What Are Typical Closing Costs in Texas?

When purchasing or selling a property, additional expenses arise, known as closing costs. These costs represent a significant financial component of any real estate transaction, encompassing various fees for services to facilitate property ownership transfer. Understanding these charges helps both buyers and sellers budget and prepare for their real estate endeavor.

Defining Closing Costs in Texas

Closing costs in Texas refer to the fees and expenses incurred by both parties at the conclusion of a real estate transaction. These are distinct from the property’s purchase price and cover the administrative and legal processes necessary to finalize the sale. The exact amounts vary based on the property’s value, location, financing type, and specific agreements. These expenses are paid at the closing, where property ownership legally transfers. For buyers, costs generally range from 2% to 6% of the home’s purchase price, while sellers often face 6% to 10% of the sale price.

Buyer’s Closing Costs in Texas

Buyers in Texas encounter various closing costs, primarily associated with securing a mortgage and ensuring clear title.

Loan origination fees: Charged by lenders for processing a new mortgage, typically ranging from 0.5% to 1% of the loan amount, or between $0 and $1,500.
Appraisal fee: Covers the cost of a professional assessment to verify the home’s market value for the lender, typically ranging from $350 to $800 for a single-family home.
Credit report fee: Often around $25 or more per borrower, charged to retrieve the buyer’s credit history.
Title insurance: Protects against future claims against the property’s title. While sellers customarily pay for the owner’s policy, buyers are responsible for the lender’s policy, which costs approximately 1% of the purchase price or $200 to $250.
Escrow fees: Paid to the escrow agent for managing funds and documents, usually around $350.
Survey fee: Ranging from $250 to $800, often required to verify property boundaries and legal description.
Recording fees: Typically between $25 and $50, paid to the county to officially register the deed and mortgage.
Prepaid expenses: Include initial payments for property taxes and homeowner’s insurance premiums.
Underwriting fees: Another lender charge for analyzing the loan application, may range from $500 to $1,000.
Attorney fees: Though not always mandatory, may be incurred if a buyer chooses legal representation to review documents or advise on the transaction, often costing between $500 and $1,500 for closing services or $150 to $500 per hour.
HOA transfer fees: If the property is part of a homeowner’s association, buyers might pay these to cover administrative costs associated with changing ownership records.

Seller’s Closing Costs in Texas

Sellers also bear a share of closing costs, with real estate agent commissions being the largest expense. In Texas, the average total commission for real estate agents is approximately 5.64% of the home’s sale price, usually split between the listing agent and the buyer’s agent. This commission is generally paid from the sale proceeds.

Owner’s title insurance policy: Customarily paid by the seller in Texas, ensuring clear title to the property. This policy can cost around $1,715 or about $5.27 per $1,000 of the home’s value.
Escrow fees: Cover the services of the escrow agent in coordinating the closing, and are typically a seller expense.
Recording fees: Sellers are responsible for fees related to the release of any existing liens on the property, estimated around $750.
Prorated property taxes: The seller pays the portion of annual property taxes accrued up to the closing date. The average property tax rate in Texas is approximately 1.44% of the assessed value, though this varies significantly by county.
HOA dues/transfer fees: If the property is part of an HOA, sellers may need to cover prorated dues or transfer fees up to the closing date.
Attorney fees: Optional for sellers, but can be incurred for legal advice or document review, potentially costing up to $278 per hour or a flat fee between $750 and $1,250 for closing services.
Repair credits/contributions: Sellers may agree to negotiated repair credits or contributions toward the buyer’s closing costs, which can range up to 2% of the sale price.

The Closing Disclosure and Estimating Costs

The Closing Disclosure (CD) is a standardized, five-page document provided by the lender to borrowers, detailing the final terms and costs of a real estate transaction. It must be provided at least three business days before the scheduled closing date, allowing time for review and comparison with the initial Loan Estimate. The CD summarizes the transaction, including the purchase price, loan amount, interest rate, and all associated fees. While the Loan Estimate provides an initial projection, the Closing Disclosure presents the finalized figures. Buyers should carefully compare the CD with their Loan Estimate to identify any discrepancies or unexpected charges, as it also details prepaid amounts and any seller credits.