Closing Costs in Texas: What Buyers and Sellers Actually Pay

For a lot of buyers the first hard number arrives with the Closing Disclosure, three business days before signing, and the wire figure is larger than the one in their head. Sellers get caught too: they budget for the commission and forget the owner’s title policy, the escrow fee, and a tax proration that on a December closing can run into five figures. All of it is knowable at the offer stage, which is the point where knowing it still changes what you do.

Closing costs are not the down payment

Start here, because the two routinely get budgeted as one number. The down payment is equity — it becomes part of your ownership stake the moment the deed records. Closing costs are the price of executing the transaction: the lender’s charges to originate the loan, the title company’s charges to insure and close it, the county’s charge to record it, and the money the lender collects in advance to fund the first stretch of your taxes and insurance.

The real arithmetic is: cash to close = down payment + closing costs + prepaids − credits. A buyer who saved a 20% down payment and nothing else is short.

Across Texas, the lender and title fees on the buyer’s side commonly land somewhere around 2% to 5% of the loan amount. That band does not include prepaids and escrow reserves, which in Texas are often the largest block on the page — once those are added, total cash to close beyond the down payment routinely runs higher. Treat the range as a sanity check, not a budget; your Loan Estimate is the only figure that reflects this property’s actual tax bill. Where you land inside that band is driven by three things more than anything else: whether your lender charges origination points, how large the annual property tax bill is (that sets the escrow deposit), and whether a new survey has to be produced.

One thing Texas does not have is a real estate transfer tax. In states that levy one, it can be the single largest line on the page. Here it is simply absent, which is why a Texas closing statement often looks lean next to one from the Northeast.

The buyer’s line items

Line item	What it is	What drives the cost
Origination / discount points	The lender’s charge to make the loan, plus any points paid to buy the rate down	Expressed as a percentage of loan amount; entirely a lender pricing decision, and directly comparable between lenders
Appraisal	An independent opinion of value ordered by the lender, not by you	Property type and complexity; rural, acreage, and multi-unit properties cost more than a tract home
Credit report, flood cert, tax service	Small third-party verification fees the lender orders	Essentially fixed; number of borrowers on the loan
Lender’s (loan) title policy	Insures the lender’s lien position up to the loan amount	Premium rates are set at the state level, so this does not vary by title company; issued at a steep simultaneous-issue discount when an owner’s policy is issued at the same closing
Title endorsements	Optional coverages added to the policies, often lender-required	Which endorsements the lender demands; survey deletion is the common one
Escrow / closing fee	The title company’s fee to run the closing, hold funds, and disburse	This one does vary by title company, and is usually split between the parties by custom
Survey	A drawing of the boundaries, improvements, and easements	Lot size and shape; whether an existing survey can be reused
Recording fees	The county clerk’s charge to record the deed and deed of trust	Set by the county; page count
HOA transfer / capital contribution	Association charges for moving the account into your name	Purely the association’s governing documents; varies wildly
Prepaid interest	Interest from your funding date to the end of that month	Where in the month you close — close on the 28th, pay almost nothing
Escrow deposit (taxes and insurance)	Not a fee. Reserves the lender collects to fund your future tax and insurance bills	The annual property tax bill, which in Texas is the largest driver of everything
First-year hazard insurance premium	Paid in full at closing	Coverage amount, deductible, roof age, carrier

The part that isn’t a fee at all

Prepaids and escrow reserves are usually the largest block on a Texas buyer’s Closing Disclosure, and they are not charges for anything. That money is yours; it sits in your escrow account and pays your bills. RESPA caps that cushion at one-sixth of the year’s projected escrow disbursements — roughly two months of the tax-and-insurance portion of your payment, not two months of the full payment. It is a ceiling, not a requirement; some lenders collect less. This is also where the year-two surprise is born, covered below.

The Texas title quirk: who pays for the owner’s policy

In most Texas markets the seller customarily pays for the buyer’s owner’s title policy. That is a custom, not a statute. The promulgated residential contract used across the state has a place to specify who bears that cost, which means it is a negotiable term like any other — and in a buyer’s market it gets negotiated.

Two things to keep straight. First, the lender’s policy protects the lender, up to the loan balance, and disappears when the loan is paid off. The owner’s policy protects you, up to the sales price, for as long as you own the property. They are different products covering different people, and the CFPB’s explanation of title insurance sets out the difference plainly. Second, because Texas title insurance premiums are set by the state’s insurance regulator rather than by each underwriter, shopping title companies does not change the premium. What it changes is the escrow fee and the quality of the closing team — which is a real difference, just not the one people go looking for.

The seller’s line items

The seller’s side is shorter but heavier:

• Real estate commission, as agreed in the listing agreement and in whatever the seller agreed to contribute toward the buyer’s side. Commissions have always been negotiable. Since the NAR settlement practice changes took effect on August 17, 2024, offers of buyer-broker compensation may no longer be published on a Realtor-affiliated MLS, and a buyer must sign a written representation agreement with their broker before touring a home. Compensation is still negotiated between the parties and can still be paid through a seller concession; NAR’s settlement FAQ sets out the details.
• Owner’s title policy, where custom or the contract puts it on the seller.
• Escrow fee, typically split.
• Property tax proration for the portion of the year the seller owned the home.
• Loan payoff, including per-diem interest through the funding date and any recording of the release.
• HOA resale certificate, and often a portion of the transfer costs.
• Negotiated repairs or credits, which land here as a debit rather than as a check written earlier.

If you are running the numbers on a sale, the seller’s proceeds sheet is the document that matters, and a good listing agent builds one before you ever accept an offer. That is the first thing we do on a home sale.

The Loan Estimate, the Closing Disclosure, and the three-day rule

Federal mortgage disclosure rules give buyers two documents and one hard deadline.

The Loan Estimate must be delivered or placed in the mail no later than three business days after your lender receives your application, and no later than the seventh business day before closing. That seven-day clock runs from when the lender sends it, not from when you open it — unlike the Closing Disclosure below, which is measured from receipt. Its content is prescribed line by line in Regulation Z § 1026.37, which is why estimates from different lenders are genuinely comparable.

The Closing Disclosure, whose format is set by § 1026.38, must be received at least three business days before consummation. Compare it against the Loan Estimate line by line.

What can move and what cannot

Costs are grouped into tolerance buckets under § 1026.19:

• Zero tolerance — the lender’s own origination charges and services you cannot shop for. These cannot increase without a documented changed circumstance.
• Ten percent cumulative — recording fees and services you shopped for from the lender’s written provider list. The group can rise up to 10% in total, not item by item.
• No limit — prepaid interest, escrow deposits, and your homeowner’s insurance premium. These are estimates of your own money and can move freely.

Only three changes restart the three-day clock: the APR becoming inaccurate, the loan product itself changing, or a prepayment penalty being added. Everything else is handled with a corrected Closing Disclosure at or before signing, with no new waiting period — and certain errors found after closing still have to be corrected by the lender within the timeframes set out in § 1026.19(f)(2).

Seller concessions, and why your lender caps them

A seller contribution toward closing costs is one of the most useful tools in a negotiation, because it converts a price reduction into cash the buyer needs today. Lenders cap them because an uncapped concession is a disguised price inflation.

The caps are set by the loan program and tier by occupancy and down payment: conventional limits commonly run from around 2% for investment property up to as much as 9% for an owner-occupied purchase with a large down payment, with government programs using their own figures. Confirm the exact cap with your loan officer before writing it into an offer, because a concession above the limit gets trimmed at underwriting and the excess is simply lost.

Property taxes: a December closing feels nothing like a June one

Texas property taxes are billed in arrears. Bills generally issue in the fall and become delinquent after the end of January, which the Texas Comptroller’s payment guidance lays out.

Close in June and no bill exists yet for the current year. The title company prorates using the prior year’s rates and values, the seller credits the buyer for their months of ownership, and the buyer’s escrow account pays the real bill in the fall — often for more than was prorated.

Close in December and the bill is already issued and frequently unpaid. It gets paid in full at closing out of the seller’s proceeds, and the buyer reimburses their days. The debits are much larger and there is no guessing.

Interest and property taxes may be deductible depending on your situation; IRS Publication 530 covers what a homeowner can and cannot deduct, and the treatment of points at purchase. Confirm your own position with a CPA.

The homestead exemption does not come with the house

This is the one that catches nearly everyone. A homestead exemption belongs to the owner who qualified for it, not to the property. You have to apply for your own through the county appraisal district — Texas now allows a new owner to apply in the year of purchase rather than waiting, but it is still an application you file. The Comptroller’s exemptions overview explains what is available.

More importantly, the limitation on assessed value that protected the prior owner does not carry over to you. If they owned the home for twelve years, their taxable value may be far below market. On sale, the appraisal district revalues — and your first full-year tax bill can be substantially higher than the figure your escrow account was funded against.

That is the year-two escrow shortage, and in our experience it is the post-closing surprise Texas buyers ask us about most. Your lender runs an escrow analysis, finds the account short, and your payment goes up twice: once to cover the higher ongoing tax, once to repay the shortfall. Ask your lender to fund escrow against a reassessed estimate rather than the seller’s historical bill. Not every lender will. The ones who do spare their borrowers a bad phone call a year later.

The survey and the T-47

The lender needs a survey to issue the title endorsement that deletes the standard survey exception. A new one costs money and takes time you may not have.

Often it is avoidable. If the seller has an existing survey and signs a T-47 affidavit — or, under the TREC contract changes effective January 3, 2025, the newer T-47.1 declaration, which does not have to be notarized — confirming that nothing material has changed since the survey was made (no new fence, pool, deck, or addition), the title company and lender can frequently accept the old survey. Both must agree, and either can decline. Ask for the existing survey during the option period, not the week before closing, because a survey ordered in the final week is a common cause of delayed Texas funding.

What to do next

Before you write an offer, ask your lender for a full Loan Estimate on the specific property and price you are targeting, and ask your agent for an estimated Closing Disclosure alongside it. Then ask one question: what does the escrow deposit look like if the appraisal district revalues this house at my purchase price? If the answer is vague, get a better answer before you sign.

We build those numbers for clients before an offer goes out, in Austin and across every market we work in — see our market areas — and we do the same proceeds math for sellers. If you want it run on a specific address, get in touch or start with our home buying process. More short answers are in the FAQ.