Closing costs are the fees associated with creating a mortgage or loan. These are usually paid by the buyer or the person taking out the loan. Closing costs include appraisal fees, title insurance, a survey, payments to local government to handle paperwork and other fees for setting up a loan.
Closing costs can vary tremendously. Generally they are around 3% of the cost of the loan, but they can be as high as 8% and in some cases as low as 1%.
In some cases you may be able to get the seller to cover the closing costs. In others you may be able to get the lender to cover the closing costs--often by paying a higher rate of interest for the loan.
The most common way of handling closing costs is to roll the costs into the mortgage. This reduces the amount of money you have to come up with at closing, but increases the amount you must borrow. This isn't always possible. You can only do this when the value of the house is higher than the amount you are borrowing. If you are trying to keep 20% equity in order to avoid having to pay for private mortgage insurance rolling the closing costs into your loan may throw off your percentages.