What are Closing Costs in Texas Real Estate?

Introduction

When buying or selling a home in Texas, closing costs are an important part of the transaction that many people don't fully understand. These fees cover various services and expenses required to complete your real estate transaction. Knowing what closing costs to expect helps you budget accurately and negotiate effectively.

What Are Closing Costs?

Closing costs are fees and expenses paid at the end of a real estate transaction when ownership transfers from seller to buyer. These costs cover services provided by lenders, title companies, escrow companies, and other parties involved in the transaction.

Closing costs typically include:

• Title insurance premiums
• Escrow and settlement fees
• Lender fees and charges
• Appraisal and inspection fees
• Recording and transfer fees
• Property taxes and insurance
• Survey and document preparation fees

These costs are separate from your down payment and are paid at closing along with your loan amount and down payment.

Why Closing Costs Matter in Texas Real Estate

Texas has specific regulations and market practices that affect closing costs. The state's regulated title insurance rates, property tax system, and local customs create unique considerations for Texas transactions.

Texas-specific closing cost factors include:

• Regulated Title Rates: Texas has state-regulated title insurance rates, ensuring consistent pricing.
• Property Tax System: Texas property taxes are relatively high and must be prorated at closing.
• No State Income Tax: Texas doesn't have state income tax, but property taxes are higher to compensate.
• Local Customs: Different areas of Texas have different customs about who pays certain fees.
• Homestead Exemptions: Texas homestead exemptions can affect property tax calculations.

Understanding Texas closing costs helps you budget accurately and avoid surprises. Closing costs can significantly impact your total transaction expenses.

How Closing Costs Work (Step-by-Step)

Understanding the closing cost process helps you prepare for your transaction. Here's how closing costs work:

For Homebuyers:

• You receive a Loan Estimate from your lender within 3 days of application
• The estimate shows estimated closing costs based on your loan and property
• You shop for title and escrow services (you have the right to choose)
• Your lender provides a Closing Disclosure 3 days before closing
• The disclosure shows final closing costs (they can't increase significantly from the estimate)
• You review all fees and ask questions if anything seems incorrect
• At closing, you pay closing costs along with your down payment

Typical Buyer Closing Costs:

• Title insurance (owner's and lender's policies)
• Escrow and settlement fees
• Lender origination fees
• Appraisal fee
• Home inspection fee
• Survey fee
• Recording fees
• Prepaid property taxes and insurance
• Loan-related fees

For Sellers:

• You receive an estimated settlement statement before closing
• The statement shows your net proceeds after all costs
• You review commission, title fees, and other seller-paid costs
• At closing, costs are deducted from your sale proceeds
• You receive your net proceeds (usually by wire transfer)

Typical Seller Closing Costs:

Texas Example or Scenario

• Real estate commission (usually 5-6%)
• Title insurance (often buyer's choice, but seller may pay)
• Escrow fees (may be split or seller-paid)
• Property taxes (prorated)
• HOA transfer fees
• Repairs or credits to buyer
• Payoff of existing mortgage

Let's say you're buying a $350,000 home in Dallas with a $280,000 mortgage (80% loan-to-value) and $70,000 down payment. Here's a breakdown of typical closing costs:

Buyer's Closing Costs:

• Owner's title insurance: $1,400
• Lender's title insurance: $900
• Title search and exam: $400
• Escrow fee: $600
• Settlement fee: $300
• Lender origination fee: $2,800 (1% of loan)
• Appraisal: $500
• Home inspection: $400
• Survey: $600
• Recording fees: $150
• Prepaid property taxes: $2,000 (prorated)
• Prepaid homeowner's insurance: $1,200
• Total Buyer Closing Costs: $12,050

Seller's Closing Costs:

• Real estate commission: $21,000 (6%)
• Title insurance (buyer's policy): $1,400
• Escrow fee: $300 (split)
• Property taxes (prorated): $3,500
• HOA transfer fee: $200
• Existing mortgage payoff: $180,000
• Total Seller Costs: $206,400
• Seller Net Proceeds: $143,600

Total Transaction Value:

• Purchase price: $350,000
• Buyer closing costs: $12,050
• Buyer Total Needed: $362,050

This example shows why understanding closing costs is important—they add significantly to your total expenses.

Common Issues or Misconceptions

Many people misunderstand closing costs. Here are common misconceptions:

• "Closing costs are included in the purchase price" - Closing costs are separate fees paid in addition to the purchase price.
• "The seller pays all closing costs" - Buyers and sellers each pay different costs, though some fees are negotiable.
• "Closing costs are the same everywhere" - Costs vary by location, lender, and transaction details.
• "I can't negotiate closing costs" - Many closing costs are negotiable, especially title and escrow fees.
• "Closing costs are a surprise" - You receive estimates early and final numbers 3 days before closing.
• "All closing costs are necessary" - Some fees can be reduced or eliminated by shopping around.

Understanding these points helps you manage closing costs effectively.

Checklist / Guide / Document

Before closing, review our Homebuyer Closing Checklist to ensure you're prepared. Use our Closing Cost Calculator to estimate your expenses.

For detailed information about closing costs, download our Closing Cost Guide. These resources help you understand and budget for all fees.

How True North Title & Escrow Helps

At True North Title & Escrow, we provide transparent, competitive closing cost services throughout Texas. Our experienced team explains every fee and helps you understand your costs.

We offer:

• Clear, upfront estimates of all fees
• Competitive title and escrow rates
• No hidden fees or surprises
• Detailed explanations of all charges
• Coordination with lenders and real estate agents
• Expert guidance on Texas closing cost requirements

Our real estate settlement services ensure smooth closings with transparent costs. We also provide title insurance services and escrow services at competitive rates.

Local Expertise Across Texas

We serve buyers and sellers across Texas with local expertise. Our team understands regional differences in closing costs and local customs.

We provide closing services in:

• Dallas - High transaction volume with competitive rates
• Fort Worth - Historic properties and new developments
• Plano - Growing communities with diverse transactions

No matter where you're buying or selling in Texas, we're here to help.