How Much Are Closing Costs When Buying a House in Austin, TX?
When you buy a house, you know the price of the house and the percentage you plan to put down, but what about additional costs? How much money will you actually have to bring to the closing table? The answer can vary depending on many factors. For example, sometimes a seller will pay for a portion or all of a buyer’s closing costs. Regardless of who covers the expense, it’s important to know what’s being paid.
Unless you are purchasing your home in cash, I generally recommend talking to a lender as early in your home buying process as possible (even a year or more before you buy). After you apply for a loan, your lender will provide you with a loan estimate that will list all estimated closing costs. It’s important to note, this is just an estimate and your actual figures will change. Before close, your lender will provide you with a closing disclosure that will list your actual closing costs and how they compare to the initial estimate. I work closely with local lenders. Please reach out for a referral to get your personalized loan estimate.
The typical closing costs when buying a home in Texas are:
Down payment
If you are financing your home purchase, your biggest closing cost is your down payment. Your down payment amount will depend on your loan type and your particular financial situation, but it is usually 3%-20% of the purchase price. The notable exception is VA borrowers, who are not required to put anything down but who will still have many of the other closing costs listed below. There are also down payment assistance programs that your lender can talk to you about. These programs are subject to qualification and do come with strings attached (for example, a higher interest rate or extra fees). FHA loans in Texas typically require 3.5% down. Conventional loans for primary residences typically require a minimum 3% down. If you put down less than 20% on a home, you will probably be required to buy private mortgage insurance ( PMI) based on the amount borrowed. In some cases, PMI is less than $100/month. With some loan types, PMI can be removed once you have 20% equity in your home (earned over time with payments, home improvements, or market appreciation). Generally, the more you put down on a home, the less risky you are in the banks’ eyes and the better loan terms you will receive. I work closely with local lenders, reach out for a referral.
Earnest Money
Your earnest money is usually 1% of the sales price of the home. It is paid to the title company within three days of contract execution to show the sellers and other interested parties that you are a serious buyer with the funds to purchase a home. This amount is credited toward your final cash to close. If you do not close through no fault of your own according to the contract terms, your earnest money will be refunded to you. If you breach the contract — for example change your mind about the home a day before you close — the seller could keep your earnest money as damages. For new construction, you typically do not have an option period and you pay a builder-determined deposit rather than earnest money.
Option Fee
Option fees, while negotiable, are typically $200-$1000. Option fees are paid to the title company within three days of going under contract. They are meant to buy you a due diligence period in which you can have inspections done and terminate the contract for any reason. If you close, the option fee is credited toward your final cash to close. If you don’t close, it is never refunded to you, even if you terminate the contract for an acceptable reason according to the terms of the agreement.
Inspection & Repair Estimates
Inspections can be pricey, but they are well worth their cost!! Inspections are generally priced based on the size of the house, and inspection fees are paid directly to the inspector at the time of inspection. Base cost starts at $500-$600 and goes up from there. Be sure to factor in more if you need to inspect a pool, septic system, propane tank, or if you’d like a wood destroying insect report (required by some lenders). I also often recommend a sewer scope. That runs around $300. Inspectors are generalists and do not provide quotes for repair. For example, they might note that an A/C unit is not cooling properly, but they will not be able to tell you why. In that case, you might want to hire a licensed HVAC technician to formally diagnose the problem and provide an estimate. Be prepared that many contractors charge trip & diagnostic fees of between $50-$150. For new builds, I commonly recommend phased inspections at different times throughout the construction which adds to the cost but which are well worth it in terms of quality of final construction.
Survey
A survey is almost always required by the lender and/or title company. If the seller has an existing survey, it is possible that will be sufficient. In that case, the seller will complete an affidavit verifying no changes have been made to the property since the last survey. However, depending on the age of the survey and whether changes have been made to the property, a new survey might be required. The cost of a new survey can range from a few hundred to a few thousand dollars depending on the complexity of the property. Whether the buyer or seller pays this cost is part of the negotiation process.
Appraisal
If the buyer is financing the home purchase, the lender will require an appraisal. This involves having a licensed appraiser, chosen by the lender, assess the fair market value of the subject property. Lenders want to ensure they are not lending more than the market value of the property. The starting price of an appraisal is around $500 and is usually paid for by the buyer. Appraisals are voluntary for cash buyers.
Home Warranty Policy (Optional)
Many sellers will offer to pay the cost — up to a maximum amount — of a 12-month home warranty policy to cover major home systems and/or appliances. It is up to the buyer to choose the policy and to pay any difference between the cost of the policy and the seller contribution. If the seller does not offer a contribution, it is entirely up to the buyer whether they want to purchase this extra insurance. Home warranty policy prices vary based on inclusions and start around $500/year.
Lending Fees
Lenders can charge a variety of fees, including loan origination, loan application, underwriting, and credit check. These fees can get into the thousands of dollars and vary significantly by lender, so it is important to research in advance before choosing a lender.
Title & Document Fees
Title fees can cover a variety of expenses such as title search fee, escrow fee, notary fees, deed prep fee, recording fees and attorney fee. These fees usually total $500-$1,000.
Title Insurance
The buyer typically pays for the lender’s title insurance policy which is usually less than .01% of the purchase price of the home. The seller typically pays for the owner’s title insurance policy, which is significantly more. Sometimes, if a buyer is trying to compete with multiple offers, they will offer to pay for their title policy. Title insurance rates are set by the Texas Department of Insurance. You can see title insurance costs here. There are also optional title policy endorsements that the buyer can choose to purchase.
Taxes
Property taxes in Texas are paid in arrears, which means that when you pay your taxes in January 2025 you are actually paying 2024 taxes. So when a buyer closes on a home, the seller will credit the buyer the estimated amount of taxes for the time that the seller owned the home, and the buyer will pay the entire tax bill the next January. For instance, if the closing takes place in August and the estimated tax bill for the year is $12,000, the seller will credit the buyer ~$7,000 for taxes. If you have an escrow account, your lender will likely require you to pay a portion of your taxes up front at closing.
Home Insurance
The buyer must arrange for homeowner’s insurance before closing and will usually pay the annual premium at closing. Insurance rates vary greatly so it is worth taking the time to compare rates from several companies. Depending on your financing (and whether you are required to escrow your taxes & insurance bills), you might have the option to pay for insurance monthly instead of up front.
HOA Fees
If the property is in a mandatory HOA, prorated dues will be required at closing. There is often an HOA transfer fee as well. HOA transfer fees are an estimated $100-$500.
Realtor Commissions
Realtor commissions are set by individual agents and will be paid according to the terms of the Buyer Representation Agreement. It is typical for sellers to pay for the buyers’ representation, but in some cases the buyer might need to cover this cost. Reach out for my pricing.
Total Amount Needed to Close
Assuming you are financing, The largest portion of the cash needed to close is the down payment. That down payment is typically between 3%-20% of the purchase price. If financing, you can expect to pay an additional 1-5% of the purchase price in closing costs for all the items listed above. Your closing costs will be a lot lower if you are able to pay cash for a home.
The amount needed to buy a house can vary drastically: There are some loan products that allow you to roll some closing costs into the loan amount, sellers often cover at least a portion of a buyers’ closing costs, and there are alternative financing options that can differ from what’s typical.
If you have questions about affording a house, please reach out to discuss your options!