Closing Costs Explained
Buyer Closing Costs
Buyer closing costs in Texas seem small, but they can add up pretty quick. Here’s what you’ll have to pay:
Loan Application and Origination Fees
If financing the loan, the lender charges usually a loan origination fee, application fee and underwriting fee. Every lender is different but these usually cost between $800-$2,000.
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Credit Report Fee
Your lender will pull your credit report several times during the loan application process to make sure your finances haven’t had a crazy change. You’ll have to pay for each credit report—even if you’re debt-free. These usually cost $50-$80.
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Appraisal Fee (Paid prior to Closing)
Before closing, you’ll need an appraiser to assess the home’s value. Then you and the seller can negotiate a final sale price based on the home’s fair market value. These usually cost $400-$900.
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Home Inspection (Paid prior to Closing)
Another up-front cost is the home inspection. A home inspection is one of the best ways to make sure you’re getting a good deal on the house. And if there are any problems you missed, they should turn up during the inspection. These usually cost $300-$700 pending size of home, age of home and any add-ons such as septic systems, sprinkler systems, and pools.
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Survey Fee
Many property owners might not know exactly where their property line is— If A new survey is needed it is usually a Buyers expense. See more about surveys here. A Survey usually costs $400-$700.
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Prepaid Costs
Prepaid costs cover a variety of home-buying expenses, like your escrow account, prepaid interest, first year of homeowners insurance, and private mortgage insurance premium. These usually make up the bulkload of the actual closing costs. However they are not to be considered as fees, as this is what helps set up your escrow account.
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Discount Points
With mortgage discount points, you pay the lender an up-front fee (essentially prepaid interest) in exchange for a lower interest rate. A discount point is a .25% lower interest rate for 1% of the loan amount. So when financing $300,000 at 5.25%, if you want a 5% rate its going to cost you $3,000.
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Seller Closing Costs
Sellers have fewer closing costs than buyers. But sellers usually pay one of the biggest closing costs—agent commissions.
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Real Estate Agent Commissions
While commissions are always negotiable, the normal Real Estate commission in Texas is 5%-6%, usually split in half between Buyers Agent and Listing Agent. So 2.5-3%, per side.
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Homeowners Association Documents
If you live in a homeowners association (HOA), you’ll need to give the buyer a copy of the HOA bylaws by purchasing a resale certificate. This document lists monthly dues and any money you owe the HOA before you sell the house. HOA Resale Certificates range from $300-$1200.
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Mortgage Payoff
You’ll have to use the profits from the sale to repay any money you owe your lender. The buyer will then take out their own separate mortgage instead of taking over your old loan.
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Seller Concessions
If you negotiated a repair credit instead of physically fixing any items, these are considered a closing cost.
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Shared Closing Costs
Some closing costs are negotiable in Texas—it doesn’t really matter who pays them, as long as they get paid. For other closing costs, buyers and sellers typically split the costs evenly.
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Escrow Fees
Escrow companies help all the money involved in a home sale get where it needs to go. Since both buyers and sellers need these services, you’ll split the costs. These are usually $300-$600 per side.
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Title Search and Title Insurance
Title insurance is dictated in the TREC 1-4 contract to be paid by the buyer or Seller. General rule of thumb is title insurance costs .75% of the sales price. Many Title companies including OnDemand Realty's preferred title company Tiago Title have a title cost calculator you can use to determine the cost.
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Prorated Property Taxes
The taxes are prorated from the day of closing. Depending on what time of the year it is, the proration may mean either the Buyer or the Seller owe the other party money to make whole on the year.
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Recording Fees
Home mortgages and deeds have to be filed—or recorded—with your county. The buyer pays the recording fees. The seller pays an additional recording fee to update the records after they take care of any issues, like unpaid bills or municipal liens. These are usually $50-$250 per side.
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