21 Nov What are some of the costs you can expect to pay when closing on a home in Texas?

Common Closing Costs as a Texas Home Buyer

Buying a home is an exciting milestone, but it’s crucial to be aware of the various costs associated with the process. Understanding common closing costs in Texas can help you prepare financially and avoid any surprises down the road. Let’s go over some the costs you can expect to see!

Loan Origination Fees

One of the initial costs you’ll encounter is the loan origination fee, typically amounting to 1% of the mortgage amount. Negotiable based on loan risk and borrower credibility, these fees are paid to the lender or bank for creating the loan.

Discount Points

Buyers can purchase discount points upfront to lower the interest rate on their loan. These fees are negotiable and may be covered by the bank, providing a valuable opportunity for borrowers to reduce their long-term interest payments.

Appraisal Fees

Appraisal fees cover the cost of a professional appraiser assessing the home’s value, ranging from $300 to $1200. While some lenders may require this, it’s advisable to have an appraisal done even if not mandatory, ensuring you don’t overpay for the property.

Title Insurance and Title Search

Title insurance protects against losses due to title defects, with costs ranging from .6%-.9% of the property’s value. A title search, crucial for ensuring a clear property title, may range from $100-$250.

Prepaid Costs

Lenders may require prepayment of costs like property taxes and insurance. The Good Faith Estimate, provided within three days of loan application, outlines these prepaid expenses, offering transparency to the buyer.

Recording Fees

Texas does not impose taxes or fees on real estate transfers, making it more buyer-friendly. However, recording fees for documents typically cost around $.55 for each $500 of value.

Survey Fee

To define property boundaries, location, and legal descriptions, a surveyor may charge between $500-$1000 based on property size and location.

Credit Report Fee

When lenders pull your credit for loan qualification, expect to pay approximately $50 to $60 for the credit report.

Other Costs to Consider

Homeowners Insurance

Homeowners insurance, vital for covering potential damages, often requires payment at closing. In Texas, annual premiums average around $1,945, making it crucial to factor this into your budget.

Property Taxes

You will usually pay for a minimum of three months or more worth of property taxes as part of closing costs. For properties closing after April 1 but before tax bills have been released in October, prorations are based on CAD’s market value multiplied by the prior year’s tax rate.  And be aware, that we also have areas located in MUD/PID/SUD Distric that could mean a higher tax rate. I have another blog post about those on my website.

Utilities and Maintenance Costs

Beyond closing costs, consider ongoing expenses such as utilities and maintenance.

In conclusion, being aware of all financial responsibilities associated with homeownership is crucial. Knowing what costs to expect can empower you to make informed decisions and ensure a smoother transition into your new home.