Everything You Need to Know About Closing Costs

Exactly what closing costs are, when you pay them, and what each fee typically runs.

Closing costs catch a lot of buyers off guard, mostly because they show up as a list of unfamiliar line items right at the end. This guide is for buyers who want to know what those charges are, why they exist and how to plan for them well before closing day.

It explains what they cover, when you pay them, the fees you'll most likely see, and what to do if you're worried about cash at closing.

What closing costs are and when you pay them

Closing costs cover the work it takes to fund your loan and transfer the home to you, like processing the mortgage, setting up homeowners insurance and prepaying property taxes. Buyers and sellers each pay their own share. What you'll pay depends on your loan amount, your loan type and where you're buying.

After you apply for a mortgage, your lender is required to give you an estimate of your closing costs within three business days. Most of these costs are paid at closing, though some lenders collect the appraisal fee when the appraisal is done. In Georgia, a closing attorney handles the title search and puts together the documents that transfer ownership.

The fees you're most likely to see

The guide goes through each fee and what it's for. Some of the main ones:

• Lender charges, like an origination fee and a processing fee, which vary by lender (some don't charge a processing fee at all)
• Discount points, which you can pay to lower your interest rate, with one point equal to 1% of the loan amount
• The appraisal, which confirms the home is worth what you agreed to pay
• The closing attorney's fee and title insurance
• Prepaid property taxes and homeowners insurance, which set up your escrow account
• HOA dues and an initiation fee, if the neighborhood has an association
• Smaller items like the credit report and flood certification

If you're using an FHA loan or another government-backed loan, there will likely be an upfront fee too, either paid at closing or added to the loan.

Who pays the buyer's agent

If the seller isn't offering to pay your agent, you may be responsible for that yourself. Agent compensation is negotiable and isn't set by law. I talk it through with my buyers before touring homes, so there are no surprises later.

Ways to lower what you bring to closing

If cash at closing is a concern, tell your agent early so asking the seller for help with closing costs can be part of your offer. Compare lenders, since their fees aren't all the same. And remember that any estimate, including the typical ranges in the full guide, is a guideline, not a quote. Your lender is the only one who can give you real numbers, so confirm every figure with them.

Common questions about closing costs

Do sellers pay closing costs too?

Yes. Buyers and sellers each have their own closing costs, and a buyer can also ask the seller to cover some of theirs as part of the offer.

When do I find out what my closing costs will be?

Your lender has to give you an estimate within three business days of receiving your mortgage application, and your final numbers come closer to closing.