The home-buying process can be a nightmare, and mortgage payments are the least of your worries when buying a new home. Real estate transactions can be complicated, but your real estate agent can help you through the process. A first-time home buyer can be overwhelmed with buyer closing costs, and the home’s purchase price does not include the closing costs.
In general, the Texas closing costs are shared by the seller and the buyer. Typically, the seller’s closing costs will amount to about 5% to 10% of the home sale price, and the buyer pays between 3% and 4% for closing costs. The seller pays higher closing costs, including the real estate agent commission, which could be a hefty fee depending on the home value.
What Are Closing Costs?
Closing costs are the fees that come with closing a mortgage. For a buyer, this will include the fees charged by your lender or title company. You are responsible for the appraisal fee and other costs not included in the loan amount.
It is important to remember that closing costs are negotiable in Texas, so buyers can negotiate a great deal when considering homeownership.
What Are the Closing Costs in Texas?
When you buy or sell a residential property in Texas, there will be some additional fees that you will have to consider. Who pays for closing costs in Texas?
Typically, the buyer is responsible for the following fees.
Loan Origination Fees
These are fees associated with a new loan, which is approximately 1% of the mortgage amount.
Your lender will typically ask for an appraisal of the home’s value. In Texas, professional appraisals usually cost between $300 and $500. Even if your lender doesn’t ask for one, it is a good idea to have one done so you know the property’s market value
It is also wise to have a home inspection done by a certified contractor. They will be able to identify any potential problems with the property’s structure. The buyer is responsible for paying the home inspection fee.
This is prepaid interest that can lower the interest rate on your mortgage.
This insurance covers the buyers from outstanding fees from liens, taxes, mortgages, and other bills from the previous owners. The price of the home determines a title insurance policy.
The buyer might have to pay property taxes or homeowners insurance upfront. The lender will provide the list of required payments no more than three days after the buyer applies for the loan.
A professional surveyor will determine the property’s boundary, location, and description. This will be an official description that will be reflected on your deed. Surveys typically cost between $300 and $800.
Credit Report Fee
The lender must check your credit score to approve your loan, so you must pay about $25.
If there is any issue with your credit, you can apply for FHA loans. These are sometimes granted to people with less than a stellar credit rating. These types of loans do not have as many requirements.
The seller is typically responsible for the following costs.
Real Estate Commission
You will have to pay the realtor to sell your house. In Texas, their commission can be up to 6% of the home’s sale price. However, selling a house without a realtor is an option that will allow you to save money on commission.
Outstanding Property Fees
The seller must pay any outstanding bills associated with their property. This could include utility bills or fees from the homeowners association.
Prorated Property Taxes
In Texas, you are responsible for paying the property taxes for the part of the year that you owned the house. They will prorate the fee to reflect the days you have been in the home.
In Texas, you can sometimes avoid attorney fees, but you will have to pay a fee to the title company or escrow for closing day services. There is no escaping the cost of a notary, and they are crucial when organizing the final paperwork.
One of your smaller fees will be for the title search. This ensures that you are the valid owner of the property and that there are no liens.
Municipal Lien Search
This more specific search will ensure no code violations or outstanding water, sewer, or solid waste fees.
You will receive a letter detailing any arrears and your monthly dues. The title company will check that you have paid all outstanding HOA fees.
This insurance protects the buyer from any liens that may have been missed during the title search. Typically, this insurance costs between $700 and $2000. The buyer and seller can negotiate who pays this fee, but in Texas, the seller is usually responsible for this fee.
Texas Closing Cost Inclusions
Potential home buyers might know some of the fees associated with purchasing a house. There will be some fees that will come as a surprise. The best way to have a successful house-buying experience is to consult a real estate attorney. An attorney will be able to list the costs that you will be responsible for and give you some amazing tips to sell a house in TX.
Many young home buyers think they only have to worry about saving a down payment for their dream house. Sadly, this is not the case. Buying a home can be an overwhelming investment, and mortgage insurance, transfer taxes, and escrow fees might be things that have never crossed your mind.
The buyer’s agent must also make a living, so they must be paid. You should consider a home warranty if you have any concerns about potential repairs that might need to be done to the property.
The closing day can be stressful for many homebuyers. It is the day when everything comes together. The buyer may have to add courier fees to their list of paperwork that has to move from attorney to attorney or the escrow company.
Who Pays Closing Costs in Texas? Who Should Pay?
In Texas, the fees for closing costs are negotiable, and the buyer and seller can find an arrangement that everyone is happy with.
Typically, the buyer is responsible for the following:
- Loan fees
- Appraisal and inspection fees
- Discount points
- Prepaid Costs
- Survey fees
- Credit report fees
- Real estate commission
- Property fees
- Down payment
- Mortgage Insurance
- Transfer fee
- Recording fees
- Escrow fees
Typically, the seller is responsible for the following:
- Settlement fees
- Title Search
- Municipal lien search
- HOA fees
- Title insurance
Pros and Cons of Paying Closing Costs in Texas
Unfortunately, there is no way to avoid paying closing costs. The purchase of a home is an expensive and complicated process, and you have the option to roll your closing costs into your mortgage. This may seem easy to deal with closing costs, but there are some disadvantages.
When you finance your closing costs with your mortgage, you don’t have to come up with an added lump sum. Many people struggle to save money for their down payment, so closing costs can be an added burden.
Knowing that you can include your closing costs in the mortgage might allow you to purchase a house sooner. You won’t have to save the extra money.
Your closing costs will be less expensive over the life of your loan. When you decide on a fixed-rate mortgage, your payments will not increase, and you will be building equity in your home.
You will have to pay interest on your closing costs. Is the extra interest worth the convenience? It is best to remember that the interest payments will be spread over decades. This interest may seem minimal compared to handing over a lump sum from your savings. Keeping a little nest egg for your first year of homeownership might be wiser.
You must be careful that including your closing costs does not affect your loan-to-value ratio. Lenders have a limit on the amount of money they can lend for your mortgage; if you exceed this limit, your lender may refuse your mortgage loan.
You also must remember that your mortgage is a loan paid over decades, and you will pay for your closing costs for many years. Paying your closing costs upfront will decrease your mortgage payments.
You should weigh all the pros and the cons and decide what is best for your financial situation. Financing your closing costs can make life a little more affordable at a very stressful time. However, paying your closing costs upfront makes sense if you have saved enough.
Becoming a homeowner can be a wonderful experience, and knowing everything you’ll be expected to pay is essential. Additional bills can sometimes be overwhelming if you weren’t expecting them.
Closing costs can be pretty expensive, and saving for a downpayment is just the start. You can set some money aside for your closing costs and your first year of homeownership.
Whether you want to sell a house fast in Tyler or are looking for cash home buyers in Longview, you can consider selling to a company that takes care of everything for you. We buy houses Texas homeowners are looking to get on the market. Contact Texas Land and Home today and find out how easy selling your house can be.