Who Pays the Closing Costs?

Closing costs are fees paid to third parties to finalize a home purchase, explains Fool.com, by both the buyer and the seller. Costs can vary widely depending on state requirements, the type of loan the buyer has, the fees that the lender charges, local customs and any arrangement negotiated between the buyer and seller.

Buyers typically pay the closing costs related to their mortgages such as loan origination fees, discount points, mortgage insurance and more. Buyers are also responsible for some third-party fees such as attorneys’ fees, appraisal fees, escrow fees and title search fees, prorated shares of property taxes and hazard insurance, and more. Buyers may be required by the lender to escrow monthly payments in advance for one to three months and property taxes and insurance for up to a year in advance.

Three days before closing, the lender provides a closing disclosure that outlines all fees and the “cash to close” required of the buyer at closing – typically as much as 3% to 6% of the home purchase price. Buyers have the option of paying cash, rolling closing costs into their mortgage, paying a higher interest rate of lender-paid fees and asking the seller to pay them in exchange for a higher purchase price.

Home sellers are usually responsible for the buyer’s title insurance and both the buyer’s and seller’s real estate commissions and/or fees. Seller’s fees can range between 6% to 8% of the home’s sale price and are taken out of the transaction proceeds.

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