Closing Costs, Explained: Who Pays What
Last reviewed October 22, 2026
Buyer closing costs typically run 2% to 5% of the loan amount — the cited national convention — on top of the down payment. Seller closing costs are structurally different: they are dominated by agent commission and state transfer taxes, which range from negligible to more than 2% of the sale price depending on where you sell. Both sides get their exact numbers on standardized forms: the Loan Estimate at application, the Closing Disclosure before signing.
The buyer side: 2–5% of the loan
Buyer costs are mostly lender and third-party fees: origination, appraisal, credit report, title search and the lender's title insurance, recording fees, and prepaid escrow deposits (several months of taxes and insurance, plus prepaid interest). CFPB rules require these to appear on page 1 and 2 of your Loan Estimate — which is why “same-rate, lower-cost” lender quotes should be compared line by line, not by headline rate.
The share moves with your state: our per-state dataset (41 cited rows built on the Bankrate/LodeStar state analysis) keeps the 2–5% buyer band as the cited national convention and flags where state structure — title-insurance model, transfer taxes, attorney requirements — materially shifts it.
The line items, and who customarily pays
| Item | Typical shape | Customarily |
|---|---|---|
| Loan origination fee | 0.5%–1% of the loan | Buyer |
| Appraisal | $300–$800 (typ. ~$500) | Buyer |
| Credit report | $25–$100 | Buyer |
| Title search + lender's title insurance | Scales with loan/price; state-dependent | Buyer (lender's policy); owner's policy varies by state custom |
| Transfer taxes / recording fees | State + local; 0% in some states, >2% of price in the highest-tax states | Typically seller (custom varies) |
| Prepaid interest, insurance + tax escrow deposits | Several months' worth, cash at closing | Buyer |
| Agent commission | The single largest seller cost — negotiated | Seller (customary, negotiable) |
| Settlement/attorney fees | Varies; mandatory attorney representation in attorney states | Both, by state custom |
“Customarily” is doing real work in that table: every item above is negotiable in the purchase contract, and local custom — not federal law — decides who writes each check.
The seller side: commission + transfer taxes
Sellers don't pay lender fees (there is no new loan), so their closing costs are driven by three things: the negotiated agent commission, the owner's title policy where state custom assigns it to the seller, and transfer taxes — a state-and-local levy on the sale itself that our dataset tracks per state (zero in some states, above 2% of the price in the highest-tax jurisdictions). See the home sale proceeds calculator to net this against your mortgage payoff.
Where the calculator fits
The closing cost calculator models the buyer side on the same structure: loan-fee and third-party line items plus prepaid escrow deposits, against the 2–5% convention band. This guide is the explained version of what it computes — with the sources shown, not asserted.
Sources
- Consumer Financial Protection Bureau — Loan Estimate and Closing Disclosure (lender fees, third-party fees, escrow deposits)
- Consumer Financial Protection Bureau — What are escrow accounts and how do they work?
- Bankrate — average closing costs by state (LodeStar state analysis)
- GR closing-costs data layer — 41 cited rows (Bankrate/LodeStar, CFPB, NerdWallet, PropertyShark/Wikipedia transfer-tax compilations, October Research attorney-state facts)
- Model: the GeniusRealty closing cost calculator