What Are the Common Closing Costs for Buyers?

Most buyers plan carefully for their down payment and then get surprised by a second number at the closing table. That second number is closing costs, and it’s worth understanding before you’re sitting in front of a stack of papers wondering what you’re actually signing for.

Closing costs are the fees and prepaid expenses that come with finalizing a mortgage and a home purchase. They’re separate from your down payment, and they’re due at closing, not spread out over time.

For most buyers, that number lands somewhere between 2 and 5 percent of the loan amount. On a $300,000 loan, that’s roughly $6,000 to $15,000, depending on the lender, the loan type, and where you’re buying.

A good chunk of that goes to your lender: an origination fee for processing the loan, an underwriting fee, and an appraisal to confirm the home is worth what you’re paying. Another piece covers title work, the search and insurance that confirm the property is legally clear to sell, plus an escrow or closing fee for the company handling the paperwork.

You’ll also see prepaid items on the list. Lenders typically collect a portion of your property taxes and homeowners insurance upfront, along with prepaid interest for the days between closing and your first mortgage payment. None of that is a hidden fee, it’s just money that has to be paid eventually, collected early.

One newer wrinkle: since 2024, buyers sign a written agreement with their agent before touring homes that spells out how that agent gets paid. In practice, sellers still cover that cost most of the time, especially when they want to attract serious buyers, but it’s worth knowing the agreement exists and asking how it’s being handled in your specific deal.

If you’re buying in Michigan, here’s one cost you can mostly take off your list: the state and county transfer tax. That’s a seller expense under Michigan law, almost always paid out of their proceeds at closing, not yours.

You also have more room to negotiate than most buyers realize. Asking the seller to cover a portion of your closing costs, often up to 2 or 3 percent, is a normal part of putting together an offer, especially in a market where sellers want a clean, reliable deal.

The exact numbers depend on your loan, your lender, and the specific deal you’re working through. If you want help running through what to expect before you get to the closing table, I’m happy to walk through it with you.