Closing on a home is an exciting milestone, but it also comes with important financial responsibilities. Among the most significant are closing costs—the fees and charges due when your loan is finalized. This guide to closing costs explains what they include, how they’re calculated and paid, and what options homebuyers have for managing them.

What Are Closing Costs?

Closing costs are the expenses and fees you’ll need to pay in addition to your down payment when finalizing your home purchase. These costs vary based on the type of mortgage loan you choose, your location, and the lender’s terms. Understanding your closing cost information can help you plan your budget and avoid last-minute surprises.

Typical costs include:

  • Loan origination fees – charges from the lender for processing your loan
  • Appraisal and inspection fees – payments to professionals who confirm the home’s value and condition
  • Title search and title insurance – protects against disputes over property ownership
  • Attorney or settlement fees – legal and administrative fees to prepare and finalize documents
  • Prepaid taxes and insurance – covers a portion of property taxes and homeowners insurance up front
  • Recording and transfer fees – local government fees for updating official records. 

How Much Should You Expect to Pay?

Home closing costs generally range between 2% and 6% of the purchase price. For example, on a $300,000 home, you could pay anywhere from $6,000 to $18,000 in closing costs. These are in addition to your down payment. 

Every buyer receives two important forms to help estimate and review their home closing costs:

  • Loan Estimate – provides an overview of expected charges early in the process
  • Closing Disclosure – outlines final costs before you sign

Your lender or real estate agent can walk you through these forms so you feel confident and prepared.

How Are Closing Costs Paid?

Most closing costs are paid on closing day, along with your down payment. These payments are usually made via certified check or wire transfer. While the buyer typically pays the majority of closing costs, sellers often contribute a portion, especially if you negotiate for seller concessions.

In some cases, you may be able to roll closing costs into your loan, but that depends on your lender and mortgage type.

It’s also important to know that some fees and expenses may be paid before closing. For example, you might pay for a home appraisal or inspection early in the process to keep things moving forward.

Options for Managing or Reducing Closing Costs

Even though closing costs are a standard part of buying a home, there are ways to make them more manageable. Here are a few ways to help reduce or offset what you owe:

Shop around for lenders and service providers. Lenders set their own fees, so compare quotes. Credit unions often offer lower fees and local support.

Understand what can and can’t be negotiated. Some fees, like title insurance or settlement costs, can be flexible. Ask what services you can choose yourself.

Review all fees line by line before closing. Don’t hesitate to ask questions. If something seems unclear or excessive, your lender should be able to explain it or help you find a better option.

Consider first-time home buyer assistance programs or grants. These programs can help cover down payments or closing costs and are often based on location or income. Your lender or housing counselor can help you explore what's available in your area.

Understanding your closing costs can make the final stage of your homebuying journey    smoother. With a bit of preparation, you’ll be able to make informed decisions, avoid surprises, and stay in control of your finances.

Connect with a Heritage Family Credit Union lending specialist to review your options, estimate your costs, and prepare for a successful closing day.