Buying a home is the biggest investment most of us will ever make, and in 2026, it’s also harder than ever. Some 65% of US households can’t afford a median-priced new home, according to the National Association of Home Builders. If you’re one of the 35% who can, every dollar counts, which means closing costs deserve just as much attention as your down payment. The national average closing cost is $4,528, according to LodeStar Software Solutions’ 2026 closing cost report — and that total varies significantly by lender, state and property type.”
Closing costs are the fees that come with transferring ownership of a property. Basically, any time someone performs a service, you’ll pay a fee. You’ll pay these banks, lenders or insurers a settlement at the closing of a real estate transaction. This compensates those involved with funding, approving and insuring the sale.
The buyer and seller split the closing costs. The costs vary based on where you live, the property you buy, and the type of loan you take out.
The closing costs aren’t listed in the purchase price, and they’re separate from the down payment. After you submit your mortgage application, your lender gives you a Loan Estimate within three business days that includes a list of expected closing costs and explanations.
If you move forward with the purchase, you’ll get a Closing Disclosure Statement that outlines the final closing costs three business days before closing. There are limits to the amount that fees can increase by, so there should be no surprises.
Closing costs vary based on your lender, state, loan amount and size and type of the property — but let’s look at the nationwide averages. At the moment, closing costs add up to an average of 1.04% of the purchase price before taxes, according to LodeStar Software Solutions’ 2026 Purchase Mortgage Closing Cost Data Report.
This may seem like an insignificant number, but it can translate to thousands of dollars.
These charges are relative to the price of property in your state. For example, Washington DC and New York have the most expensive real estate in the country, and they have higher closing costs to match. In comparison, Iowa and Missouri have the lowest property prices, so buyers and sellers cough up a lot less money in closing costs.
Typically, the buyer pays the bulk of the fees and taxes — but sellers are on the hook, too.
Buyers are saddled with the costs associated with purchasing a property and taking out a home loan, such as inspection fees, origination fees and homeowners insurance.
Sellers are usually responsible for the real estate agent’s commission and the fees relating to the transfer of property, such as the transfer tax.
The question of who pays closing costs also comes down to the type of loan. Each mortgage program has its own set of stipulations.
For example, veterans who buy a home with the help of a VA loan aren’t allowed to pay certain closing costs, like attorney fees and document fees. To secure a sale, sellers often make concessions and cover those closing costs. VA borrows are, however, responsible for paying the VA funding fee.
FHA loans limit a seller’s concession to 6% of the purchase price or appraised value, whichever is lower. This means sellers can’t contribute more than that, even if they’re desperate to finalize a transaction.
Conventional loans are inconsistent. In some states, lenders will allow sellers to put up to 6% of the sales price towards the buyer’s closing costs. In others, the limit is 3%.
These are the common closing costs, taxes and other fees you can expect to pay when buying or selling property.
Environmental conditions can cause closing costs to climb in some states. For example, in Florida and Wyoming, you’ll be charged a flood certification fee to get the government-required document that determines whether the property is located in a flood plain. If it is, you’ll have to buy flood insurance.
Most fees and taxes are set in stone, but there are a few ways to cut down your closing costs:
According to the IRS, the closing costs you can claim on your tax returns if you itemize your deductions include mortgage interest, property taxes (deductible up to $40,000 for tax years 2025–2029), and mortgage points paid to reduce your interest rate, which are typically deductible in full in the year of purchase. Starting with tax year 2026, mortgage insurance premiums — PMI and MIP — are also deductible for borrowers with adjusted gross income up to $110,000. Most other closing costs aren’t deductible, but some can be added to your home’s cost basis to reduce capital gains tax when you sell. As always, speak to a tax professional for advice specific to your situation.
If you itemize your deductions, you can deduct these costs in the year you buy your home.
If you’re buying a home, you’ll need to set aside some funds for the closing costs that lenders require. They’re unavoidable and vary based on where you live and what kind of property you’re purchasing.
To save as much money as possible, shop around and compare lenders with our guide to mortgages.
