Closing Costs Explained for First-Time Buyers

What are closing costs?

Closing costs are the upfront costs you pay to get your mortgage and complete the purchase. The Consumer Financial Protection Bureau (CFPB) defines them as the "total upfront costs associated with your loan and real estate transaction, excluding your down payment." That last part matters: your down payment is a separate amount, and the two are combined in your cash to close.

How much are closing costs for a first-time buyer?

Published sources give different answers because they count different things, so plan with a range and then replace it with the figure on your own Loan Estimate.

Sources: Freddie Mac, LodeStar, Fannie Mae research.

Freddie Mac's range is wider than LodeStar's average because prepaids and the initial escrow deposit are part of what a buyer brings to closing, and the LodeStar figure leaves them out. It also comes from lender quotes rather than funded loans. For budgeting, the wider range is the safer one.

What does 2% to 5% look like in dollars?

Applying Freddie Mac's range to three home prices, as of October 15, 2026:

These are planning illustrations, not quotes. NAR's median price comes from its September 2026 existing-home sales report.

What is included in closing costs?

The CFPB groups closing costs on the Closing Disclosure into sections you can look for on your own paperwork:

• Origination charges: "Upfront charges from your lender for making the loan."
• Services you cannot shop for: "third-party services required by your lender in order to get a loan."
• Services you can shop for: services you choose and shop for separately.
• Taxes and other government fees: "Costs associated with transferring the property to you and registering your mortgage with the county records office."
• Prepaids: a category that includes "interest on your loan between the time you close and the end of that month." Freddie Mac adds that lenders usually require the first year of homeowners insurance at or before closing.
• Initial escrow payment at closing: a payment that "will establish an initial balance in your escrow account," which your lender uses to pay certain property-related expenses.
• Other: costs for other services you chose.

Which of these apply, and how large they are, depends on your lender, your loan and where the home is.

Are closing costs the same as cash to close?

No. Closing costs are one part of cash to close. The CFPB describes Estimated Cash to Close as "the estimated amount of money you will have to bring to closing," and it also includes your down payment, less any credits. Our guide to what cash to close is shows how the pieces add up by loan type, and down payment vs. closing costs explains what each one pays for.

Who pays closing costs?

The buyer pays them unless something offsets them. Three things can lower what you bring:

1. Seller concessions. The seller agrees to pay part of your costs, within a limit set by your loan. On a conventional loan for a principal residence, Fannie Mae limits these contributions to 3% of the price when the loan is above 90% of the home's value, 6% from 75.01% to 90% and 9% at 75% or less. HUD's FHA handbook allows up to 6% of the sales price. VA limits seller concessions to 4% of the home's reasonable value, and USDA limits seller contributions to 6% of the sales price.
2. Lender credits. The CFPB explains that lender credits lower your closing costs up front in exchange for a higher interest rate.
3. Assistance and gifts. These change who supplies the money rather than lowering the total.

Sources: Fannie Mae Selling Guide, HUD Handbook 4000.1, VA, USDA Rural Development, CFPB on lender credits and points, CFPB Loan Estimate guide.

Whether a seller agrees to pay anything is a negotiation, and no outcome is guaranteed. Our post on how to lower your cash to close walks through each option.

Do closing costs change by loan type?

Yes, because some programs add their own upfront fee. These are examples from the program owners, and your Loan Estimate shows whether each is paid at closing or added to the loan:

• FHA: an upfront mortgage insurance premium of 1.75% of the base loan amount, with exceptions (HUD Mortgagee Letter 2023-05, effective March 20, 2023).
• VA: a funding fee of 2.15% for a first-use purchase with less than 5% down, unless you are exempt (VA, updated October 5, 2026).
• USDA: an upfront guarantee fee of 1.00% for fiscal year 2027 (USDA Rural Development, September 16, 2026).

Where do I find my actual closing costs?

On your Loan Estimate and, later, your Closing Disclosure. The CFPB says that because loan costs vary across lenders and loan types, you should request Loan Estimates for the same kind of loan from different lenders and compare them. It also says lenders are required to provide your Closing Disclosure three business days before your scheduled closing, which leaves time to compare it with your Loan Estimate and ask your lender to explain any difference.

How should a first-time buyer plan for closing costs?

Save for them alongside your down payment, using the 2% to 5% range until you have a Loan Estimate. If you are still building your target, read how to set a down payment savings goal and the first-time homebuyer hub. If you are looking for help, the down payment assistance hub lists programs and guides, and each program states whether it can be used for closing costs.

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