What to Expect at Closing: A Texas Home Buyer's Guide to Closing Costs

Closing day is the finish line in your home-buying journey, but it comes with a bill that surprises many first-time buyers. In Texas, closing costs typically run 2% to 5% of the home's purchase price — on a $400,000 home, that's $8,000 to $20,000 due at settlement. Knowing what's inside that number before you get to the table puts you in control.

What Do Closing Costs Actually Cover?

Closing costs bundle together fees from multiple parties involved in your transaction: your lender, the title company, the county, and various service providers. They generally fall into two categories: lender fees and third-party fees.

Lender Fees

• Origination fee — The cost the lender charges to process and underwrite your loan, typically 0.5%–1% of the loan amount.
• Discount points — Optional prepaid interest to lower your mortgage rate. Each point equals 1% of the loan amount.
• Appraisal fee — Your lender orders a professional appraisal to confirm the property's value. Expect $400–$600 in Texas.
• Credit report fee — Usually $25–$50, covers the lender pulling your credit history.

Title and Closing Fees

Texas is a title insurance state, and unlike most states, both the buyer and the seller typically purchase separate title insurance policies. The Owner's Title Insurance Policy protects your ownership rights; the Lender's Title Insurance Policy protects the lender. Combined, these premiums often total $1,500–$3,000 depending on the purchase price.

Other title-related costs include:

• Title search fee — Research to confirm there are no liens or ownership disputes on the property ($150–$400)
• Escrow/settlement fee — The title company's charge for managing the closing ($300–$700)
• Survey fee — Texas lenders often require a current survey of the property. Budget $400–$700 for a standard residential survey.

Government and Recording Fees

Prepaid Items and Escrow Reserves

These aren't traditional "fees" — they're funds you prepay at closing and place into your escrow account:

• Homeowners insurance — Lenders require proof of a paid-up first year of coverage (varies widely by property and location)
• Property tax reserves — Typically 2–3 months of estimated annual taxes
• Prepaid mortgage interest — Interest on the loan from your closing date to the end of that month

Prepaid items and escrow reserves can easily add $3,000–$6,000 to your total closing costs in Texas.

Who Pays Closing Costs — Buyer or Seller?

In Texas, closing costs are split by convention, not by law. The buyer typically pays lender fees, title insurance for the lender's policy, and prepaid items. The seller typically covers the real estate commission, their own title policy (the Owner's Policy), and any liens.

Seller concessions are negotiable: in a slower market, you can ask the seller to contribute toward your closing costs as part of the purchase offer — often 1%–3% of the purchase price.

How to Reduce Your Closing Costs

1. Shop lenders. Loan Estimates are standardized — get quotes from at least three lenders and compare origination fees and points directly.
2. Negotiate seller concessions. In Austin's current market, motivated sellers often agree to contribute $5,000–$10,000 toward buyer closing costs.
3. Check for assistance programs. The Texas State Affordable Housing Corporation (TSAHC) and the Texas Department of Housing offer down-payment and closing cost assistance for eligible buyers.
4. Close at the end of the month. Closing later in the month reduces the prepaid interest owed at settlement.
5. Review the Closing Disclosure carefully. Lenders must provide this form 3 business days before closing. Compare every line against your Loan Estimate and question any new fees.

The Bottom Line

Texas closing costs are significant but predictable once you know what to look for. On a $500,000 home with a conventional loan, a well-prepared buyer should budget $10,000–$18,000 for closing — separate from the down payment.

Working with a knowledgeable local broker who has navigated dozens of Texas closings means you'll never be caught off guard at the table.