Let’s Talk About Closing Costs: What Every Buyer Needs to Know in 2025

You’ve found the house. You’ve negotiated like a champ. You’re about to lock in your loan and finally hold the keys to your new place.

Then your lender hits you with a number that makes you blink twice: “Your estimated closing costs are $18,000.”  Wait… what?

If you’re like most buyers—especially first-timers—that moment can feel like a surprise plot twist. But don’t worry, friend. Let’s break it all down together so you know what’s coming, why it matters, and how to be totally prepared.

Because no one likes surprises at the finish line.

What Are Closing Costs, Anyway?

Think of closing costs as the supporting cast of your home purchase. They’re not the stars of the show, but without them, the deal doesn’t happen.

They include all the fees and services needed to legally transfer the property from seller to buyer. Some go to your lender. Some to the title company. Some to your local government. It’s a mix of necessary professionals and paperwork that keep the process running smoothly and legally.

What’s Included in Closing Costs? Here’s a Breakdown

The actual list may vary by location, lender, and loan type—but here are the most common items you’ll see:

Lender Fees

  • Loan origination fee (usually 0.5%–1% of loan amount): What the lender charges to process your mortgage.

  • Appraisal fee: An independent appraisal to determine the home’s value—usually $500–$800.

  • Credit report fee: A small charge to pull your credit report.

  • Underwriting/processing fees: The internal work to approve your loan and documents.

Title & Escrow Fees

  • Escrow fee: A neutral third party handles the funds and paperwork until closing.

  • Title insurance: Protects you and your lender in case there’s a title issue later (like a past lien).

  • Recording fee: Paid to your county to officially record the sale.

  • Notary fee: For verifying signatures during closing.

Prepaid Items

  • Property taxes: You may need to prepay a few months’ worth at closing.

  • Homeowners insurance: Lenders usually require the first year to be paid in full upfront.

  • Prepaid interest: Covers interest between your closing date and first mortgage payment.

Other Potential Costs

  • HOA fees (if applicable): Covers your first month or two of dues.

  • Home inspection (not always included in closing but still necessary): Paid earlier in escrow, usually $400–$600.

2025 Reality Check: For most buyers, expect total closing costs to fall somewhere between 2% and 5% of the purchase price. So on a $700,000 home, that’s roughly $14,000–$35,000.

Who Pays for What?

Great question. In California (and many markets), buyers typically pay the majority of closing costs—especially those tied to the loan. However, there’s wiggle room.

Sellers can offer closing cost credits to help cover some of your fees. And in 2025, that’s becoming more common again—especially if the seller’s motivated or the property has been sitting for a few weeks.

Tip: A smart agent can structure your offer to include seller credits without weakening your offer's competitiveness. It’s all about the right balance.

How to Budget for Closing Costs Without Stressing Out

Here’s how to stay ahead of the game:

  1. Get a Loan Estimate Early.
     When you apply for a mortgage, your lender will give you a document called a Loan Estimate within three business days. This shows a detailed preview of your estimated closing costs. Ask questions. Go through it line by line.

  2. Keep a Cushion.
     Budget for slightly more than you think you’ll need—just in case. I usually recommend having an extra $2,000–$3,000 set aside for wiggle room.

  3. Use Gift Funds or Grants.
     Many first-time buyer programs allow family gifts or grant assistance to be used for closing costs. If you qualify, it’s free money—don’t leave it on the table.

Ask About Rate Buydowns vs. Costs.
In today’s higher-rate climate, you may hear about paying points to lower your rate. This becomes a strategic decision between short-term affordability (lower costs now) vs. long-term savings (lower rate). Let’s talk through your options.

Final Thought: It’s Not Just a Fee—It’s a Finish Line

Closing costs aren’t fun to pay—but they’re part of the bigger picture: homeownership. They get you across the finish line with your name on the deed, your keys in hand, and your equity beginning to build from day one.

So instead of being caught off guard, walk in prepared, confident, and clear-eyed.

Need Help Breaking Down Your Costs? Let’s Chat. Whether you’re early in the home search or already working with a lender, I’m here to help you understand exactly what to expect—and how to make it work for your budget.

Reach out and let’s schedule a quick call or coffee. I’ll break it all down in plain English and help you feel 100% confident in your next step.

Because informed buyers make stronger moves—and that’s the kind of buyer I want you to be.

Stephen Husted