Texas Real Estate Closing Costs Guide: What Buyers & Sellers Pay
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Overview of Texas Closing Costs
Closing costs are the fees and expenses incurred during a real estate transaction beyond the property's purchase price. In Texas, buyers typically pay 2-5% of the loan amount in closing costs, while sellers pay 6-10% of the sale price including real estate commissions. On a $400,000 home, a buyer might pay $8,000-$20,000 and a seller might pay $24,000-$40,000 in total closing-related expenses.
Texas has some unique closing cost characteristics compared to other states. The state does not use attorneys for closings; instead, title companies handle the settlement process. Texas also requires sellers to pay for the owner's title insurance policy by custom (though this is negotiable). The option period, a Texas-specific contract provision, involves a separate fee paid directly to the seller.
Understanding these costs before you buy or sell prevents surprises at the closing table. Your lender is required to provide a Loan Estimate within three business days of your application, and a Closing Disclosure at least three days before closing. These documents itemize every fee, giving you time to review and question any charges that seem excessive or unexpected.
Buyer Closing Costs Breakdown
Key Insight: Texas luxury real estate encompasses properties Closing costs are the fees and expenses incurred during a real estate transaction beyond the property's purchase price. In Texas, buyers typically pay 2-5% of the loan amount in closing costs, while sellers pay 6-10% of the sale price including real estate commissions. On a $400,000 home, a buyer might pay $8,000-$20,000 and a seller might pay $24,000-$40,000 in total closing-related expenses. Texas has some unique closing cost characteristics compared to other states. The state does not use attorneys for closings; instead, title companies handle the settlement process. Texas also requires sellers to pay for the owner's title insurance policy by custom (though this is negotiable). The option period, a Texas-specific contract provision, involves a separate fee paid directly to the seller. Understanding these costs before you buy or sell prevents surprises at the closing table. Your lender is required to provide a Loan Estimate within three business days of your application, and a Closing Disclosure at least three days before closing. These documents itemize every fee, giving you time to review and question any charges that seem excessive or unexpected. Buyers in Texas face several categories of closing costs. Lender fees include the origination fee (typically 0.5-1% of the loan amount), underwriting fee ($300-$800), and processing fee ($300-$500). The appraisal fee runs $400-$600 for a standard single-family home, and the credit report fee is $25-$50. These fees are charged by or arranged through your mortgage lender and are detailed on your Loan Estimate. Title and escrow fees are another significant category. The lender's title insurance policy protects the lender against title defects and typically costs $800-$1,500 depending on the loan amount. The escrow or settlement fee charged by the title company runs $400-$800. Recording fees charged by the county for filing the deed and mortgage documents are usually $100-$200. Survey costs, if required, add $350-$600. Prepaid items round out the buyer's closing costs. These include prepaid interest from closing to the end of the month, the first year's homeowner's insurance premium ($1,500-$3,500), and the initial escrow deposit for property taxes and insurance (typically 2-4 months of estimated taxes and insurance). The option fee, unique to Texas, is a negotiated amount (usually $100-$500) that gives the buyer the right to terminate the contract during the option period for any reason. The largest seller closing cost by far is the real estate commission, which historically has been 5-6% of the sale price split between the listing and buyer's agents. On a $500,000 sale, that represents $25,000-$30,000. Following recent industry changes, commission structures are more negotiable than ever, and some sellers are paying less by negotiating with their listing agent or offering reduced buyer agent compensation. Sellers in Texas customarily pay for the buyer's owner's title insurance policy, which protects the buyer against title defects. This cost is based on the sale price and is set by the Texas Department of Insurance on a sliding scale. For a $400,000 home, the owner's title policy costs approximately $2,300. Sellers also pay their share of the title company's escrow or settlement fee, typically $400-$600. Additional seller costs include prorated property taxes from January 1 through the closing date, any outstanding HOA fees or transfer charges, any negotiated repair costs or credits, and the cost of paying off the existing mortgage including any prepayment penalties. Sellers should also budget for any home warranty they agree to provide the buyer, typically $400-$600 for a one-year plan. Title insurance is a critical but often misunderstood closing cost. In Texas, there are two types: the owner's policy (which protects the buyer) and the lender's policy (which protects the mortgage lender). The owner's policy is customarily paid by the seller, and the lender's policy is paid by the buyer. Both are one-time premiums paid at closing that provide coverage for as long as you own the property or hold the mortgage. Texas is unique in that title insurance rates are regulated by the Texas Department of Insurance. This means all title companies charge the same base premium, so you cannot shop around for a lower rate on the policy itself. However, you can shop for lower title company fees (escrow fees, document preparation, etc.), which vary by company. The simultaneous issue rate provides a discount on the lender's policy when purchased at the same time as the owner's policy. Title insurance protects against hidden risks such as forged documents, undisclosed heirs, recording errors, and boundary disputes that a standard title search might not uncover. While claims are relatively rare, the consequences of a title defect can be devastating, potentially resulting in loss of the property. This is one closing cost that provides genuine long-term protection. Several closing costs are negotiable in a Texas real estate transaction. Seller contributions toward buyer closing costs are common, especially in buyer's markets or when the seller is motivated. The TREC contract includes provisions for the seller to pay a specified dollar amount toward the buyer's closing costs. FHA loans allow up to 6% seller contributions, conventional loans allow 3-6% depending on down payment, and VA loans allow up to 4%. Lender fees are also negotiable. You can shop multiple lenders and use competing Loan Estimates as leverage to negotiate lower origination fees, reduced underwriting charges, or lender credits. Some lenders offer no-closing-cost options where they cover fees in exchange for a slightly higher interest rate. This can be advantageous if you plan to refinance within a few years. The option fee and earnest money amounts are negotiated between buyer and seller as part of the initial contract. In competitive markets, higher option fees and earnest money deposits signal serious intent. In balanced or buyer-friendly markets, buyers have more leverage to keep these amounts lower. Your agent should advise you on market-appropriate amounts for your specific situation. To estimate your total closing costs as a buyer, start with 2.5-3% of the loan amount as a baseline. Add your prepaid items (first year's insurance, initial escrow deposits, prepaid interest) which vary based on your closing date and policy costs. Your lender's Loan Estimate will provide a detailed projection within three days of your application, giving you a realistic number to plan around. Sellers should estimate total costs at 7-9% of the sale price, including 5-6% for commissions and 1.5-3% for title insurance, prorated taxes, HOA fees, and other closing costs. If you owe a significant balance on your mortgage, factor in the payoff amount and any prepayment penalties. Your listing agent should provide a net sheet showing your estimated proceeds after all costs. Our Mortgage Calculator includes a closing cost estimate feature that helps buyers understand total upfront costs based on their loan amount and down payment. For a more precise estimate, request a Loan Estimate from your preferred lender and a seller net sheet from your listing agent before committing to a transaction. First-time buyers in Texas have access to several closing cost assistance programs that can significantly reduce upfront expenses. The Texas Department of Housing and Community Affairs (TDHCA) offers the My First Texas Home program and the My Choice Texas Home program, both of which provide down payment and closing cost assistance of up to 5% of the loan amount in the form of a forgivable second lien. The Texas State Affordable Housing Corporation (TSAHC) offers similar programs with competitive interest rates and assistance up to 5% of the loan amount. These programs have income limits that vary by county and household size, but the thresholds are generous enough to cover most moderate-income buyers. A homebuyer education course is typically required. Some cities and counties offer their own assistance programs. Austin, Houston, Dallas, and San Antonio all have local programs that can be layered on top of state assistance. Additionally, many builders offer closing cost incentives on new construction, especially when using their preferred lender. Check our first-time buyer guides for metro-specific program details. On closing day in Texas, you will visit the title company's office to sign the final documents and transfer funds. Bring a valid government-issued photo ID and any documentation your lender or title company has requested. Funds for closing (down payment plus closing costs minus any earnest money already deposited) must be delivered via wire transfer or cashier's check. Personal checks are not accepted for large amounts. You will sign the mortgage note, deed of trust, and numerous disclosure documents. The title company will walk you through each document, but review your Closing Disclosure carefully in the days before closing to identify any discrepancies from your Loan Estimate. Federal law requires you to receive the Closing Disclosure at least three business days before the closing date. After signing, the title company submits the documents for recording with the county. In Texas, the deed and deed of trust are typically recorded the same day or the following business day. Once recorded, the transaction is complete, and you receive the keys to your new home. The entire signing process usually takes 30-60 minutes. Congratulations on your purchase.Texas Real Estate Closing Costs Guide: What Buyers & Sellers Pay
Table of Contents
Interactive Tools to Help Your Search
Overview of Texas Closing Costs
Buyer Closing Costs Breakdown
million and above, with ultra-luxury exceeding $5 million. Premier markets include Austin's Westlake Hills, Dallas's Highland Park, and Houston's River Oaks. These properties offer resort-style amenities, acreage, and architectural distinction.
Seller Closing Costs Breakdown
Title Insurance in Texas
Negotiating Closing Costs
How to Estimate Your Total Costs
Closing Cost Assistance Programs
Closing Day: What to Expect
Sheila Smith Oliver is the founder and principal broker of Dwellverse, with over two decades of experience in Texas residential real estate. She has personally facilitated 500+ successful transactions across Austin, Dallas, Houston, and San Antonio, totaling over $250 million in sales volume. Sheila specializes in luxury properties, relocation services, and investment strategy.
Frequently Asked Questions
Buyers in Texas typically pay 2-5% of the loan amount in closing costs. On a $400,000 home with 10% down, that translates to approximately $7,200-$18,000 in closing costs including lender fees, title insurance, prepaid taxes and insurance, and escrow deposits.
By custom in Texas, the seller pays for the owner title insurance policy that protects the buyer. The buyer pays for the lender title insurance policy that protects their mortgage lender. Title insurance rates are regulated by the Texas Department of Insurance, so all companies charge the same base premium.
Some closing costs can be financed into the loan through lender credits (accepting a higher interest rate in exchange for the lender covering fees) or through no-closing-cost loan options. VA loans allow the funding fee to be rolled in. However, prepaid items like taxes and insurance escrow deposits generally must be paid at closing.
The option period is a Texas-specific contractual provision that gives the buyer the unrestricted right to terminate the contract for any reason during a negotiated time frame (typically 7-10 days). The buyer pays a non-refundable option fee (usually $100-$500) directly to the seller for this right.
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Last updated: 2026-01-27