Your First-Time Home-Buyer Questions Answered: Who Pays Closing Costs?


When purchasing a home for the first time, there are lots of questions that come up during the process. At NeighborWorks Orange County, we are here to help you through the entire process.

One of the most common questions first-time homebuyers ask is, “Who pays the closing costs?” To help, here is a quick overview of closing costs.

Closing Costs Are Different than a Down Payment 

Perhaps the biggest challenge in understanding closing costs is differentiating between closing costs and the down payment. Before we dive too far into closing costs, let’s do a quick break down of each. Depending on which loan option you chose, the down payment varies between 3-3.5% of the total loan. For example, a 3% down payment on a $200,000 home is $6,000.

Lenders require you to bring money to the table to purchase the home. They want you to have your own money invested into the deal. To learn more about down payments, check out our guide Everything You Need to Know About a Down Payment.

Your closing costs cover all the expenses that come up during the transaction. Purchasing a home is a big investment with several moving pieces. You need to make sure the home is safe and that it’s worth what the seller is asking, apply for a loan, and have help with the paperwork. To make sure you are protected, you work with experts throughout the process. This includes brokers, inspectors, appraisers, and more. The closing costs cover their fees. 

Typical Costs Included

There are many different factors that go into determining the exact amount you will owe in closing costs. Some fees, such as property tax, are determined based on the value of the home. Others are a flat fee. Your realtor and mortgage broker can help give you estimations on a range of fees to anticipate when starting the process of making an offer. Once the seller accepts your offer and you have a final amount for the loan, you can get exact numbers for your closing costs.

Here are typical expenses included:

  • Title company,
  • Appraisals,
  • Title Insurance,
  • Property Tax,
  • Escrow,
  • Origination fees

Every case varies. No two closing fee costs are ever exactly the same. While we can’t guarantee what your final costs will total, typically closing costs range in the 3-4% of the total price of the home.

Who Pays Closing Costs?

It’s standard for the buyer to pay the closing costs.

There are occasional instances that a seller will pay closing costs. That needs to be negotiated and is largely dictated by how strong the market is or how motivated the seller is to sell the home. In the current market conditions, a seller’s market, it’s very unlikely that a seller will agree to pay closing costs.

Especially in a hot market, as a buyer you want to give the seller an attractive offer on their home. Requesting they pay closing costs doesn’t necessarily accomplish that. If they get other offers, most likely the seller will pick one of those. Make sure to work with a good realtor to ensure that you make a good offer when home searching. 


Working With Down Payment Assistance Programs

Many of our clients qualify for one of the Down Payment Assistance Programs.

Two programs, WISH and IDEA, offer 3-to-1 matching funds up to $15,000 to apply toward a down payment. This means if qualifying applicants save $5,000 toward their home purchase, the assistance program will pay $15,000 toward the home.

One of the unique advantages of the programs is that you have the freedom to apply your money to the deal in whichever way makes the most sense for your family. We advise our clients to use the funds they bring to the table on their closing costs. With the assistance program covering the down payment, typically this makes the most sense.

Learn more about the down payment programs out there.

Help Throughout the Process

 Buying a home can be an overwhelming process. There are several moving pieces, and understanding all the requirements can be daunting.

That’s why we invite you to partner with NWOC throughout the process. Starting with our Home Buyer Workshops, we teach you about all the different elements to buying a home. This one-day course prepares you to successfully enjoy homeownership. We also have experienced realtors to help you search for your home.

Contact us today to start your journey toward homeownership!