Closing Costs in Texas: What to Expect

How Much Are Closing Costs in Texas?

For buyers in Texas, closing costs typically range from 2% to 4% of the purchase price. On a $400,000 home, that is $8,000 to $16,000 in addition to your down payment. The exact amount depends on the loan type, lender fees, title company, and the specific county where the property is located.

Texas closing costs are slightly above the national average, primarily because of higher property tax prorations and the fact that Texas uses title companies (not attorneys) for closings, which affects fee structures.

Buyer Closing Costs Breakdown

Here is what you can expect to pay as a buyer on a $400,000 purchase in the Austin area:

Lender Fees

• Origination fee: 0-1% of loan amount ($0-$4,000). Many lenders, including us, offer competitive origination fees or waive them on certain programs.
• Appraisal fee: $450-$700. Required by the lender to confirm the property's value.
• Credit report: $50-$100. Covers pulling your credit from all three bureaus.
• Underwriting / processing fee: $500-$1,000. Administrative fee for reviewing your loan.

Title and Escrow Fees

• Title insurance (lender's policy): $800-$1,200. Required by your lender to protect their interest. In Texas, title insurance rates are set by the state.
• Title insurance (owner's policy): $1,500-$2,500. Optional but highly recommended. In Texas, the seller traditionally pays for the owner's title policy, but this is negotiable.
• Escrow / closing fee: $400-$600. Charged by the title company for handling the closing.
• Title search: $200-$400. Research to confirm clear title to the property.

Prepaid Items and Escrow Reserves

• Homeowners insurance (first year): $2,000-$4,000. Paid upfront at closing.
• Property tax prorations: Varies by closing date. You reimburse the seller for taxes they prepaid from your closing date through the end of the tax period.
• Escrow reserves: 2-6 months of property taxes and insurance deposited into your escrow account to create a cushion.
• Prepaid interest: Per-diem interest from your closing date to the end of the month. Closing at the end of the month minimizes this cost.

Government Fees

• Recording fee: $50-$150. Travis County charges to record the deed and mortgage.
• Transfer taxes: Texas does not charge a transfer tax — a significant savings compared to many other states.

Loan-Specific Fees

• FHA upfront MIP: 1.75% of the loan amount (can be financed into the loan)
• VA funding fee: 1.25-3.3% depending on service status and down payment (can be financed). Waived for veterans with service-connected disabilities.
• USDA guarantee fee: 1.0% of the loan amount (can be financed)

Who Pays What in Texas?

Texas has customary practices for who pays which closing costs, though everything is negotiable in the purchase contract:

• Seller typically pays: Owner's title policy, their share of property taxes, real estate commissions, survey (in some areas)
• Buyer typically pays: Lender's title policy, appraisal, inspection, lender fees, prepaid items, escrow reserves, homeowners insurance
• Negotiable: Survey, home warranty, repair credits, closing cost contributions (seller concessions)

How to Reduce Your Closing Costs

• Negotiate seller concessions. Sellers can contribute up to 3-6% of the purchase price toward your closing costs (limits vary by loan type). In a balanced or buyer's market, this is a common negotiating tool.
• Use down payment assistance. Many DPA programs in Texas cover both down payment and closing costs.
• Choose a lender credit option. Some lenders offer a slightly higher interest rate in exchange for a credit that covers closing costs. This makes sense if you plan to refinance within a few years.
• Close at the end of the month. This minimizes prepaid interest — one of the larger variable costs at closing.
• Shop your homeowners insurance. Insurance premiums vary widely in Texas. Getting 3-5 quotes can save hundreds per year.
• Ask about fee waivers. Some lender and title fees are negotiable. It never hurts to ask.

The Closing Disclosure

Federal law requires your lender to provide a Closing Disclosure (CD) at least three business days before closing. This document shows every cost line by line. Compare it carefully to the Loan Estimate you received when you applied — the numbers should be close, and certain fees cannot increase at all.

If anything looks different from what you expected, ask your loan officer immediately. The three-day review period exists specifically so you have time to resolve any questions before you sign.