Understanding Buyer Closing Costs: Recurring vs. Non-Recurring Expenses

When buying a home, most buyers focus on the down payment — but that’s only part of the financial picture.

Closing costs are separate from your down payment and represent the fees required to complete the transaction and legally transfer ownership. Many buyers underestimate these costs, which can create stress right before closing. Understanding them early helps you plan confidently and structure your offer strategically.

Closing costs generally fall into two categories:

non-recurring costs and recurring costs.

Let’s break them down.

Non-Recurring Closing Costs

Non-recurring costs are one-time expenses tied directly to the purchase of the property. You pay these once at closing and they don’t repeat.

Typical non-recurring costs include:

• Loan origination fees

• Appraisal fees

• Title insurance

• Escrow fees

• Notary and recording fees

• Home inspection fees

• Credit report fees

• Underwriting fees

• Transfer taxes (where applicable)

These costs are tied to processing the loan, verifying the property value, protecting ownership rights, and legally recording the sale.

Think of non-recurring costs as the administrative and legal expenses required to complete the purchase.

Recurring Closing Costs

Recurring costs are expenses related to homeownership that start at closing and continue after you move in.

These typically include:

• Prepaid property taxes

• Homeowners insurance premiums

• Mortgage interest from closing date to month end

• HOA dues (if applicable)

• Initial escrow account deposits

Lenders collect these upfront to ensure your future tax and insurance obligations are covered. Even though these are part of ongoing ownership, they’re collected at closing — which is why buyers need extra funds beyond the down payment.

Why Buyers Must Plan for These Costs

A common surprise for first-time buyers is learning that closing costs are in addition to the down payment.

Depending on the purchase price and loan structure, buyer closing costs often range between 2% and 4% of the purchase price. On a $700,000 home, that could mean $14,000–$28,000 on top of your down payment.

Understanding this early helps you:

• Avoid last-minute financial strain

• Structure a realistic offer

• Work with your lender to estimate total cash needed

• Negotiate strategically with sellers

Using Seller Credits to Finance Closing Costs

Here’s the part many buyers don’t realize:

Closing costs can often be built into the offer price using a seller credit.

A seller credit means the seller agrees to pay a portion of your closing costs at settlement. Instead of paying all costs out of pocket, buyers can increase the offer price slightly and request a credit back from the seller.

Example:

• Home price: $700,000

• Buyer asks for $20,000 seller credit

• Offer price becomes: $720,000

• Seller nets roughly the same

• Buyer finances closing costs through the loan

This strategy can significantly reduce the upfront cash required while still keeping the deal attractive to the seller.

There are lender limits and guidelines on how much credit is allowed, so this must be structured properly — but when used correctly, it’s one of the smartest tools buyers have.

The Bottom Line

Buying a home is more than just the down payment.

Recurring and non-recurring closing costs are a normal part of the process, and smart buyers prepare for them early. With the right strategy, these costs can often be negotiated and financed in a way that protects your cash position without hurting your chances of winning the home.

A knowledgeable broker and lender will walk you through these numbers before you ever write an offer — so there are no surprises at the finish line.