Who pays closing costs in Texas?

Whether you are selling your Texas home or buying a new one, signing that contract is a big milestone in your real estate journey. But before you celebrate, be sure you understand the transaction’s true price tag. Homebuyers pay more than just the agreed-upon sale price for a property, because every sale comes with closing costs. And selling a home isn’t all profit — sellers pay closing costs, too. Both parties should be aware of how these fees affect the total cost of the transaction. Here’s what to know about closing costs in Texas.

How much are closing costs in Texas?

Closing costs can vary widely depending on many factors, including your specific lender and loan type. According to 2021 data from CoreLogic’s ClosingCorp, the national average for mortgage closing costs on a single-family home, excluding transfer taxes, was $3,860. By contrast, Texans paid an average of $4,548, which amounts to about 1.5 percent of the average Texas home’s sale price. For many states, that figure falls below 1 percent, but for others it can go up as high as 4 or 5 percent. (These numbers do not factor in real estate commission fees.)

As of June 2024 Redfin data, the median price of a home in Texas was $354,300. Closing costs of 1.5 percent on a home of that price would come to $5,314.50. However, that full amount is not paid by just the buyer or seller alone.

Who pays closing costs in Texas, buyers or sellers?

There are at least some closing costs for both buyers and sellers in every state, and the costs are typically split. At least some of these costs are often negotiated, so each deal is different.

The good news for Texans is that the state does not levy transfer taxes on real estate sales, unlike many other states. So that’s one less cost to worry about. Keep in mind that, while the state of Texas does not require you to hire a real estate attorney, it can be smart for both buyers and sellers to do so anyway, to be sure their interests are protected. If you do, the legal fees will also be part of your closing costs.

Closing costs for buyers

When buying a house in Texas, there are two main categories for closing costs: Fees related to your mortgage loan, and fees related to the property itself.

• Lender-related fees: Mortgage lenders often charge several kinds of fees, including for loan application, loan origination, credit check and underwriting. You’ll also have to pay for a home appraisal, to ensure that the property is worth at least the amount they’re lending you. And if you buy down your interest rate by paying mortgage points upfront, these will also usually be rolled into your closing costs.

• Property-related fees: Homebuyers also pay costs related to the home itself. These can include the cost of a home inspection, title search and insurance charges, property taxes and HOA fees (if it’s part of a homeowners association).

Closing costs for sellers

Typically, home sellers’ closing costs are taken out of the sale proceeds during the closing process. Here are common fees to expect.

• Real estate commissions: If you’ve hired a real estate agent, you’ll be responsible for paying their commission fee. This usually runs between 2.5 and 3 percent of the home’s sale price — on a median-priced $354,300 Texas home, 2.5 percent comes to more than $8,800. Depending on the details of your deal, the seller may or may not also be responsible for paying the buyer’s agent. If this is the case in your deal, expect that amount to double.

• Title and transaction fees: Texas sellers may be required to cover escrow and title fees, and both property taxes and HOA fees must be paid right up until the closing date.

• Seller concessions: In many real estate transactions, the buyer negotiates for the seller to cover some portion of their expenses. For instance, sellers might agree to cover the cost of needed repairs uncovered during the home inspection. If this is the case, these expenses become part of your closing costs as well.

• Mortgage payoff: If your home still has a mortgage on it, it must be paid in full before ownership can be transferred. Your lender may charge fees for this as well.

Lowering your closing costs in Texas

Closing costs can’t be avoided altogether, but there are a few ways to help keep them in check. Realtor commissions can usually be negotiated, for example, and even a small discount can amount to big savings.

There is often financial help available for first-time homebuyers, as well. Talk with your agent to see what you might be eligible for — these programs typically take the form of low-cost or no-cost loans intended to make homeownership more affordable. Texas offers statewide programs, and many cities (including Fort Worth and El Paso) offer closing-cost assistance for eligible applicants within certain income brackets.

In addition, lender fees can make up a big chunk of buyers’ closing costs, so be sure to shop around for Texas mortgage lenders to find the lowest fees. You can also shop around for title companies. While title premiums are regulated by the state in Texas, each company may offer slightly different services, so it’s still possible to choose the company that best serves your needs for the money.

Find a local real estate agent

A good local agent can help you navigate the real estate process and recommend trusted vendors and partners. For sellers, an experienced agent can help you fetch the best price possible for your home, and for buyers, they can help you find a home that fits your needs and budget. Bankrate’s home-affordability calculator can also give you an idea of how much house you can comfortably afford.

FAQs

• What is the most expensive part of closing costs in Texas?

  The priciest aspect of closing costs is usually the commission fees paid to the real estate agents involved in the sale. It used to be that the seller automatically paid these fees for both their own agent and their buyer’s — a significant expense that could add up to 5 or 6 percent of the home’s sale price. On a $350,000 home, 6 percent comes to $21,000. However, thanks to a recent lawsuit settlement, some buyers might now be responsible for paying their own agents directly. If that’s the case, each party would negotiate and pay their own agent’s fee independently.

• Do I have to pay taxes on my home sale in Texas?

  Yes — however, Texas sellers get a break in that the state does not charge a transfer tax for transferring the ownership of the home, as most states do. There will still be local property taxes due up until ownership changes hands, though. And if you make a significant profit on the sale, it may trigger the federal capital gains tax (though there are a lot of factors that depends on, including how long you lived there and whether you file taxes individually or jointly with a spouse).