — sometimes called documentary stamps or excise taxes — are imposed on the deed to record the change in ownership. Rates vary widely: some jurisdictions charge a flat amount per transaction, others calculate a percentage of the sale price, and some states don’t impose a transfer tax at all. Where one exists, local custom determines whether the buyer, the seller, or both carry the charge.
Sellers are generally responsible for preparing the new deed and paying any associated notary fees. Before the deed can transfer, the seller also has to clear any existing liens, mortgages, or judgments recorded against the property. Those payoff amounts come straight out of the sale proceeds at closing.
Owner’s Title Insurance
In many markets the seller buys an owner’s title insurance policy for the buyer. This one-time premium protects the new owner from pre-existing title defects such as forged signatures in the chain of title, undisclosed heirs, or recording errors. The cost depends on sale price and state. In some areas local custom shifts this cost to the buyer instead.
How the Contract Can Shift Costs
The purchase agreement can move closing costs from one side to the other. A seller concession is a contractual promise by the seller to pay a portion of the buyer’s closing costs, written in as either a flat dollar figure or a percentage of the sale price. Concessions reduce the cash a buyer needs on closing day without changing the price on paper.
Lenders cap how much a seller can contribute, and the cap depends on the loan type and the buyer’s down payment. For conventional loans backed by Fannie Mae, the ceiling scales with the loan-to-value ratio: 3% of the sale price when the down payment is under 10%, up to 6% in the middle tier, and up to 9% when the down payment exceeds 25%. Any concession above those limits gets treated as a reduction to the sale price for underwriting purposes.7Fannie Mae. Interested Party Contributions (IPCs)
FHA loans allow seller concessions of up to 6% of the sale price regardless of down payment. VA loans have no cap on seller contributions toward actual closing costs, but concessions for other items — such as paying off the buyer’s debts or covering the VA funding fee — are limited to 4% of the home’s reasonable value.8U.S. Department of Veterans Affairs. VA Funding Fee and Loan Closing Costs
Local Custom Changes the Default Assignments
Who pays for what often comes down to where you’re buying. In some markets the seller customarily pays for the owner’s title insurance policy; in others the buyer does. Escrow fees — the charge for the neutral third party that holds funds during the transaction — are split in some markets and assigned entirely to one party in others. A property survey, if one is required or requested, runs $400 to $1,000, and the local norm decides who pays. Recording fees and municipal lien search charges also vary by county.
These customs operate as defaults in the standard contract forms used locally, not as rules. Anything in the agreement is open to negotiation. Asking your agent which costs are typically assigned to each party in your area is the fastest way to see where you’ll land before you sit down at the table.
One Boundary: Foreign Sellers
If the seller isn’t a U.S. citizen or resident, the buyer is generally required to withhold 15% of the sale price under the Foreign Investment in Real Property Tax Act and send it to the IRS.9Internal Revenue Service. FIRPTA Withholding The money comes out of the seller’s proceeds rather than the buyer’s cash, but the buyer is the party legally responsible for the withholding. The seller can file a U.S. tax return afterward to claim a refund if the actual tax owed is less than what was withheld.
How to Confirm Who’s Paying What Before Closing
Federal law requires your lender to send a Closing Disclosure at least three business days before you close on the loan.10Consumer Financial Protection Bureau. What Should I Do if I Do Not Get a Closing Disclosure Three Days Before My Mortgage Closing? It lists every closing cost, who pays it, and the final loan terms. Compare it line by line against the Loan Estimate you received when you applied.
Federal rules limit how much certain fees can increase between the two documents:11Consumer Financial Protection Bureau. Regulation 1026.19 – Certain Mortgage and Variable-Rate Transactions
- Zero tolerance for fees paid to the lender, fees paid to a mortgage broker, transfer taxes, and fees for services where the lender chose the provider — these cannot increase at all.
- 10% aggregate tolerance for recording fees and third-party services the lender let you shop for.
- No fixed cap on prepaid interest, property insurance premiums, escrow deposits, and services you chose yourself outside the lender’s list, though the lender still has to base estimates on the best information available.
If a zero-tolerance or 10%-tolerance fee rises above the allowed amount, the lender has to refund the excess at closing or within 60 days afterward. That three-day review window is the point where catching a cost that was supposed to be the other party’s — or a fee that jumped higher than the rules allow — still gives you time to raise it.