What fees or charges are paid when closing on a mortgage and who pays them?

When you are buying a home you generally pay all of the costs associated with that transaction. However, depending on the contract or state law, the seller may end up paying for some of these costs.

Even if you don’t pay the mortgage closing fees directly out of pocket, you might end up paying them indirectly. Sometimes, you can negotiate with the seller for a “credit” towards your closing costs, but the seller will usually require you to pay a higher price for the home in order to cover the costs of this credit.

You’re still paying for these costs—they are just paid through your loan instead of paid out of pocket. The lender may also offer to give you a credit to help with your closing costs. This credit isn’t free either. Typically, the lender will either increase your loan amount to cover these costs, or charge you a higher interest rate in exchange for the credit.

Common closing fees or charges may include:

• Appraisal fees

• Tax service provider fees

• Title insurance

• Government taxes

• Prepaid expenses such as property taxes, homeowners insurance, and interest until your first payment is due

Know Before You Owe: Closing Disclosure

After you’ve reviewed the Loan Estimate for accuracy and picked your loan options, for most mortgages you’ll get a Closing Disclosure, at least three business days before closing.

The Closing Disclosure is a five-page form that helps you understand the key features, costs, and risks of your mortgage loan. If you applied for a loan on or after October 3, 2015, the Closing Disclosure will replace the HUD-1 Settlement Statement and Final Truth-In-Lending (TIL) forms for most mortgages.

The Closing Disclosure is a key part of our Know Before You Owe mortgage disclosure rule. To create this form we combined the two federal mortgage disclosures listed above. We tested this form with consumers and discussed the changes with industry. As part of the rule we also added new timing requirements, so you have time to review your loan terms. These changes make it easier to understand the terms of your mortgage before signing on the dotted line.

To help you understand your Closing Disclosure, we’ve created an interactive sample form. This resource helps you double-check the details and get definitions for unfamiliar terms. To make sure you’re prepared for closing, review your Closing Disclosure carefully and get our closing checklist, available in the “Buying a House” suite of tools and resources for homebuyers.

When you’ll get your Closing Disclosure

During our work on the Know Before You Owe mortgage initiative, we reached out to loan officers, consumers, real estate professionals, and attorneys to learn about the process of closing. We learned that the documents are often hard to understand, overwhelming, and there isn’t enough time to review them.

Our rule requires lenders to send you the Closing Disclosure at least three business days before you finalize your loan. This gives you time to compare your Closing Disclosure to your Loan Estimate and ask your lender, your housing counselor, or your attorney any questions you may have.

More Resources

While our new forms are easier to understand, the mortgage process can be confusing and filled with complex terms. To help you navigate we’ve created a set of resources to help.

Interactive sample Closing Disclosure – Want to know where to find a particular fee, or how much money you will have to bring to the closing table? This interactive resource helps you understand the form. We’ve also made one for the Loan Estimate. These resources guide you through the forms by highlighting key information and defining terms. “Buying a House” – This suite of tools and resources takes you through the process of buying a home. Here you will get detailed explanations of how to go about getting a mortgage and what to consider when making decisions. You’ll also find tools and resources to help you learn more about your options, make decisions, and prepare for closing. “Your Home Loan Toolkit” – This booklet has worksheets and conversation starters to help you navigate the mortgage process. You can fill it out on your computer or print a copy from our site. Find a Housing Counselor – Housing counselors approved by the U.S. Department of Housing and Urban Development (HUD) can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, usually at little or no cost to you. Find a housing counselor near you with our search tool.

Know Before You Owe | Mortgages

Tools and resources

Mortgages can be complex and confusing. To supplement the rule, we’ve created several resources to help you as you navigate the mortgage process.

Sample Loan Estimate

The Loan Estimate makes it easier to understand the loan offer from the lender. The interactive sample form will help you double check the details and get definitions for terms used on the Loan Estimate.

• Explore a sample Loan Estimate

Making the mortgage process easier

The Know Before You Owe mortgage disclosure rule replaces four disclosure forms with two new ones, the Loan Estimate and the Closing Disclosure. The new forms are easier to understand and easier to use. The rule also requires that you get three business days to review your Closing Disclosure and ask questions before you close on a mortgage.

Date of Last Revision: August 8, 2026

What is a mortgage "closing?" What happens at the closing?

The “closing” is the last step in buying and financing a home. The "closing,” also called “settlement,” is when you and all the other parties in a mortgage loan transaction sign the necessary documents.

After signing these documents, you become responsible for the mortgage loan. Familiarize yourself with some of the key documents you will be signing so that you know what to look for when you get them.

If you’re purchasing a home with a loan, the closing of your loan (the time when your loan becomes final and the funds are distributed) and the closing of your home purchase (when you become owner of your new home) typically happen at the same time. Once the closing is complete, you are legally required to repay the mortgage.

Your closing may include some or all of these entities:

• Your real estate agent or realtor

• Your title insurance company

• An escrow company

• Your attorney (if you come from a state where attorneys conduct closings, or if you hire legal representation for your closing)

• The seller’s attorney

• Your lender may or may not attend

Depending on what state you live in, all the parties may sit around a table and sign all the documents at once. Or the closing could take several weeks as the signatures of each party are collected separately. Some companies allow you to electronically sign documents, either in advance of closing or at the closing table. A closing may even be conducted by mail or even on the internet.

Regardless of who performs the closing or where it occurs, there will be many important documents that you’ll need to sign that will have lasting financial implications on your life. 

Tip: Before you sign, make sure you carefully read and understand all the loan documents. Don’t sign the loan documents if the loan is different from what you expected. Don’t sign the documents if you can’t make the payments, if you find any errors, or if you do not understand the loan terms.

Be sure to understand how your payments may change over time. With an adjustable-rate mortgage, your payments may increase over time, and it is important to understand when the payment can change and by how much. Even with a fixed-rate mortgage, your total monthly payment may change due to changes in your taxes or insurance.  

What documents should I receive before closing on a mortgage loan?

Before closing on a mortgage, you can expect to receive documents required by state and federal law and contractual documents.

You can expect to receive various types of documents:

Documents required by federal law

These documents inform you of the key terms, provisions, and costs of your loan. They outline your key rights and responsibilities as a borrower and record the transaction between you and your lender.

These documents include:

• The Loan Estimate is a form that lays out important information about the loan you applied for. The lender sends you a Loan Estimate within three business days of receiving your application. Visit our interactive sample Loan Estimate with tips and definitions.

• The Closing Disclosure is a form that lists all final terms of the loan you’ve selected, final closing costs, and the details of who pays and who receives money at closing. Your lender sends you a Closing Disclosure at least three business days before closing. Visit our interactive sample Closing Disclosure with tips and definitions.

• The Notice of the Right to Rescind for loans not used to purchase a home, for example, a refinance or home equity line of credit. This notice informs you that you have three business days from the lender’s fulfillment of certain conditions to cancel your loan and provides a form for cancelling the loan.

• The Initial Escrow Statement, which lists the estimated taxes, insurance premiums, and other charges the lender anticipates paying from your escrow account during the first year of your loan.

Note: You will not receive a Loan Estimate or Closing Disclosure if you are shopping for:

• A reverse mortgage

• A home equity line of credit (HELOC)

• A manufactured housing or mobile home loan not secured by real estate

• A subordinate loan through certain types of homebuyer assistance programs

For these kinds of loans, you should receive Truth-in-Lending disclosures. If you are shopping for a reverse mortgage, you will also receive a Good Faith Estimate (GFE) and a HUD-1 Settlement Statement.

• A promissory note, which describes what you are agreeing to. It provides you with details regarding your loan, including:

  • The amount you owe

  • The interest rate of the mortgage loan

  • The dates when the payments are to be made

  • The total amount you will pay

  • The length of time for repayment

  • Whether and how the payment amounts can change

  • The place where the payments are to be sent

• A mortgage or security instrument: This explains your responsibilities and rights as a borrower. The mortgage grants the lender or servicer the right to foreclose on your home if you fail to make payments as you’ve agreed.

• State and local government-mandated documents: These are documents that fulfill state and local government requirements, generally for the purpose of collecting information and protecting you.

• Lender documents: These are documents added by the lender, for example, an affidavit of occupancy.

Is there such a thing as a no-cost or no-closing cost loan or refinancing?

There are services rendered and costs related to originate all mortgages, but some lenders or mortgage brokers may offer you a loan that is advertised as having no lender fees or no closing costs.

There are two ways lenders can do this. One way is by charging you a higher interest rate and giving you a credit to cover the cost of making the loan. The other way is by adding the closing costs to your loan amount. A higher interest rate will mean you pay more over time and a higher loan amount will increase your payments and reduce your equity.

How long do I have to rescind? When does the right of rescission start?

If you are buying a home with a mortgage, you do not have a right to cancel the loan once the closing documents are signed. If you are refinancing a mortgage, you have until midnight of the third business day after the transaction to rescind (cancel) the mortgage contract.

The right of rescission refers to the right of a consumer to cancel certain types of loans.

When does the right of rescission apply in refinancing a mortgage?

If you are refinancing a mortgage, and you want to rescind (cancel) your mortgage contract, the three-day clock does not start until all three of the following events have happened:

• You sign the credit contract (usually known as the Promissory Note)

• You receive a Truth in Lending disclosure (in most circumstances, this will be your Closing Disclosure form

• You receive two copies of a notice explaining your right to rescind

The first business day after the last of these events counts as day one. For rescission purposes, business days include Saturdays, but not Sundays or legal public holidays. For example, if the last of the above three events occurs on a Friday, and there are no legal public holidays in between, then you have until midnight on the following Tuesday to rescind.

You may use the form provided to you by the lender or write a letter. Whatever form of written notice you use, make sure it is mailed or delivered before midnight of the third business day. Keep a copy and any evidence that it was mailed or delivered on time.

If you did not receive your Truth in Lending disclosure or the notice of your right to rescind, or if they were incorrect, you may be able to rescind your loan up to three years from the date of closing. If you think this situation may apply to you, consult an attorney.

Escrow vs Closing Cost

Closing costs are the total one-time fees paid to finalize a real estate transaction (typically 2% to 5% of the purchase price). An escrow setup—which includes initial property tax and insurance reserves—is just one specific component bundled inside those overall closing costs, alongside ongoing monthly payments made after the sale closes.

Closing Costs Overview

• Definition: A broad collection of fees paid at the closing table to process and transfer home ownership.

• What it covers: Lender origination fees, home appraisals, credit reports, title searches, attorney fees, and government recording charges.

• Timing: One-time lump sum due on closing day.

Mortgage Escrow Overview

• Definition: A specialized account managed by your lender to pay recurring homeownership costs like property taxes and homeowners insurance.

• At closing (Initial Deposit): You pay an upfront reserve into this account (often 2 to 3 months of taxes and insurance) plus the first year's insurance premium, which counts as part of your initial closing costs.

• After closing (Ongoing Payment): Part of your regular monthly mortgage payment goes into this account to cover future bills.

Seller Concession

A mortgage seller concession is an agreement where the home seller pays some of the buyer’s upfront closing costs or fees. This financial contribution reduces the amount of cash the buyer must bring to the closing table, though it does not lower the actual purchase price or principal loan amount.

How Concessions Work

• Negotiated as part of the initial purchase contract or after a home inspection.

• Expressed as a fixed dollar amount or a percentage of the home's purchase price.

• Credited directly to eligible fees at closing rather than given to the buyer as cash.

Common Uses for Concessions

• Closing Costs: Loan origination, underwriting, title insurance, and settlement fees.

• Prepaid Expenses: Property taxes, homeowners insurance premiums, and initial HOA dues.

• Financing Perks: Buying discount points or funding a temporary mortgage interest rate buydown.

• Repairs: Credits offered in lieu of the seller completing physical repairs found during an inspection.

Loan Program Limits

Lenders and government-backed loan programs place strict caps on how much a seller can contribute:

• Conventional Loans: Limits typically range from 3% to 9% depending on the down payment size.

• FHA Loans: Capped at a maximum of 6% of the purchase price.

• VA Loans: Generally capped at 4% plus reasonable closing costs.

• Note: Concessions cannot be applied toward covering the buyer's down payment.

Lender Credits

A lender credit is money a mortgage lender gives you to help pay for your closing costs. In exchange for this credit, you agree to a higher interest rate on your loan. It lowers your upfront costs at closing, but raises your monthly payment and total interest over time.

How Lender Credits Work

• Reduces Cash Needed: Lowers or eliminates the cash you must bring to closing day for fees.

• Trades for Rate: Works as a "negative point" where taking a higher rate funds the credit.

• Restriction: Can only be used for closing costs, never for your down payment.

Pros and Cons

• Pros: Preserves your personal cash savings; helps if you plan to move or refinance soon.

• Cons: Increases your monthly mortgage payment; costs more total money if you keep the loan long-term.