Closing Costs Will Wipe Out Your Savings

Myth #3 of 30

Closing costs confuse almost everyone. A Wells Fargo survey in 2026 found that nearly 90% of people planning to buy their first home didn't really understand them, even though most said they felt like they did. So if this part worries you, you're not alone.

The worry usually sounds like this: "Even if I save for the down payment, closing costs will eat up the rest." It's a fair concern. But closing costs are easier to plan for, and easier to get help with, than most people think.

What are closing costs?

Closing is the day you sign the final papers and get the keys. Closing costs are the fees paid that day to make the purchase official. They're separate from your down payment.

Here are the common ones, explained:

• Lender fees: what the bank or mortgage company charges to set up your loan.
• Appraisal: a professional estimate of what the house is worth. The lender wants this to make sure they're not lending more than the house is worth.
• Title insurance: protection in case someone later claims they own part of the house or that there's an old unpaid debt tied to it.
• Recording fees: what the county charges to put the sale on public record.
• Prepaid items: your first year of homeowners insurance and a few months of property taxes, paid ahead of time.

Good news if you're buying in Missouri: there's no state transfer tax. That's a tax some states charge every time a home is sold, and it can add thousands of dollars.

How much are closing costs?

It depends on the price, the loan and the lender. Across the country, buyers in 2025 paid around $4,500 on average in lender, title and government fees. That doesn't count the prepaid insurance and taxes.

You won't have to guess. Your lender has to give you a Loan Estimate soon after you apply. It's a standard three-page form that lists your expected costs, so you can see them early and compare lenders.

Can the seller pay some of your closing costs?

Often, yes. When you make an offer on a house, you can ask the seller to pay part of your closing costs. This is called a seller concession. Each type of loan has a limit on how much the seller can pay:

• Conventional loan (a regular loan not backed by the government): 3%, 6% or 9% of the price, depending on how much you put down.
• VA loan (for veterans and military): up to 4%.
• FHA loan (a government-backed loan popular with first-time buyers) and USDA loan (a government-backed loan for rural areas): usually up to 6%.

Whether a seller says yes depends on the house. A home that's been for sale a while is a different conversation than one with five offers. But you can't get it if you don't ask.

Are there other ways to cover closing costs?

A few. Some lenders will pay part of your costs if you accept a slightly higher interest rate, which is the extra cost the lender charges you for borrowing. Some down payment help programs can be used for closing costs too. And money gifted to you by family can often be used, with the right paperwork.

How do you avoid surprises at closing?

Ask for your Loan Estimate early and compare it between lenders. At least three business days before closing, you'll get a Closing Disclosure, which is the final version of your costs. Compare the two. If a number jumped, ask why.

Make it personal: get your free workbook

Reading about it is one thing. Knowing your own numbers is another. We made a free workbook for this topic, Your Closing Costs Workbook, that walks you through each idea in this post using your own situation. Sign up once and you'll get every workbook in this series as it comes out, right to your inbox.

Get your free first-time buyer workbooks

Want the full story? Watch my video: Closing Day Is Here! What First-Time Buyers Should Expect