Buying a home is an expensive proposition. While the bulk of the money you’ll need gets tied up in your mortgage — which you pay off over time — you need to be ready to pay some money upfront, too. These closing costs often total thousands of dollars, and they’re separate from your down payment. Here’s what homebuyers need to know to budget for the closing table.

What happens at the closing table

Historically, the closing table was, as its name suggests, an actual table. The buyer, seller, and their agents would meet there to complete the closing process, sometimes with an attorney or escrow officer. All paperwork finalizing the home sale would be signed. The buyer walked away with the keys to their new home.

Today, the table might be more figurative than physical. It’s very possible to e-sign all the documents you need to buy your house. Still, whether you head to a tangible table or not, you need to be ready to hand over some money as you finalize your home purchase. 

In addition to their down payment, homebuyers need to pay money at the closing table. You’ll hear an umbrella term here: closing costs. This is a blanket name for all of the money you’ll need to pay upfront to get into your house other than your down payment. 

Usually, closing costs equal somewhere between 2–5% of your home’s purchase price. Two major government-sponsored enterprises in the mortgage space, Fannie Mae and Freddie Mac, both say that’s an accurate estimate. 

An overview of the most common closing costs

While the seller pays some of the closing costs, the buyer’s responsible for a lot of them. You can potentially find a no-closing-cost mortgage, but that doesn’t mean these expenses go away. A lot of times, they’re just rolled into your loan or you pay a higher interest rate rather than paying these fees upfront. If you can afford to handle these costs at the closing table, it’s usually cheaper to get them out of the way there. 

The most common costs you need to be prepared to pay here are:

Fees from the lender

First up, you need to be ready for origination charges. These are the fees your lender charges you in order to create your loan. They might include application fees or the cost of underwriting your mortgage. If you’re paying for mortgage points in order to lower your interest rate, the cost of those points technically fits into this category, too.

Beyond that, the lender might charge you for specific line items attached to creating your loan and evaluating the its risk level, like:

• A credit report fee (the cost to pull your credit report from credit bureaus)
• An appraisal fee (the cost to have the value of your home confirmed by a professional)
• Tax status research and monitoring fees
• A pest inspection fee
• A survey fee (if they need to confirm that your property matches up with the boundaries on the title)

All of these costs can add up. You’re probably looking at thousands of dollars here. Fortunately, a lot of the fees in this bucket are negotiable. 

Get loan estimates from a few different lenders and compare them. If one lender’s origination fees are lower but you like the overall offer more from another, you can ask your preferred lender if they’ll match or at least come down on their fees.  

On page two of your loan estimate, you’ll see some closing costs broken into two different categories: costs you can shop for and costs you can’t. The expenses you can shop for indicate that you can find your own provider (e.g., your own pest inspector or surveyor), potentially at a lower cost. 

Third-party fees

Your lender probably won’t be the only party to which you need to turn over money at the closing table. Closing costs from third parties often include:

• Title search. You’ll need to pay a company to look through your property’s title and make sure there aren’t any issues, like liens or another owner besides the person you’re buying it from. 
• Title insurance. Most lenders require buyers to pay for lender’s title insurance, which protects them if an issue with the title doesn’t get caught in the initial search. You might also choose to get your own title insurance policy to protect yourself here. 
• Attorney fees. If you work with an attorney to buy your house, you’ll usually need to pay their fees at closing. 
• Escrow company fees. An escrow company operates as a third party, holding the money from you and your lender while all the final details are ironed out. Then, they give the money to the seller. You usually need to pay for that service. 

Prepaids

There are a few things you might need to prepay at the closing table in order to finalize your purchase. Those prepaids usually include:

• The cost of your homeowners insurance policy
• Property taxes for the portion of the year that you’ll own the home
• Any interest that will accrue between when you close and your first mortgage payment
• An initial deposit into your escrow account to give it a cushion (some of your monthly mortgage payment will go into that account moving forward to pay for home insurance and property taxes)

To keep the costs of prepaids down, close late in the month if you can. This prevents you from having too much prepaid interest to cover. 

Local requirements

Based on the house you’re buying and where it’s located, you might also need to cover closing costs like:

• Flood determination and monitoring fees
• HOA transfer fees
• Property transfer taxes
• Recording fees

Your real estate agent should tell you what will apply, like the requirements for the HOA if you’re buying in one and what kind of recording is required with your local government. 

Loan estimates: Your key to understanding closing costs

Your loan estimate clearly spells out what you’ll need to hand over at the closing table. Make sure you compare that against your closing disclosure, which your lender needs to give you three days before closing. 

To help you get a better feel for ballpark closing costs, we have a list of averages by state. 

The best way to know what you’ll pay, though, is to apply for a mortgage and get a loan estimate. To start exploring rares to see which lenders might be a good fit for you, use our live rate tables.