The housing market in Texas has been booming the past couple years, and you may be thinking about buying a home there. That means you’ll have to pay closing costs. These fees are part of every real estate transaction—but they vary from state to state.
Today, we’ll go over everything you need to know about closing costs in Texas—like how much they are, who pays for what and how you can save.
What Are Closing Costs in Texas?
Closing costs are fees people pay for services that switch ownership of a home from the seller to the buyer. The good news is, some closing costs are tax deductible.
We’ve talked about closing costs before, so check out our other article for more general info about closing costs. For now, we’re focusing on closing costs in Texas. Let’s start with the question everyone wants to know: How much are closing costs in Texas?
How Much Are Closing Costs in Texas?
In Texas, the average closing costs for buyers are typically 2–6% of the home’s purchase price. Sellers can expect to pay around 6–10% of the home’s purchase price (including real estate agent commissions).
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So, if you’re selling a house, don’t think you’re off the hook—you may actually have more closing costs than the buyer!
How to Calculate Closing Costs
Calculating closing costs is pretty easy—you just multiply the home’s purchase price by the percent you’ll pay for closing costs. In Texas, the median list price for a home was $370,000 in April 2022.1
If the buyer has to pay 3% for closing costs, that would look like:
$370,000 x 3% = $11,100 closing costs
Now, let’s say the seller’s closing costs are 8%. So they’re looking at:
$370,000 x 8% = $29,600 closing costs
That’s a big chunk of change. But don’t worry—you won’t get slapped with a huge bill all at once.
When Will You Find Out How Much You Owe?
A ballpark number is nice. But when will you find out how much your closing costs are?
Buyers will get an estimate of their closing costs when they apply for a mortgage. They can then take that estimate back to the seller and negotiate to see if the seller will cover any closing costs.
Once the buyer shares that info with the lender, both the buyer and the seller will get their final closing cost numbers at least three business days before they actually close on a house.
Who Pays Closing Costs in Texas?
Like we said, both buyers and sellers pay closing costs in Texas. But they don’t necessarily split them down the middle. Let’s dig into who pays for what—as well as which costs they can share.
Buyer Closing Costs
Buyer closing costs in Texas seem small, but they can add up pretty quick. Here’s what you’ll have to pay:
Loan Application and Origination Fees
Before they give you a mortgage, lenders have to click a few buttons and check your finances. That’s a lot of work—not! But they still charge you for processing your paperwork and setting up your loan.
Credit Report Fee
Your lender will pull your credit report several times during the loan application process to make sure your finances haven’t had a crazy change. You’ll have to pay for each credit report—even if you’re debt-free.
Before closing, you’ll need an appraiser to assess the home’s value. Then you and the seller can negotiate a final sale price based on the home’s fair market value. You’ll have to pay for the appraiser’s services up front.
Another up-front cost is the home inspection. You may be tempted to skip this step, but don’t! A home inspection is one of the best ways to make sure you’re getting a good deal on the house. And if there are any problems you missed, they should turn up during the inspection.
Many property owners might not know exactly where their property line is—especially if you’re buying land that’s been handed down for generations. With a professional survey, you’ll know exactly where your new property boundaries are.
Prepaid costs cover a variety of home-buying expenses, like your escrow account, prepaid interest, first year of homeowners insurance, and private mortgage insurance premium.
With mortgage discount points, you pay the lender an up-front fee (essentially prepaid interest) in exchange for a lower interest rate. But you can probably skip this closing cost—mortgage points aren’t always worth it.
Seller Closing Costs
Sellers have fewer closing costs than buyers, and Texas has banned some seller closing costs that other states have—like transfer tax fees. But sellers usually pay one of the biggest closing costs—agent commissions.
Real Estate Agent Commissions
Most real estate agents charge 3% of the home’s sale price for commission. But since sellers traditionally pay their agent and the buyer’s, you’ll likely pay around 6%. We know that’s a lot, but it’s worth it. Your agent will help you negotiate a better deal than you can get alone.
Texas doesn’t require an attorney to sit at the closing table with you—but an attorney may still help the lender prepare closing documents. Traditionally, the seller pays the attorney’s fee if there is one.
Homeowners Association Documents
If you live in a homeowners association (HOA), you’ll need to give the buyer a copy of the HOA bylaws. And you’ll both need an estoppel letter, or resale certificate. This document lists monthly dues and any money you owe the HOA before you sell the house.
If you have a mortgage, your lender has a lien against your house. A reconveyance fee pays to remove this lien so you can sell the home.
This one’s kind of well, duh—but you’d be surprised how many people forget. You have to pay any bills you owe before you can sell your property, whether that’s your Wi-Fi bill or a city fine.
You’ll have to use the profits from the sale to repay any money you owe your lender. The buyer will then take out their own separate mortgage instead of taking over your old loan.
You may agree to pay some buyer closing costs—like prorated property taxes or home inspection fees. But keep in mind, you can only help with a certain amount of buyer closing costs in Texas (or any state for that matter).
How much you can help depends on the buyer’s loan type and down payment, but the maximum is 9% of the purchase price. If you’re already at your limit and still need to sweeten the deal, you may need to make other concessions, like replacing the water heater or installing new cabinets.
Shared Closing Costs
Some closing costs are negotiable in Texas—it doesn’t really matter who pays them, as long as they get paid. For other closing costs, buyers and sellers typically split the costs evenly.
Escrow companies help all the money involved in a home sale get where it needs to go. Since both buyers and sellers need these services, you’ll split the costs.
Title Search and Title Insurance
During the title search, a title company checks public records to make sure the seller rightfully owns the property and there are no claims against it. Title insurance protects buyers if a problem turns up later.
The buyer and seller typically split the cost for the title search. Traditionally, sellers in Texas bought title insurance for the buyer—but these days, more buyers are paying for their own policies. Either way, the Texas Department of Insurance regulates how much those policies cost.2
Municipal Lien Search
A city can put liens on a property for code violations, structures that were built without proper permits, and so on. A municipal lien search finds these violations so the seller can resolve them before closing. Either party can pay for or split this closing cost.
Prorated Property Taxes
Most people pay property taxes every 6–12 months. So, what happens if the home sale occurs in the middle of the payment cycle?
The seller pays property taxes owed before closing. The buyer takes over paying the property taxes after closing. Usually, buyers have to pay a couple months of property taxes up front—called a tax service fee. That way, property taxes don’t get lost in the home-buying shuffle.
Home mortgages and deeds have to be filed—or recorded—with your county. The buyer pays the recording fees. The seller pays an additional recording fee to update the records after they take care of any issues, like unpaid bills or municipal liens.
Home warranties are an unnecessary closing cost, and they’re usually not worth it for buyers. The only time we recommend paying for a home warranty is if you’re selling an older house or one in a competitive real estate market.
Some closing documents need to be notarized—and if the notary charges a fee, the buyer and seller usually split the cost. But Texas has lots of free notaries, so you shouldn’t have to pay for this service on top of all your other closing costs. We recommend checking with a local bank, credit union, government office or library.
Other Costs to Consider
We’ve covered a ton of closing costs you’ll have to pay in Texas. Whew—glad that’s done! But home buyers, you’re not out of the woods yet. There are other expenses in this process that you should be aware of.
You'll definitely need to budget for the cost of the move itself. Depending on how and where you move, the whole process could cost thousands of dollars (not to mention lots of headaches from working with an overpriced moving company). One way to ease the strain of a move is with our RamseyTrusted friends at PODS Moving & Storage. They've helped with over 6 million moves and can help you move on your terms.
You’ll also have ongoing costs, like:
Wait, didn’t we already talk about these? Yes, but only for the first few months. You’ll have to pay these suckers as long as you own the property, so make sure you have a plan to save up for future property taxes.
Your first year of homeowners insurance is included in your closing costs. But you’ll have to renew your policy each year. Want help finding the right policy for your home? Talk to a RamseyTrusted insurance provider.
Utilities and Maintenance
Good news—Texas has a lower cost of living than many other states! So home maintenance may cost less if you move there. But that doesn’t mean it’s cheap. Plus, utilities in Texas cost about 3% above the national average.3 Again, you’ll need a plan to pay for these items.
Your monthly budget should include utilities, and your emergency fund can cover unexpected home repairs. But if you’ve got an upcoming expense—like replacing the windows next year—a sinking fund is a great way to start saving for those upgrades.
How to Save on Closing Costs in Texas
Buying and owning a home is expensive, so let’s talk about how buyers can save on closing costs in Texas. Sellers, don’t worry—we’ve got some saving tips for you too.
Lenders claim lender credits are a smart way to save on closing costs. And a lot of people think the lender pays the closing costs for you. Spoiler alert: They don’t!
With lender credits, the lender fronts you the money for your closing costs—then adds that amount to your mortgage, plus interest. So you actually end up paying more. Lender credits are just a big moneymaking scheme for lenders, which is why we never recommend them.
Now that that’s out of the way, let’s get to some ways you can actually save money on Texas closing costs.
Closing Cost Assistance
Some home buyers may qualify for closing cost assistance from the state of Texas. Let’s check out some of the most popular state assistance programs.
Southeast Texas Housing Finance Corporation (SETH)
SETH closing cost assistance is only available in certain communities in southeast Texas. Its main programs—5 Star and GoldStar—offer 5% and 7% of the total loan amount toward your closing costs, respectively.
But you have to meet certain criteria for income, home sales price, credit score and more. Plus, with SETH 5 Star, you’ll get stuck with a 30-year mortgage, which we don’t recommend.
P.S. The Texas Home Star Program is just another version of the SETH 5 Star.
Texas Homebuyer Program
The Texas Department of Housing and Community Affairs (TDHCA) offers closing cost assistance to first-time home buyers and veterans through its My First Texas Home Program. On the other hand, the My Choice Texas Home program is open to all home buyers.
Again, you’ll have to meet income, sale price and credit score limits. And the My Choice program sticks you with a 30-year loan—so you’ll pay thousands more dollars in loan interest than you’ll save on closing costs.
Are closing cost assistance programs worth it?
Most closing cost assistance programs aren’t worth it. These programs may seem good for you—but they’re better for the lender.
Before you jump at any of these assistance programs, do the math. Are you actually getting the best deal, or are you paying more over time? If it’s the latter, you’re better off saving for closing costs on your own.
Whether you’re a buyer or a seller, your best chance at saving money on closing costs is to negotiate! That way, both parties can work out a compromise that fits their needs. Plus, your real estate agent is an expert negotiator. They can help you get the best deal on closing costs—and the final sale price.
Finding the Best Real Estate Agent
Real estate agents are the key to a smooth home purchase or sale. They really do make all the difference! If you want to hire one of the best real estate agents in all of Texas, make sure they’re a RamseyTrusted agent.
These guys and gals are part of our Endorsed Local Providers (ELP) program. We endorse them because we trust them to serve you with excellence. And since they’re local, you can work with an agent who knows your real estate market inside and out.