- [First-time home buyers]() [Home]() > [Blog]() > Who Pays Closing Costs? A Deep Dive # Who Pays Closing Costs? A Deep Dive July 22, 2026 [Schedule a consultation **]() **Get a quote** First step ** Only takes 1 minute ## Select a loan type - ** Personalized quote - ** Expert guidance Or [Schedule a consultation **]() ## Closing Costs: Homebuyer’s or Seller’s Responsibility? When you buy or sell a home, agreeing on a purchase price is only the first step. For the ownership to officially transfer, both parties must complete a series of legal, financial, and administrative steps — known collectively as the closing process. Closing services come with fees, or closing costs, which can range from 2% to 6% of the home's purchase price, based on the loan type, location, taxes, and the services required. But a common misconception among homebuyers is that either the buyer or the seller takes up these expenses. We beg to differ — both parties usually pay closing costs, but they pay different types of fees, and the final allocation is often negotiable. The purchase contract, local customs, state regulations, lender requirements, and current market conditions all influence who pays what. ## Closing a Home Purchase Is a Two-Way Deal, Actually There’s no single legal rule that narrows all closing costs down to only one party. Each side of the bargain has their own expenses to cover. And each expense is tied to the service used either by the buyer, the seller, or both. Generally speaking: - A homebuyer must usually cover mortgage costs, as well as some extra payments to obtain full ownership. - A home seller, in turn, pays expenses of preparing, then transferring the property, and completing the sale. ***However***, in many transactions, *negotiated concessions* can take place, where one party agrees to cover some of the other party’s costs (e.g., a seller may want to move the deal faster by taking care of some legal expenses for the buyer). This is why closing costs may vary a lot even for two equally priced and situated homes. This is also why closing costs deserve closer inspection. Let’s get a bit deeper into how all this works. ## Buyer’s Closing Costs For buyers, most closing costs are related directly to the mortgage and the loan risk assessment (i.e., proving to a lender that you have sufficient mortgage funds). As for the major buyer-paid costs, they include: - Loan origination fees - Credit report fees - Appraisals - Home inspection (which is usually paid before closing) - Title search costs - Insurance policy for a lender’s title - Property recording fees - Prepaid property taxes - Homeowner’s insurance premiums - Mortgage insurance (when applicable) - Initial escrow deposits - Interest accrued before the first mortgage payment Homebuyers must pay to 1. verify the property's value 2. establish legal ownership over it 3. and protect the lender's financial interest (e.g., by showing sufficient fund reserves) Some expenses, such as homeowners insurance or escrow funding, aren't fees in the traditional sense. They’re prepaid amounts that the borrower would owe regardless of closing costs. ## Seller’s Closing Costs Seller expenses are mostly tied to transferring ownership and meeting all existing financial obligations. The common seller-paid costs include: - Realty agent commissions (if relevant) - Owner's title insurance policy (common in many US states) - Transfer taxes (depending on state law) - Attorney fees (where required) - Recording or deed preparation fees - Outstanding property taxes - Mortgage payoff balance - HOA transfer fees - Agreed seller concessions Unlike buyers, sellers don't have to pay lender-related fees (as they’re not obtaining any external financing). As a seller, your largest closing expense is the commission you owe to real estate professionals. Although, coming from the practice, buyers/sellers increasingly prefer to negotiate commission structures directly between each other, avoiding third parties. The negotiations, in turn, can dictate new, unique closing cost aspects. ## How Negotiations Can Steer Closing Costs When it comes to a real estate transaction, closing costs are one of the most negotiable aspects. For example, a buyer might offer the full asking price for a house, but request a seller credit, thus offsetting closing costs. Alternatively, a seller may decline to reduce the home's price but agree to contribute something toward the buyer's financing expenses to move the deal. If real estate market conditions are in their favor, a seller readily accepts such requests. Also, things are different for a seller’s and buyer’s markets: → In a seller's market, the sales inventory (i.e., properties) is limited, and demand is high, so sellers are generally less willing to offer concessions. After all, they get to choose from multiple competing offers. → In a buyer's market, sellers tend to contribute more eagerly toward closing costs — it makes their property more attractive and easier to sell. ## How Loan Programs Influence Closing Costs Another factor for closing costs is different mortgage programs, which place different limits on seller contributions (to prevent them from artificially inflating property values). For example: - [Conventional loans]() allow seller concessions, but the maximum amount depends on the buyer's down payment and occupancy type. - [FHA loans]() permit sellers to contribute up to 6% of the purchase price toward closing costs. - VA loans also allow seller concessions (although separate rules distinguish ordinary closing costs from additional concessions). - USDA loans have their own limits and eligibility requirements. ## Can Closing Costs Be Rolled Into Mortgage? This is a big common question — yes, sometimes you can use certain mortgage payments for closing costs. But you generally cannot simply add closing costs to the loan balance (the loan amount is based on the property's value and the lender's approved LTV ratio). However, as a buyer, you can still finance some closing costs if you: - Make a larger down payment (within your program’s limits). - Request lender credits (for paying a slightly higher interest rate on your part). - Negotiate seller concessions. - Choose a loan program that permits you to finance certain upfront fees. It’s easier (and much more common) to roll closing costs into the new loan when you’re [refinancing a property]() and already have some equity on it. ## How You Can Reduce Closing Costs as a Buyer Although a majority of closing costs are unavoidable, you get several opportunities to lower them as a borrower: - Compare Loan Estimates from several lenders - Negotiate lender fees when possible - Ask about lender credits - Request seller concessions - Shop independently for title and settlement services (if permitted) And remember — even modest savings made on several fee categories can reduce your upfront cash requirements by thousands of dollars(!) ### How LBC Mortgage Can Help You Need assistance optimizing closing costs? [LBC Mortgage]() will personalize your closing, handle negotiations for you, and schedule the closing strategically to reduce both prepaid interest and total costs. Make your next move ### What could your mortgage look like? Turn your plans into a conversation. Explore loan options with guidance from LBC Mortgage. [Get my personalized quote **]() **Author:** [Alex Shekhtman CEO & Founder, LBC Mortgage]() [** Previous Post]() [Next Post **]() ## Frequently Asked Questions - ### 1. Can the seller pay all of my closing costs? ** Yes, ***it’s*** ***possible***, but only if both parties agree and the mortgage program allows it. When you negotiate a purchase, a seller may offer to pay some (or in certain cases nearly all) of the buyer’s closing costs, through seller concessions or seller credits. These contributions can be especially helpful for buyers who have enough money for a down payment but want to [reduce the amount of cash]() they need to bring to the closing table. Seller concessions can generally be applied toward many of the buyer’s upfront expenses, like: - loan origination fees - property appraisal and title charges - prepaid property taxes - homeowners insurance premiums - escrow funding As a buyer, the seller concession can help you cover all of the above, plus some other eligible settlement costs. However, you can’t use it as cash back or make it exceed your actual closing costs. And in case the negotiated seller credit does exceed the allowable amount of your program or total closing costs, you must restructure the purchase agreement (otherwise, the unused portion of credit costs will be forfeited). Mind your loan program limits for concessions — conventional, FHA, VA, and USDA mortgages each set maximum contribution amounts (based on the down payment made, property occupancy status, and type of loan). - ### 2. Are closing costs in the same category as down payment? ** No. Although, as a homebuyer, you must pay both around the same time, down payment and closing costs serve completely different financial purposes. → *A down payment* is your initial investment in the home — naturally, it becomes part of the purchase price. Also, a paid down payment immediately creates equity and reduces the amount you need to borrow. → *Closing costs*, on the other hand, are the fees you pay to finalize the mortgage and legally transfer ownership of the property. These costs can also be quite diverse and include: - lender charges - appraisal and title services - government recording fees - prepaid property taxes - homeowners insurance - escrow funding and more One way to think about it is that the down payment buys part of the home, while closing costs are what you pay for the transaction between you and the seller. This distinction is important (especially for first-time homebuyers) because you need to plan the budget for both the down payment and closing costs. Overfocusing on the down payment is a common pitfall — make sure not to overlook the need for additional cash you will require at closing. - ### 3. When will I learn the exact amount I need to bring to closing? ** You’ll know the exact amount right after you receive your Closing Disclosure. It is a formal disclosure file that your lender is required to provide at least three business days before your scheduled closing date. The Closing Disclosure is a five-page document that contains the finalized terms of your mortgage, including: - the interest rate - monthly payment - itemized closing costs - prepaid expenses - seller and lender credits - and your final Cash to Close amount (the total you must bring to complete the home purchase) Once you get the Closing Disclosure, there’s a three-day review period. It is meant to give you enough time to understand the numbers, compare them with your earlier Loan Estimate, and ask all the questions you need before signing legally binding documents. Keep in mind also that the Closing Disclosure doesn’t always match your Loan Estimate exactly. Some changes that occur in it are normal. It happens because certain costs can only be finalized shortly before closing, including: - prepaid interest - property tax prorations - homeowners insurance premiums - your escrow account funding amount (which can vary) Each of the above adjustments can increase or decrease your Cash to Close without any ensuing problems. You should be concerned only if you notice major deviations or significant differences in lender fees, loan terms, or other outlier charges. - ### 4. Which exact closing costs are negotiable? ** You can negotiate a range of lender-imposed fees, but not all the fees offer the same opportunities for savings. Also, some points are more negotiable than others. In terms of flexibility and negotiability: - the most flexible are the charges imposed by your lender - government fees are usually fixed and rigid - third-party costs are also fixed, but some can be negotiated It’s important that you know the category each fee falls into, thus gaining the upper hand in negotiations and achieving feasible reductions. The fees with the greatest room for negotiation include: - loan origination fees - underwriting fees - processing fees - application fees - rate-lock fees - and discount points If you’re comparing Loan Estimates from several lenders, you can use a competing offer and negotiate lower lender fees. You can also request lender credits in exchange for accepting a slightly higher interest rate. As for third-party service payments, you get to reduce them based on your locality. There are many states that allow you (a borrower) to shop for title companies, settlement agents, and owner’s title insurance (instead of strictly going with the lender’s preferred vendors). In turn, a set of non-negotiable closing expenses includes: - property recording fees - property transfer taxes - prepaid property taxes - many appraisal or credit report charges These are set in stone and impossible to restructure because they are either fixed or prepaid. - ### 5. What happens if I delay my closing date? ** A delayed closing doesn’t necessarily jeopardize your mortgage, but it can affect both your timeline and your closing costs. It all depends — if you postpone the closing by a few days, you will encounter only the minimal changes. In turn, longer delays will generate extra expenses. In particular, in the cases when: - a lock on your interest rate expires - updated financial documents are required - you need to recalculate certain prepaid costs The final and overall impact depends on why the delay occurred and who is responsible for it. Rate lock expiration should be among your biggest concerns. Most mortgage rate locks stay valid for **30, 45, or 60 days**. If you don’t close the loan before your lock expires, you may need to: 1. purchase a rate-lock extension 2. accept the current market interest rate 3. renegotiate your loan terms The extension fee doesn’t always apply — it depends on your lender’s policies and the original reason for the delay. In other cases, the lender may cover the extension themselves. For instance, if the delay was caused by lender processing issues, you may well have your extension fee waived. Delays may also require your lender to refresh parts of your loan application. Namely, you may need to update pay stubs, bank statements, and employment verification. Even a new credit check may be requested if previously submitted documents have expired. In certain cases, an appraisal or other third-party reports may also need to be updated, provided they’re no longer valid. Your home. Your goals. Your next step. ## Let's find a loan that fits *your life.* Buying or refinancing? Start with your goals. We'll help you explore the possibilities. [Get my personalized quote **]() [Schedule a consultation]() ** Only takes 1 minute · Personalized to you ### Get in Touch Whether you’re buying a home or are ready to refinance, our experts are here to help. [** Call us now]() [** Book a consultation]()