How Much Are Closing Costs in Texas?

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Mike Romano

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Jul 27, 2023

Mike Romano is a mortgage industry veteran with over 20 years of experience. His expertise spans mortgage technology, credit risk, and loan origination, and he has spoken at many mortgage and fintech conferences. He has a Bachelor's and MBA from the University of California, Berkeley and currently resides in Austin, TX. NMLS # 2515901

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    In this article, we explain everything that goes into closing costs in Texas, to help you calculate what you’ll pay up front when you buy a home. 

    Closing costs can be a bit of a sore spot for homebuyers. You’ve gotten money together for a down payment, you’re prepared for the monthly payment, you’re already worried about finding the right house and getting the best mortgage rates, and then they stack thousands of dollars on top of the home price as closing costs.

    It might sting a bit, but closing costs are a mostly unavoidable part of buying a house, and the best way to deal with closing costs is to understand them. Additional costs always seem worse when they’re unexpected.

    So, how much are closing costs in Texas? What do closing costs pay for? Are there ways to reduce your closing costs? Once you know the answers to these questions, you’ll be much more comfortable when it’s time to close on your home.

    Use down payment assistance to pay for closing costs in Texas

    You might be able to get help paying for your closing costs in TX. Most down payment assistance programs allow you to use the money on closing costs, which can reduce your up front burden by thousands or even tens of thousands of dollars.

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      Disclaimer: This article is for informational purposes only and should not be considered as legal or financial advice. Please consult an attorney, mortgage lender, or CPA for guidance on your specific situation.

      Note: Throughout this article, when we list home costs, we use average home values as of June 30, 2023. We base closing cost data off of an aggregate of information from Closing Corp, Zillow, the Consumer Financial Protection Bureau, and the Stewart Rate Calculator.

      How much are closing costs in Texas? 

      Texas closing costs for a buyer average 1.5% of the home’s sale price. The average price for a TX home costs around $303,971. Using this number, closing costs in Texas average around $4,559. This number varies based on several factors including the value of the home, local property tax rates, and optional items like lender points.

      Who pays for closing costs in Texas?

      Both the buyer and the seller pay some closing costs in Texas. The seller is responsible for the lion’s share of closing costs, because the seller typically pays the real estate commission for both the buyer’s and seller’s agent (around 6% of the sale price). But there are some costs paid by the buyer as well. 

      As we said before, buyers pay an average closing cost of 1.5% the sale price. We’ll focus most of this article on buyer closing costs. But first, here’s a quick breakdown of who pays what.

      Closing costs paid by the buyerClosing costs paid by the seller
      Loan origination feesRealtor commission
      Credit reportTitle transfer fee
      Appraisal and home inspectionTitle insurance
      Prorated interestReconveyance fee
      Property taxes (prepaid)Escrow fees (split buyer/seller)
      Title insuranceOutstanding HOA fees
      Homeowner’s insuranceOutstanding property taxes
      Escrow fees (split buyer/seller)
      Private mortgage insurance (if applicable)
      Survey fee (if applicable)
      Discount points (if applicable)

      Closing costs paid by buyer in TX

      Like most states, these closing costs are typically paid by the buyer in Texas.

      Loan origination fees

      Loan origination fees are what you, the buyer, pays to cover the lender’s costs for administering your mortgage loan. Loan application fees usually fall under this category, although they occasionally get their own separate line item. 

      These fees help pay loan officers and any other employees who work on your loan. Loan origination fees range from about .5% to 1% of the total loan costs. For our example above (an average-priced Texas home costing $303,971) we factored 0.5% in loan origination fees. This amounts to $1,519.

      Credit report

      Your credit score factors into your loan terms, so your mortgage lender will run a credit report before issuing you a loan. The fee for running the report is usually added to your closing costs, although some lenders cover this cost themselves. A mortgage credit report usually costs between $25-$50.  

      Appraisal and home inspection

      Most home sales involve an appraisal and home inspection because they provide useful information for closing the sale. Some jurisdictions require this to happen. The fees for an appraisal and home inspection are a flat cost, not a percentage of the home price. 

      Average home appraisal fees in Texas range from about $425-$650. Inspection fees cost between $375-$475. 

      Prorated interest

      When you close on your home, you prepay the interest on your loan through the end of the current month. This includes paying for interest on the day you close. For example, if you close on the 11th of August, you pay 21 days of prorated interest. 

      On a $303,971 home, assuming you paid 20% down and have an interest rate of 7.63%, you’ll pay $1,068 for 21 days of prorated interest. 

      Property taxes (prepaid)

      When you own a home, your property taxes can either be paid annually, in one lump sum, or monthly as part of your mortgage payment. To make sure you are up-to-date from the start, most lenders require you to pay at least a few months in advance. This amount is wrapped up into your closing costs. 

      In most cases, a buyer in Texas prepays three months of property taxes. The average property tax rate for Texas is 1.6%, although this varies by location. If you pay three months worth of property taxes when you close on your home, this amounts to 0.4% of your home’s value added toward your closing costs. 

      In the example of a $303,971 home, this is approximately $1,216 in prepaid property taxes. 

      Title insurance

      Title insurance is an insurance policy that protects you from any costs related to a mistake in the title filing process such as a bad deed or an undisclosed lien on the house. A typical title policy in Texas costs between 0.5% and 1% of the home’s closing price. 

      For our example of a $303,971 home, 0.5% for title insurance amounts to about $1,519. 

      Homeowner’s insurance

      Most mortgage loans require you to have a homeowner’s insurance policy. Your first payment on this policy is due at the time of closing, and it gets wrapped up into closing costs. Some insurance companies will ask you to pay a few months in advance at the time of closing. 

      It costs an average of $323 per month to insure a home in Texas, making it the second most expensive state for homeowner’s insurance. The cost of homeowner’s insurance depends on the area in which the home is located, as well as which insurance carrier you choose, so it’s worth shopping around. 

      Escrow fees

      Escrow fees pay for services from the title company and escrow company, as well as certain paperwork fees like deed recording. In Texas, these fees are often split between the buyer and the seller, although this is negotiable.

      Private mortgage insurance (if applicable)

      Private mortgage insurance (PMI) is usually required if you put less than 20% down on your home. The first month’s PMI payment is included in your closing costs. Thereafter, you pay PMI as part of your monthly mortgage payment. 

      Survey fee (if applicable)

      You usually don’t need a property survey when you buy a home, unless you’re building on undeveloped land, because most properties are surveyed when a home is first built. But if you do need one, the fees get rolled into your closing costs. 

      Discount points (if applicable)

      Discount points are optional, so we didn’t include them in our 1.5% closing cost estimate for Texas. That being said, discount points are often worth considering, so many buyers opt for them. Your mortgage lender will help you do the math on this. 

      A discount point is money a buyer pays upfront at closing in exchange for a lower interest rate on their loan. This interest rate reduction can be for the life of the loan, but more often, it is only for a few years. 

      One discount point costs 1% of the total loan amount, and is due at closing. The amount of interest rate reduction you get for each point, as well as the length of time this reduction lasts, depends on your lender and type of loan.

      Four discount points is generally considered the maximum a buyer can purchase, but this isn’t a hard and fast rule. 

      Closing costs paid by seller in TX

      In Texas, these closing costs are typically paid by the seller. 

      Realtor commission

      The standard realtor commission in Texas is 6%, split between the buyer’s agent and the seller’s agent. This is by far the largest closing cost line item, although as we mentioned earlier, this can sometimes be negotiated down. 

      Realtor fees are typically paid by the seller. However, if your realtor is open to negotiating their fee, it’s in your best interest to do so, even as a buyer. This is because the cost of realtor fees usually gets passed on in the form of a higher sale price on the home. 

      Title transfer fee

      Once the sale is complete, the home title gets transferred from the seller to the buyer. Costs for this transfer are usually paid by the seller. 

      Title insurance

      As we mentioned in the buyer costs section, title insurance protects both the buyer and the seller from costs related to a mistake in the title filing process. In most cases, both the buyer and the seller purchase title insurance. 

      A typical title policy in Texas costs between 0.5% and 1% of the home’s closing price.

      Reconveyance fee

      This is a nominal fee, usually around $50. It pays the administrative costs of clearing the existing loan on the home (the seller’s loan). This must happen before a new loan is issued to the buyer. 

      Escrow fees

      Escrow fees pay for services from the title company and escrow company, as well as certain paperwork fees like deed recording. In Texas, these fees are often split between the buyer and the seller, although this is negotiable.  

      Outstanding HOA fees, if applicable

      If you buy a home within a homeowner’s association (HOA), there are fees associated with preparing new HOA documents and transferring ownership information. In Texas, like most other states, these are usually paid by the seller. 

      Outstanding property taxes (if applicable)

      If the seller owes any property taxes at the time of sale, they must pay these in full at the time of closing. 

      Getting help with your Texas closing costs

      Closing costs can be a pretty hefty chunk of change. In most cases, the buyer is able to add closing costs onto the mortgage loan. However, there are ways to manage your closing costs and keep your home loan as small as possible.

      Negotiating closing costs

      Some closing costs can be negotiated in one way or another. 

      Certain closing costs, such as local taxes, must be paid by a certain party.There’s no negotiating there. However some fees, such as the survey and appraisal fees, can be paid by the seller if you can negotiate a deal. 

      Another option to consider is negotiating a lower commission with your real estate agent. In Texas, as in most states, the seller is responsible for paying realtor commissions for both the buyer and seller’s agent. But this cost is usually passed on to you in the form of a higher sale price on the home. 

      Negotiating a lower realtor commission can help you lower the sale price. 

      One caveat to all of this: If you negotiate with the seller to get some of your closing costs covered, remember that it’s a negotiation and the seller can always walk away and go with another buyer. So be prepared to give something to the seller in exchange for covering closing costs.

      There are a lot of things you can work with when you negotiate with a seller. You can offer things like a longer timeline for them to move out or offer to remove any furniture they can’t take with them or cover certain house repairs.

      You’re not limited to just negotiating an asking price. Work with the seller to help meet their needs and they’ll be more likely to work with you to meet yours.

      Using down payment grants and loans

      Down payment assistance programs are primarily aimed at helping buyers get the funds they need to make a large down payment. However, a down payment and closing costs are both upfront expenses, so many down payment assistance programs allow you to use the funds to cover closing costs.

      Just make sure you read the fine print on any down payment assistance program you qualify for, because not all down payment assistance programs allow you to use the money in this way. 

      Ready to get started? Stairs Financial can help. Find out what down payment assistance you qualify for.

      Frequently asked questions

      That covers the big, important information about closing costs. However, there are a few more details which are good to know.

      What is the most expensive part of closing costs?

      Realtor commissions are the most expensive part of closing costs, ranging between 4% and 6% of the closing price. Many other closing costs are fixed fees, meaning they don’t scale with the closing price, and therefore rarely exceed realtor commissions.

      How many months of property taxes are collected at closing in Texas?

      In most cases, the buyer is required to pay at least three months of property taxes at the time of closing. There are special circumstances where a buyer may be required to pay more than three months, but these situations are rare. Buyers can also voluntarily pay more than three months taxes in advance, if they wish.

      How much for title transfer in Texas?

      The biggest cost in a title transfer in Texas is the title search fee, which costs between $75 and $200. There are additional fees involved with the title transfer, such as deed prep, survey, and notary fees. These fees are variable and are typically paid in one payment called the title settlement fee.

      How much are closing costs on a $200,000 house in Texas?

      Closing costs on a $200,000 house in Texas are approximately $3,000, for the buyer. This is based on 1.5% of the total home price, which is the average percentage a buyer in TX pays for closing costs. 

      Can you roll closing costs into your mortgage?

      Rolling closing costs into your mortgage is a common method of paying closing costs, as they can be far too expensive for many buyers to afford. So, yes, you can roll closing costs into your mortgage. 

      Pay fewer closing costs out of pocket with down payment assistance

      You should negotiate closing costs, if you can. However, the most straightforward way to reduce your closing costs is to get more money to pay those costs upfront. Down payment assistance programs can do that. 

      Most down payment assistance programs let you use the funds to cover closing costs. Most programs also allow you to accept funds from more than one down payment assistance program, meaning you could potentially get thousands or even tens of thousands of dollars to put toward your closing costs and down payment. 

      The biggest challenge is finding information about down payment assistance programs. The information is spread far and wide across the internet.

      Stairs Financial brings all this information together in one place. Stairs connects you with qualified lenders who work with down payment assistance programs, then lets you compare down payment assistance programs and loan options side-by-side and choose the best option for you. 

      Learn more about all your down payment assistance options.

      Find up to $15,000 towards a home 🏠

      Compare local down payment assistance and find a mortgage, fast.

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        Search by ZIP code, address, city, county, or neighborhood
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