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Closing costs in Texas
Retiring in Texas? You’ll save in closing costs compared to other popular snowbird states.
Many Canadians purchase real estate in the US for personal and investment purposes. Perhaps you’re considering a vacation spot, looking to make money off a rental property or are thinking of retiring in Texas. Whatever your real estate interests are, you might be wondering what the closing costs are in Texas. In this guide, you will learn about the average closing costs in Texas in addition to other important information about the closing process.
Average closing costs in Texas
Closing costs are the administrative and legal fees a property buyer will incur when finalizing a home sale. Property insurance, prepaid utility bills and title insurance are a few of the expenses that are typically included in closing costs. It’s important to estimate closing costs because they can be several thousand dollars.
Average closing costs in Texas are US$3,744 after taxes as reported by ClosingCorp. The amount you pay is typically between 1.25% and 1.87% of the final property purchase price. In Texas, the average property costs between US$200,000 and US$300,000.
Common closing costs in Texas include loan origination fees, appraisal fees, title insurance, recording fees, survey fees and credit report fees. These costs can be challenging to estimate, so be sure to set aside funds to cover all the closing costs.
Down payment and exchange rates
There is little information on how much of a down payment a foreign buyer is required to pay for a property purchase in Texas. As a general rule of thumb, Canadians looking to purchase a personal property in the US should expect to put down at least 20%. If the property will be an investment property, expect to put down at least 40%. Keep in mind that the more you put down, the more favourable you’ll be in the eyes of lenders.
As a Canadian buyer, you will likely pay closing costs and down payments in US dollars. Be mindful of this because the cost of exchanging currency will add to your total closing costs.
Who pays closing costs in Texas?
In Texas, the buyer and seller split closing costs. Below is a breakdown of who pays for what when closing a sale in Texas.
For the buyer
|Loan origination fees||Typically 1% of mortgage amount|
|Appraisal fees||Between US$350 and US$500|
|Prepaid costs (utilities, property taxes, etc.)||Varies|
|Survey fee (optional)||Between US$338 and US$670|
|Credit report fee||Between US$25 and US$75|
|Homeowners insurance||Approximately US$1,945 per year|
|Home inspection||Between US$250 and US$600|
For the seller
|Real estate agent commission||Between 5% and 6% of sale price|
|Prorated property taxes||Varies|
|Settlement fees||Between US$350 and US$600|
|Title search fee||Varies|
|Municipal lien search||Between US$100 and US$200|
|Homeowners association estoppel||Between US$200 and US$500|
Who pays for title insurance in Texas?
It is common practice that the seller pays for title insurance. The only exception to this rule is when the property is a new construction development. In this case, the buyer usually pays for the title insurance.
How do Canadians get a mortgage for a US property?
Some Canadian lenders will not be able to finance a mortgage for a US property if they don’t have legal jurisdiction in the US. The only exception to this rule is if the Canadian lender also operates in the state where you want to purchase property. Before completing an application, check with the lender to determine what states it operates in, if any.
If you cannot find a Canadian lender, you always have the option to work with a local US lender. It is very common for Canadians to buy property in Texas, so finding a lender who is willing to work with you shouldn’t be difficult. However, getting approved can be challenging as a foreign buyer. Do your best to prepare for the application process and any foreseeable complications.
What to know about buying a condo or co-op in Texas
In order to maintain the property and amenities, you will usually incur condo fees. In addition to a mortgage, condo fees can be expensive, so be sure to factor these fees into your budget.
A co-op is a unique kind of real estate ownership. When you buy a co-op, you aren’t actually purchasing real estate. Instead, you’re purchasing shares in a corporation that owns the building where you want to purchase a unit. Normally, monthly operating costs must be paid to maintain the building and common areas. These costs can be pricey in addition to loan payments.
Securing financing for a co-op purchase as a foreign buyer can be challenging. This is because the loan would not be considered a mortgage since the funds would be used for a share purchase. The lack of security and high loan amount can make you an unfavourable borrower.
On average, the closing costs in Texas are US$3,744 after taxes. This works out to be between 1.25% and 1.87% of the final purchase price. Canadians purchase real estate in Texas and the US for a variety of reasons. Whether you’re making an investment, purchasing a seasonal home or retiring in Texas, be sure to set aside funds for closing costs.
Frequently asked questions
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