Mortgage Closing Costs Guide 2025: What They Are, How Much, & Tips to Save

Closing cost are the various fees and expenses you pay to finalize your mortgage loan and complete the home purchase.  The "closing" itself is the final step where ownership transfers from seller to buyer, involving the signing of documents, inspections, and disbursements.  This process can take anywhere from one hour to several hours and typically involves real estate agents, attorneys, lenders, title companies, and escrow firms.  Even if you're paying cash for the home (no mortgage), you'll still face some of these costs, like statutory fees.  

In essence, closing costs cover services that process and secure the loan, ensure legal compliance, pays the title fee, taxes and insurance, and handle the transaction properly.  

These are expenses you have to pay to state and local agencies, even if you paid cash for the house and didn't need a mortgage:

Transfer Taxes – Required by some localities to transfer the title and deed from the seller to the buyer.

Deed Recording Fees – To pay for the County Clerk to record the deed and mortgage, and to change the property tax billing.

Pro-Rated Taxes – Property taxes may need to be split between the buyer and the seller since they are due at different times of the year. For example, if taxes are due in October and you close in August, you would owe taxes for 2-months, and the seller would owe for the other 10-months. Pro-rated taxes are usually paid based on the number of days, not months of ownership. Some lenders may require you to set up an escrow account to cover these bills. If not, you may want to set one up yourself to insure the funds are set aside for these important expenses.

State & Local Fees – Other state and local mortgage taxes and fees may apply.

There may be expenses paid to others like agents, attorneys, inspectors or insurance firms, even if you paid cash for the property:

Attorney Fees – You may want to hire an attorney when purchasing a home. They usually charge a percentage of the selling price up to 1%, or some work on an hourly basis or for a flat fee.

Title Search Costs – Usually your attorney will perform or will arrange for the title search to ensure there are no obstacles such as liens or lawsuits regarding the property. Or you may work with a title company to verify a clear property title.

Homeowner's Insurance – Most lenders require you prepay the first year's premium for homeowners insurance, sometimes called hazard insurance, and must show proof of payment at the closing. This insures that the investment will be secured even if the property is destroyed.

Real Estate Agent's Sales Commission – The seller pays the real estate agent's commission, and if one agent lists the property and another sells it, the commission is usually split. The commission is negotiable between the seller and the agent.

Owner's Title Insurance: Protection against title issues. 

Appraisal Fees: An Independent valuation to confirm the home's market value.  

Origination Fee: For processing underwriting and administrative work. 

Points: If you choose to buy points to lower your interest rate and monthly payment. 

The buyer (you) covers most closing costs, including statutory, third-party, and lender fees.  Sellers usually pay their agent's commission and may contribute to repairs or pro-rated taxes.  However, negotiations can shift some burdens- such as seller credits toward your costs- especially in a buyer's market.  Cash buyers still pay statutory and some third-party fees.  

Inspections – This is optional, but it's a great way to inform you decision before buying by identifying hidden problems, ensuring safety.  You can make your purchase offer contingent based on satisfactory completion of some other inspections such as structural, water quality tests, septic, termite, roof and radon tests. You and the seller can negotiate these inspection fees.

Owner's Title Insurance – You may want to purchase title insurance in case of unforeseen problems so you're not left owing a mortgage on property you no longer own. A thorough title search ensures a clear title.

Appraisal Fees – Avi Mortgage Team will order this.  They use a 3rd party by law - keeps people from tampering with numbers.

Money to the Seller – You'll need to pay for items in the house you want that were not negotiated in the purchase offer such as appliances, light fixtures, drapes, lawn furniture, or fuel oil and propane left in tanks.

Moving Expenses – If you are changing jobs, your new employer may pay for your relocation, otherwise you must figure in the moving costs such as truck rentals, professional movers, cash for utility deposits like telephone, cable, electricity, etc.

Repair Expenses – In the purchase offer, you can request that the seller set up an Escrow Account to defray any costs for major cleanup, radon mitigation procedures, house painting, appliance repairs, etc. Depending on the purchase offer contract and contingency clauses, you may discover that you have expenses upon moving in.

Example: Your purchase offer contract has a clause making the purchase contingent on a satisfactory structural inspection, and it's determined that the house needs a new roof. You can negotiate to have the seller arrange for the work to be done but, this will delay the closing date. You may have to agree to a higher price for house, or to pay some of the new roof repair expenses. Or you and the seller may split the cost using estimates from a contractor of your choice, and each of you will put funds into an Escrow Account. Or, the seller may be willing to reduce the sale price of the house, but either way cash will be needed for the new roof.

Time Investment – One often overlooks major up-front costs in buying a home. The time and expenses invested in house-hunting, which can take up to 4-months, plus the time spent searching for the best mortgage for you, the right real estate agent, an attorney, and other related things that take up your valuable time.