Closing costs in Texas
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Whether you are selling your Texas home or buying one, signing that contract is a big milestone in your real estate journey. But before you celebrate, be sure you understand the transaction’s true price tag. Homebuyers pay more than just the agreed-upon sale price for a property, because every sale comes with closing costs. And selling a home isn’t all profit — sellers pay closing costs, too. Both parties should be aware of how these fees affect the total cost of the transaction. Here’s what to know about closing costs in Texas.
How much are closing costs in Texas?
Closing costs can vary widely depending on many factors, including what lender you’re using and how much your real estate attorney charges. A 2022 report from CoreLogic’s ClosingCorp found that the national average for mortgage closing costs on a single-family home, excluding transfer taxes, was $3,860. By contrast, Texans pay an average of $4,548, which amounts to about 1.5 percent of the average Texas home’s sale price. For many states, that figure falls below 1 percent, but for others it can go up as high as 4 or 5 percent. (These numbers do not factor in real estate commission fees.)
The good news for Texans is that the state does not levy transfer taxes on real estate sales, unlike many other states. So that’s one less cost to worry about. Owner’s title insurance, another typical closing cost, is not a legal requirement for buyers in Texas. However, if you’re financing your purchase with a mortgage, your lender will still require a lender’s closing policy, whether you choose to get an owner’s policy or not. The cost of title insurance in Texas is regulated by the state.
Who pays closing costs in Texas, buyers or sellers?
There are at least some closing costs for both buyers and sellers in every state, and the costs are typically split. The split is not even, though: Sellers usually pay more closing costs than buyers do, and at least some of these costs are often negotiated, so each deal is different. Here’s how it typically breaks down in Texas.
Closing costs for buyers
When buying a house in Texas, there are two main categories for closing costs. Remember that if you are using a real estate attorney, those fees will have to be paid as well.
- Lender-related fees: Mortgage lenders can charge several kinds of fees, including for loan application, loan origination, credit check and underwriting. If you buy down your interest rate by paying mortgage points upfront, these will also usually be rolled into your closing costs.
- Property-related fees: Homebuyers also pay costs related to the home itself. These typically include fees covering the home appraisal, home inspection, title search and title insurance.
Closing costs for sellers
As is the case in most states, Texas home sellers’ costs can be taken out of the sale proceeds during the closing process. This is sometimes referred to as deducting fees off the top.
- Real estate commissions: The seller is responsible for covering real estate agents’ commission fees. Expect to pay around 5 to 6 percent of the sale price, which is then split down the middle between your agent and your buyer’s agent. This can be a large chunk of money: On a $400,000 home, for example, 6 percent comes to $24,000.
- Title and closing fees: Texans don’t have to pay transfer taxes as a part of their closing costs. Still, the seller may be required to cover escrow and title fees, title insurance costs, outstanding property taxes or HOA fees and more.
- Seller concessions: In many real estate transactions, the buyer negotiates for the seller to cover some portion of their closing costs. For instance, sellers might cover the cost of needed repairs uncovered during the home inspection.
Lowering your closing costs in Texas
Closing costs can’t be avoided, but there are a few ways to help keep them in check. For one thing, there is often financial help available for first-time homebuyers, typically in the form of low-cost or no-cost loans intended to make homeownership more affordable. Cities like Fort Worth and El Paso offer closing-cost assistance for eligible applicants within certain income brackets.
In addition, lender fees can make up a big chunk of closing costs, so be sure to shop around for Texas mortgage lenders that charge the lowest fees. You can also shop around for title companies. While title premiums are regulated by the state in Texas, each title company may offer slightly different services, so it’s still possible to choose the company that best serves your needs for the money.
Find a local real estate agent
A good local real estate agent can help you navigate the sale process and recommend trusted vendors and partners. For example, agents may have a list of local inspectors with reasonable rates or have a relationship with a particular title company. A trusted agent can also help you keep your budget in check — Bankrate’s new-house calculator can give you an idea of how much house you can actually afford.
Buyers and sellers both have closing costs to cover in Texas (as is the case in all states). Sellers absorb the bulk of the costs in most cases, including covering the commissions for both real estate agents involved in the sale.
Buyers are typically responsible for lender fees and inspection and appraisal costs. They may also cover some title fees. Buyers are not legally required to use a real estate attorney in Texas, but if they do, they will be responsible for legal costs as well.
Sellers are responsible for real estate agent commissions, some title fees and any outstanding HOA fees or property taxes. Agent commissions will make up the bulk of these costs, typically 5 to 6 percent of the home’s sale price. The seller may also pay attorney fees if one is used, and in many transactions, the seller agrees to cover a portion of the buyer’s closing costs as well.