Cash to close
Closing Costs by Buyer and Seller
Closing costs are the transaction costs paid to complete a home purchase and mortgage. Some are paid by the buyer, some by the seller, and some can be negotiated or credited depending on the contract and loan rules.
Quick Take
- Buyer costs often include lender fees, appraisal, title services, prepaids, and initial escrow deposits.
- Seller costs often include commissions, transfer taxes, payoff amounts, and negotiated seller credits.
- The Closing Disclosure is the key document for seeing who pays what.
Common buyer costs
Buyer-paid costs can include origination charges, discount points, appraisal fees, credit report fees, title and settlement charges, recording fees, prepaid interest, homeowners insurance, and initial escrow deposits.
Some services can be shopped for. The Loan Estimate identifies which services fall into that category.
Common seller costs
Seller-paid costs often include real estate commissions, mortgage payoff, transfer taxes where customary, title costs in some areas, prorated taxes, and agreed seller credits.
Custom varies by state and local market. The purchase contract should spell out any seller credit or seller-paid item.
Seller credits are not free money
A seller credit can reduce the buyer's cash needed at closing, but it is part of the negotiated price. Sometimes the seller will require a higher contract price to offset the credit.
Loan programs may limit how much seller credit can be used, and unused credit may not simply come back to the buyer as cash.
What to review before signing
Compare the Loan Estimate with the Closing Disclosure. Look for the interest rate, cash to close, total closing costs, seller credits, escrow deposits, prepaid items, and any fees that changed.
Ask the lender or closing agent to explain any line that you do not understand before closing day.
Run the numbers