What are closing costs? On a US mortgage, they are the fees and charges paid to complete the loan and the purchase, separate from the down payment. The federal mortgage forms group them into two halves. Loan costs are the lender's origination charges and the third-party services the lender requires. Other costs are government taxes and recording fees, prepaid items such as interest and homeowners insurance, the first escrow deposit, and anything else due at closing. The Consumer Financial Protection Bureau (CFPB) says the buyer generally pays them, though the contract or state law can shift some to the seller.
This guide goes through the line items in the order the forms list them, then shows how to tell who paid each one. It is general information about US home purchases, not advice about any transaction.
Why this guide quotes no average
Most pages on this topic open with a percentage of the purchase price. This one does not, for a practical reason: a national average describes no particular loan. The borrower's own figure is printed on two federal forms. The Loan Estimate shows estimated closing costs on page 1 and the full itemization on page 2, and the Closing Disclosure shows the final figures in the same layout. Reading those lines answers the question for one specific loan in a way an average cannot.
The CFPB's consumer answer What fees or charges are paid when closing on a mortgage and who pays them? (last reviewed September 11, 2024, read October 2, 2026) gives its own short list: "Common closing fees or charges may include: Appraisal fees, Tax service provider fees, Title insurance, Government taxes, Prepaid expenses such as property taxes, homeowners insurance, and interest until your first payment is due."
What are closing costs, section by section
Both federal forms itemize closing costs under the same lettered headings. The table below follows them in order. The descriptions come from CFPB consumer pages and the text of Regulation Z, the federal rule that sets the forms.
| Section | What it holds | Examples from CFPB guidance |
|---|---|---|
| A. Origination Charges | "Upfront charges from your lender for making the loan" | Lender fees such as underwriting and processing |
| B. Services you cannot shop for | Third-party services the lender requires and selects | Title services, when listed here |
| C. Services you can shop for | Required services where the borrower may choose the provider | Title services, when listed here |
| E. Taxes and other government fees | "Costs associated with transferring the property" | Government recording charges |
| F. Prepaids | Items paid in advance at closing | Homeowners insurance, property taxes, and interest until the first payment |
| G. Initial escrow payment at closing | The opening balance of the escrow account | Reserves toward future property taxes and insurance |
| H. Other | Items that do not fall under E through G | Varies by transaction |
Sections D and I are subtotals, and J is the total closing costs. The CFPB's Closing Disclosure explainer describes that total as the "total upfront costs" of the loan, "excluding your down payment."
Loan costs, sections A to C
Section A is the lender's own price. The CFPB's Closing Disclosure explainer defines points next to the origination charges, as "an upfront fee" paid "in exchange for a lower interest rate," so a rate bought down with points shows up in the loan costs rather than in the rate alone.
Sections B and C hold third-party services. The CFPB names appraisal, credit report, tax service and flood certification fees as typical third-party fees; whether each lands in B or C depends on whether the lender lets the borrower shop for it. The CFPB's answer on title service fees (last reviewed August 8, 2024) explains that "title service fees include the title search fee, the premium for the lender's title insurance policy, and other costs and services associated with issuing title insurance," and that they are "listed in section B or C of page 2." The difference matters: "If the title services are listed in Section C, you can shop for them separately."
Other costs, sections E to H
Section E is set by government. The CFPB defines recording charges as "fees assessed by state and local government agencies for legally recording your deed, mortgage and documents related to your home loan," listed in section E on both forms.
Sections F and G are where the household's ongoing bills appear at closing. Prepaid interest covers, in the CFPB's description, "interest on your loan between the time you close and the end of that month." The initial escrow payment "will establish an initial balance in your escrow account," a reserve for items such as property taxes and insurance. The homeowners insurance premium in section F is the one printed on the policy, and our guide on how to read an insurance declarations page shows where to find it.
Who customarily pays closing costs
The CFPB's starting point is the buyer: "When you are buying a home you generally pay all of the costs associated with that transaction. However, depending on the contract or state law, the seller may end up paying for some of these costs."
That sentence carries the whole answer. There is no single national rule that assigns each line to a buyer or a seller. Custom varies by place, and the purchase agreement can reallocate items between the parties. A few points are stated directly in CFPB guidance:
| Cost | What CFPB guidance says about who pays |
|---|---|
| Closing costs in general | The buyer generally pays; contract or state law may shift some to the seller |
| Government recording charges | Either a buyer or a seller may pay them |
| Seller credit | Reduces the buyer's cash at closing, but "the seller will usually require you to pay a higher price for the home in order to cover the costs of this credit" |
| Lender credit | "This credit isn't free either," because the lender will "either increase your loan amount to cover these costs, or charge you a higher interest rate" |
The two credit rows are the easiest to misread. A credit moves a cost rather than removing it: a seller credit can move into the price, and a lender credit into the loan amount or the rate. Whether that trade suits a household depends on its cash on hand and how long the loan is kept, which is a question for the household and its advisers.
How to see who paid each line
The Closing Disclosure answers the "who pays" question for a specific transaction, and this is where it goes further than the Loan Estimate. Under Regulation Z section 1026.38, its closing cost pages carry separate columns for "Borrower-Paid," "Seller-Paid" and "Paid by Others," each split into at closing and before closing. Every line therefore shows who paid it and when.
Page 3 of the Closing Disclosure adds "Summaries of Transactions," with a "Borrower's Transaction" and a "Seller's Transaction" side by side, including adjustments between the parties. The CFPB's explainer lists "costs that have been prepaid by the seller" and "prior taxes and other fees owed by the seller" among them, and asks the buyer to check that the seller credit "reflects what you agreed upon with the seller." The rule also permits a modified version of the form for the seller, with certain information removed.
Read together, the payer columns and the transaction summaries are the record of how the parties split the costs in that transaction. They should match what the purchase agreement says.
Which closing costs can be negotiated
The CFPB's answer Am I allowed to negotiate the terms and costs of my mortgage at closing? (last reviewed September 11, 2024, read October 2, 2026) states that "you can always negotiate the terms of the mortgage loan up until you sign on the dotted line," while noting that a lender or seller can refuse.
It also ranks the line items by how movable they are: "It's usually easier to negotiate the fees charged by your lender than it is to negotiate third-party fees." Lender fees such as underwriting and processing sit at the movable end. Third-party fees such as appraisal, credit report, tax service and flood certification are harder to move. Government charges such as taxes, city and county stamps and recording fees are set by government. The same page adds that "the best way to get a good deal on a mortgage that's right for you is to shop around well before you get to the closing table."
Which closing costs can change before closing
Federal rules limit how far some estimates on the Loan Estimate can rise by the time of closing, and the limits follow the sections above. Lender charges and required services the borrower could not shop for generally cannot increase without a change in circumstances. Recording fees and services chosen from the lender's written list share a combined cap. The CFPB's recording-charges answer puts it this way: "The sum of these charges and certain other settlement services generally cannot increase by more than 10 percent in total at closing." Prepaids and escrow deposits have no cap, because they depend on the insurer, the county and the closing date.
What closing costs do not include
- The down payment. The CFPB's total closing cost figure excludes it, although both are due at closing and appear together in the cash-to-close calculation.
- The monthly payment. Sections F and G fund the first stretch of ongoing bills; regular payments begin afterward.
- Costs the seller agreed to pay. These appear on the Closing Disclosure in the Seller-Paid column rather than the Borrower-Paid column.
Who can help with a specific closing
For a question about a specific line, the lender is the first contact for sections A to C, and the settlement or closing agent can explain the transaction summaries on page 3. A real estate attorney can review how the purchase agreement allocates costs, and a HUD-approved housing counselor can walk through the forms. Each will want the most recent Loan Estimate, the Closing Disclosure, the lender's written list of service providers and the signed purchase agreement. The homeowners policy behind sections F and G is explained in our guide to homeowners insurance Coverage A through F.
Frequently asked questions
What are closing costs on a mortgage?
The fees and charges paid to complete the loan and the purchase, apart from the down payment. They include lender charges, required third-party services, government taxes and recording fees, prepaid items and the first escrow deposit.
Who pays closing costs, the buyer or the seller?
The CFPB says the buyer generally pays the costs of the transaction, but "depending on the contract or state law, the seller may end up paying for some of these costs." The Closing Disclosure's payer columns show the actual split.
Are seller credits and lender credits free money?
No. The CFPB says a seller will usually want a higher price to cover a seller credit, and a lender credit is typically offset by a larger loan amount or a higher interest rate.
Where are closing costs listed?
On page 2 of both the Loan Estimate and the Closing Disclosure, in sections A through J. The estimated total also appears on page 1 of the Loan Estimate.
Which closing costs are easiest to negotiate?
The CFPB says "it's usually easier to negotiate the fees charged by your lender than it is to negotiate third-party fees." Government charges such as taxes and recording fees are set by government.
Federal disclosure rules can change. The details in this article were checked against CFPB consumer pages and the text of Regulation Z on October 2, 2026.
