Buyer's Closing Costs: What Do They Include?

According to the Texas Real Estate promulgated contract, TREC 20-18, dated 11/04/2024, the Buyer's Expenses may include all or some of:

When purchasing a home, buyer expenses usually fall into three simple buckets.

1. Loan and Financing Costs

These are the costs required by the lender to approve and create your mortgage.

Typical Houston Range
1% to 2% of loan amount

Includes
• Loan application fees
• Origination charges
• Underwriting fee
• Credit report
• Appraisal fee
• Preparation of loan documents
• Interest from closing to first payment
• Amortization schedule
• PMI if required
• FHA Mortgage Insurance Premium or VA Funding Fee if applicable

Typical Example
Loan Amount 400000
Estimated costs 4000 to 8000

2. Title and Closing Costs

These are the costs required to legally transfer ownership of the property.

Typical Houston Range
1500 to 3500

Includes
• Loan title policy with lender endorsements
• Recording fees
• Copies of easements and restrictions
• One half of escrow fee
• Wire transfer fee
• Courier fees
• Brokerage fees buyer agreed to pay

These costs ensure the property title is clean and the transaction is properly recorded with the county.

3. Prepaid and Reserve Costs

These are not really “fees.” They are future housing expenses paid upfront to set up your loan account.

Typical Houston Range
3000 to 9000 depending on taxes and insurance.

Includes
• Prepaid property taxes
• Insurance premium for the first year
• Flood insurance if required
• Escrow reserves for taxes and insurance
• Special governmental assessments if applicable

These funds go into your escrow account and pay future bills like taxes and insurance.

Simple Houston Example

Purchase Price
500000

Loan
400000

Estimated Buyer Costs:

Loan Costs
5000 to 8000

Title and Closing
1800 to 3000

Prepaid and Escrow Setup
4000 to 8000

Estimated Total Buyer Cash to Close:
10800 to 19000 plus down payment

Quick Explanation for Buyers

Typical Houston buyers spend 2% to 4% of the purchase price in total closing costs depending on loan type, taxes, and insurance.

The good news: Many buyers today can negotiate seller concessions to help cover part of these costs.

If you ever want to walk through these numbers before making a move, I am always happy to sit down over coffee and run the math together.

George Chiriboga
Chiriboga Realty
Houston Texas