How Much Are Closing Costs In Texas: Who Pays For What?

By: ROS Team

Buying a house in Texas? Congratulations! But before you get the keys and celebrate, there’s one more hurdle to jump: closing costs. These fees can add a significant chunk of money on top of the purchase price, leaving many homebuyers wondering – who pays closing costs in Texas? In Lonar Star State, the answer isn’t always straightforward.

Read on to explore how closing costs are typically divided between buyers and sellers in Texas, and delve into strategies to potentially lower your closing cost burden.

What are Closing Costs?

When you buy a home, there are extra expenses you need to pay on top of the sale price. These extra costs are called closing costs. They cover the fees for things like processing the loan, getting insurance for the home’s title, and paying the property taxes.

What is the Average Closing Costs in Texas?

When buying a home in Texas, the typical closing costs are around $4,548. This amount equals about 1.17% of the average Texas home price. It is a bit higher than the nationwide average. However, it’s important to note that this figure is just an estimate and the actual closing costs for your home purchase may differ based on factors like the property value, your chosen lender, and any negotiated credits from the seller. One advantage in Texas is that there are no transfer taxes, which can help reduce closing costs compared to some other states.

Who Pays Closing Costs in Texas, Buyers or Sellers?

In Texas, closing costs are typically shared between buyers and sellers.

Closing Costs Paid by the Buyer:

Loan Origination Fees (1% – 1.5% of the loan amount)

This is a fee charged by the lender for processing your loan application. It can sometimes be negotiated.

Appraisal Fee ($400 – $800)

This covers the cost of an appraiser to assess the value of the home.

Home Inspection (Optional, $300 – $500)

Though not required, a home inspection can reveal potential problems with the property.

Discount Points (Optional, vary based on negotiation)

These are upfront fees paid to the lender in exchange for a lower interest rate on your mortgage.

Title Insurance (varies)

Title insurance protects you from any ownership claims on the property. There are two parts: Lender’s title insurance, which your lender will require, and Owner’s title insurance, which is optional but protects you from any future claims after purchase.

Prepaid Costs (varies)

This covers items like homeowner’s insurance and property taxes for the period from closing until the end of the billing cycle.

Survey Fee (Optional, $400 – $800)

This creates a map of the property’s boundaries. Not all lenders require a survey.

Credit Report Fee ($25 – $50)

This fee covers the cost of obtaining your credit report.

Closing Costs Paid by the Seller:

Real Estate Commission (5-6% of the selling price)

This is the fee paid to the real estate agents who represent the buyer and seller. It’s typically the biggest expense for sellers.

Outstanding Property Fees (vary)

This covers any unpaid homeowners association (HOA) dues, property taxes, or other outstanding charges on the property.

Prorated Property Taxes (varies)

This covers the portion of property taxes the seller is responsible for up to the closing date. The buyer will then be responsible for the remaining property taxes for the year.

Settlement Fees (vary)

These are fees charged by the closing agent for conducting the closing process.

Additional Costs (May apply to both buyers and sellers):

Title Search ($250 – $500)

This researches the property’s history to identify any potential ownership claims or liens.

Municipal Lien Search ($50 – $100)

This checks for any outstanding city or county liens on the property.

HOA Estoppel Certificate (varies)

This document from the HOA provides information about the association’s fees and rules. Not all properties are located in an HOA community.

How Much Is Closing Cost for Buyer in Texas?

Estimated closing costs for buyer in Texas typically range between 2% and 6% of the purchase price of the home. So if you buy a house for $307,038 (the average price in Texas), your closing costs could be anywhere from $6,140 to $18,422.

The exact amount you’ll pay depends on various things like the lender you choose, what type of loan you get, and if the seller agrees to cover any of the costs. But no matter what, you’ll need to budget for closing costs when buying a Texas home. They’re an important extra expense on top of your down payment.

How Much Are Closing Costs in Texas for a Seller?

Estimated closing costs for seller in Texas are higher as compared to buyers, ranging from 6% to 10% of the selling price. This can be a significant amount, especially considering the average home price in Texas is $307,038. In this scenario, closing costs could be between $18,422 and $30,703.

The main expense is typically the real estate agent’s commission, which can be around 5-6% of the sale price. Other costs include title fees, outstanding property taxes, and potentially attorney fees. Additionally, sellers may agree to cover some of the buyer’s closing costs as part of the negotiation process.

How to Lower Your Closing Costs in Texas?

Search for various lenders and compare their fees. Don’t be afraid to negotiate the origination points, processing costs, and underwriting charges they offer.
In Texas, closing costs are negotiable. Your real estate agent can assist you in discussing with the seller who covers which expenses. Sellers may sometimes agree to pay some of your closing costs to make their offer more attractive.
Consider a mortgage with no closing costs. These loans typically have a higher interest rate, so carefully evaluate if the upfront savings justify the long-term cost.
Improve your credit score. A higher credit score can qualify you for a better interest rate and potentially lower lender fees.
Schedule your closing strategically at the end of the month. Lenders may be more flexible with fees to meet their monthly goals.
Compare quotes for title insurance, homeowners insurance, and appraisal services from different providers. You might save money by getting quotes from multiple sources.
Inquire about waivers or credits. Some lenders may offer fee waivers or credits for using their affiliated services like title insurance or appraisals.

Closing Costs Texas: FAQs

Who Pays Closing Costs on a New Construction Home in Texas?

When building a new house in Texas, closing costs are usually split between the buyer and the builder. As the buyer, you’ll likely pay fees like loan setup, home appraisal, inspections, and homeowners insurance premiums.

The builder often covers certain expenses to make the sale more appealing. This may include title insurance, transfer taxes, and sometimes additional costs as part of promotions or negotiations.

Who Pays Closing Costs on a Vacant Land in Texas?

In Texas, the closing costs on vacant land are shared between the buyer and seller. Commonly, the buyer pays for expenses like loan fees, appraisal charges, title insurance, and land surveys. On the other hand, the seller covers realtor commissions, any outstanding taxes owed, and a prorated amount for property taxes.

Who Pays Closing Costs in Texas on a Wholesale Deal?

When you buy a home through a wholesale deal in Texas, the closing costs are usually paid by the end buyer, not the wholesaler. The wholesaler acts as a middleman and makes profits from an assignment fee. The closing costs that the end buyer pays can include fees for the loan, title insurance, and escrow.

Who Pays Closing Costs for Cash Buyer in Texas?

Cash buyers in Texas have a closing cost advantage. They typically avoid loan-related fees like origination points and appraisals. However, they’ll still be responsible for buyer-side costs like title insurance, prorated taxes, and sometimes even homeowner’s insurance.

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