What Are Buyer's Closing Costs In Texas?

If you made the decision to buy a house or if you are wondering what it actually costs to close on a house, you came to the right place. We are going to cover three key points in this article.

• What are the closing costs in a transaction in Texas and how can you estimate yours?
• How can you lower your closing costs?
• When will you know more percise closing costs?

If you are reading online it can be hard to figure out what you will actually owe at closing. This is largely due to the fact that different states will have different costs and they can swing from 1.5% to 10% which is too wide of a range to really be valuable. Other factors will lean heavily on the type of loan you have and your credit scores.

How To Budget For Closing Costs

Origination Charges: 

If you are using a loan you will have some sort of origination charge at closing. These are commonly between $800-$3,500 in a transaction to cover underwritting fees etc. In addition, you may also have points that you pay depending on your credit score or the type of loan you are purchasing.

Services Borrower Did Not Shop For

These are mainly costs associated with your loan. On average we see these costs fall between $1,800-$3,000. These will include many things, such as:

• Appraisal
• Flood Certification
• Lenders Attorney
• MERS 
• Tax Related Servicing
• Third Party Processing
• Credit Report Fee

These are costs your lender incurs as they work dilligently on getting you approved and deliver the underwritting needed to fund.

Services Borrower Did Shop For

These costs are mainly driven by your Title company. Your Buyer's Real Estate Agent will be able to guide you as to which title company you can use in a transaction. In general these fees range from $500-$1,500. If you opt to also pay the title insurance then this will be an additional cost at closing. In Texas sellers typically pay the title insurance and title insurance ranges from 0.6%-0.9% of the purchase price. These will include fees such as:

• Title Courier Fee
• Title E-Recording
• Title Endorsements
• Title Guarantee Fee
• Title Lenders Title Insurance
• Titles Settlement or Closing Fee
• Title Survey Fee

Taxes and Other Government Fees

This is a fee to file the deed in Harris County it runs around $141.

Prepaids

These costs can vary quite a bit. They are largely composed of Insurance that is prepaid and interest for the first month that is prorated until the date of your first mortgage payment. This means that knowing what your monthly mortgage payment will be and getting an estimate on insurance will help you firm up what these numbers might be.  These can vary a lot from location and of course higher price points carry higher interest payments. We buy houses in Houston as investment properties and we bough several this year that were all below $230,000. To give you a ball park on what we paid here it was between $2,300-$4300.

Initial Escrow Payment at Closing

If your lender requires you to escrow your taxes and insurance then you will also need to pay additional funds at closing to fill up the escrow account. Insurance and taxes are paid on an annual basis and when they bills are due there needs to be money in that account to pay those bills. The bank will calculate what it thinks you will need for that first bill and add this to your closing costs. As you make continuous payments on your mortgage it will add money to the escrow that will be used the following year. The two variables to this are your property taxes and the cost of your insurance. These can vary a lot in the greater Houston area as taxes can range from $3,000-$20,000+++. To give you a ball park idea the same rental houses we bought this year around $230K or less had an average escrow payment between $2,770-$5055. We can help you find the information you need to calculate these.

Other Fees:

This is mainly fees for HOA. The fees you pay are outlined in the TREC 1 to 4 contract so this is very much within your control to negotiate. In general we usually see buyers offering between $200-$500 for HOA fees and the seller will pick up the rest.

How Can you Lower Your Costs at Closing In Texas?

You can lower your costs in two primary ways.

1. Shop for Lenders and negotiate their fees.
2. Ask for Seller's Concessions in your contract. Seller's will frequently help you pay some of your closing costs to incentivise buyers to make an offer. This can significantly help you reduce your money out of pocket at the closing table.

When Will I Know What My Closing Costs Will Be?

One of the first steps you take in the buying process is getting a preapproval letter from your lender. With your preapproval letter you can request to get an estimate of what your closing costs might look like. They will make a few assumptions on what property you might pick and taxes in that area to help fill in a hypothetical closing.  

Once you get a contract accpted it is a good practice to firm up what your rough numbers will be with taxes and insurance during your option period. It will still be off by a bit from the final numbers as the underwritting team work with your title company and insurance provider but it will be much closer.  Around 3 days before closing you will receive a Closing Disclosure, also known as a CD or a HUD, that will outline exactly what your costs will be.

Reach Out To An Agent on the A List Team

Let us know if you have any questions or if we can walk you through a more detailed lay out. We hope to see you at the closing table! Give us a call or fill out a form on our site.