What First-Time Homebuyers in Texas Need to Know About Closing Costs
Closing costs catch many first-time homebuyers in Texas off guard. You have saved for a down payment, found the perfect home, and made an offer - and then your lender hands you a Loan Estimate showing thousands of dollars in closing costs you did not fully anticipate. This guide breaks down exactly what closing costs are in Texas, what they cover, who pays them, and how to use Cottonwood's free closing cost calculator to know your numbers before you sit down at the closing table.
What Are Closing Costs in Texas?
Closing costs are fees and expenses paid at the end of a real estate transaction, in addition to your down payment. In Texas, buyers typically pay between 2% and 5% of the purchase price in closing costs. On a $350,000 home, that is $7,000 to $17,500. These costs cover a range of services - title insurance, lender fees, appraisal, survey, prepaid taxes and insurance, and escrow fees - all required to transfer ownership and fund your mortgage.
Breaking Down the Major Closing Cost Items
Title insurance is one of the largest closing costs in Texas. The owner's title insurance premium is regulated by the Texas Department of Insurance (TDI) and is calculated based on the purchase price using a tiered rate schedule. You will also pay for a lender's title insurance policy if you are financing the purchase. Other significant costs include the appraisal fee ($400-$700), survey ($400-$600 for a new survey), prepaid homeowners insurance, and the first year of property taxes in escrow.
What Is Negotiable - and What Is Not
In Texas, title insurance rates are set by TDI and are not negotiable. However, some lender fees, origination charges, and third-party service fees can be shopped. As a buyer, you have the right to choose your own title company, which means you can select a title company based on experience, service, and reputation rather than just accepting whoever the seller or builder recommends. Many builder transactions attempt to steer buyers to an affiliated title company - you are not required to use them.
Use Our Free Closing Cost Calculator
Cottonwood Title & Escrow offers a free Texas TDI-compliant closing cost calculator on our website. Enter your purchase price and loan amount to get an accurate estimate of title insurance premiums and other closing costs based on current TDI rate schedules. Knowing your numbers in advance means no surprises on closing day - and that is exactly how we believe every Texas homebuyer should experience their closing.