Understanding Closing Costs When Buying a Home in Texas

What are closing costs?

Closing costs cover the services and setup needed to complete your purchase and your loan. They often fall somewhere around 2% to 5% of the purchase price, but every transaction is different. Your actual costs depend on your loan, the property, and what is negotiated in your contract.

Common closing costs

• Lender fees, such as origination or underwriting fees
• Appraisal fee to confirm the home's value
• Title insurance and title company fees
• Survey, commonly required in Texas transactions
• Recording fees to record your deed and mortgage with the county
• Prepaid items, such as your first year of homeowner's insurance, prepaid interest, and an initial deposit into your escrow account for taxes and insurance

A few Texas-specific things to know

Title insurance rates are set by the state. In Texas, title insurance premiums are set by the Texas Department of Insurance, so the base premium for a given policy amount is the same no matter which title company you use. Who pays for the owner's title policy is negotiable in your contract.

Surveys. Lenders and title companies commonly require a survey. In some cases, the seller's existing survey can be used along with a signed affidavit, which may save you the cost of a new one. Ask your agent and title company.

Property taxes are paid in arrears. Texas property taxes are generally billed for the current year and due by the end of January of the following year. At closing, taxes are usually prorated between buyer and seller, and your lender may collect funds to set up your escrow account.

Homestead exemption. Once you own and live in your home as your primary residence, you can apply for a homestead exemption with your county appraisal district, which may lower your property taxes.

When will I know my exact costs?

You will receive a Loan Estimate within three business days of applying, which outlines your estimated costs. At least three business days before closing, you will receive a Closing Disclosure with your final numbers. We will walk through both with you line by line.

This article is general information, not financial or legal advice, and is not a commitment to lend. Loan programs, requirements, and costs vary. Talk with us about your specific situation.