Who Pays What? A Guide to Closing Costs

Buying a home is not as simple as negotiating a price with the seller. There are many other costs, including those associated with the loans, appraisals, and insurance. Some are one-time fees, while others recur over the life of the loan and it’s important to understand why.

There are also many parties helping you close the transaction that will require payment: depending on where you live and the terms of the transaction, what you pay for may change.

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Costs of Closing 

All of your Closing Costs will be detailed in draft for in Loan Estimate and then in final form in your Closing Disclosure; here’s what you should be prepared to see.  

Loan origination fee 

  • A fee payable to the lender as an expense to obtain the loan


  • Lenders can charge a percentage point as an origination fee to cover the cost of making the loan. A discount point may also be offered and paid by the borrower to lower the interest rate on the loan. 

Appraisal fee 

  • If an appraisal is required, it is a one-time fee that pays for an appraisal which is an assessed statement of property value. The appraisal is made by an independent appraiser, although the fee is normally paid to the lender as part of the application process for a loan. Your purchase contract usually stipulates the party that bears this expense. 

Credit report fee 

  • This one-time fee that covers the cost of pulling your credit report to verify your credit rating. This expense is payable to the lender for services processed by an independent credit reporting agency.  

Title insurance fees 

  • There are two types of title insurance policies, 1) owner’s title insurance that protects the new homeowner and 2) lender’s title insurance that protects the lender against loss due to a defect in the title. These are both one-time fees. 

Settlement agent fee 

  • The title company may charge fees for a title search, title examination, document preparation, notary fees, recording fees, and a settlement of closing fee. These are all one-time charges. 

Document preparation fee 

  • There may be a separate, one-time fee that covers preparation of the final legal papers, including the note and deed of trust. 

Prepaid interest 

  • Depending on the day of the month your loan closes, this charge may vary from a full month’s interest to just a few days’ worth of interest. If your loan closes at the beginning of the month, you will probably have to pay the maximum monthly amount. If your loan closes near the end of the month, you will only have to pay a few days’ interest. 

Mortgage insurance premium 

  • Depending on the amount of your down payment, you may be required to pay a fee for mortgage insurance, which protects the lender against loss due to foreclosure. You may also be required to put a certain amount for mortgage insurance into a special reserve account, called an escrow account, held by the lender. 

Taxes and homeowner’s insurance 

  • Based on the month you close, property taxes will be prorated between you and the seller. You will also need to pay an entire year’s homeowner’s insurance premium up front. In addition, you may be required to put a certain amount for taxes and insurance into a special reserve account (escrow account) held by the lender

Who Pays What?

Who pays what depends highly on where you live and the terms of your transaction. See what you can generally expect to pay by selecting your state below.

This article is part of the Home Buyer Guide and our Home Seller Guide.