If you’re getting ready to buy your first home, you’ve probably heard the term “closing costs.” But what exactly does that mean — and how much should you expect to pay?

The short answer: closing costs are the final expenses you’ll owe to make the home officially yours. But they can feel confusing if you don’t know what to look for.

Here’s a clear, simple breakdown to help you feel confident and prepared — no jargon, no stress.

What Are Closing Costs?

Closing costs are the fees and expenses — separate from your down payment — that you pay at the end of the homebuying process. They’re due at closing, which is the final step before you get the keys.

These costs typically include:

• Lender Fees: These may include application fees, credit report pulls, processing, and underwriting charges.
• Title and Escrow Fees: You’ll pay for title insurance, title search, and escrow services to ensure a smooth, legal transfer of ownership.
• Prepaid Items: This includes property taxes, homeowner’s insurance, and mortgage interest — often paid upfront.
• Recording & Government Fees: Expect charges for deed recording, local transfer taxes, and other required filings.

On average, closing costs run between 2%–5% of your home’s purchase price. So if you’re buying a $300,000 home, that could mean $6,000–$15,000 in closing costs.

Why Do Closing Costs Matter?

Closing costs can sneak up on first-time buyers who are focused mainly on the down payment. But knowing about them early helps you:

• Avoid budget surprises
• Negotiate smarter (some buyers ask sellers to cover a portion)
• Feel confident at the closing table

Want to know how much house you can afford? Tools like affordability calculators can help you plan with these fees in mind.

How to Prepare for Closing Costs

Getting ahead of your closing costs is all about planning and communication. Here are three steps to make it easier:

• Ask your lender for a Loan Estimate: Early in the process, your lender is required to give you a Loan Estimate. This is a 3-page document that breaks down all your anticipated fees. Review it carefully — and ask questions if anything looks unfamiliar. You’ll get a finalized Closing Disclosure a few days before closing with the final amounts.
• Budget a little extra: Even if your lender gives you a ballpark estimate, it’s smart to have a buffer in your savings. Taxes, insurance premiums, and third-party fees can fluctuate slightly depending on timing and your location.
• Review everything with your agent before closing: Your real estate agent can walk you through the costs, explain which are normal, and even help negotiate with the seller. Some markets allow you to ask for seller-paid closing costs, which can lighten your upfront expense.

Closing costs are just one piece of the puzzle. To better understand the full homebuying budget — including down payments, earnest money, and prepaid items — check out our post on what first-time buyers need to know about earnest money.