So you’ve found a house that fits all of your needs: the right amenities, the right location, the right price, and now you’re ready to make an offer. But not so fast!
Before you start seriously considering buying land in Texas, you need to understand all of the additional costs that can come into play when buying a home.
When you buy a house or piece of land, the down payment for the property isn’t all you’ll need to pay. Keep reading to learn more about closing costs and how much you can expect to pay in Texas.
When you’re ready to start looking for the land of your dreams, SRC Land can help you find the perfect lot for sale in Texas.
What Are Closing Costs?
In Texas, both buyers and sellers pay closing costs on land purchases. Closing costs are meant to cover the expenses associated with the process through which land changes ownership.
Closing costs vary, but you might be expected to pay attorneys’ fees, appraisal fees, and lender fees.
Buyer’s Closing Costs
- Credit report fee – Your lender will access your credit so you qualify for a loan, typically costing roughly $50 to $60.
- Loan application fee – If you plan on getting a traditional loan, you will need to pay to apply.
- Home inspection – While not typically required, it’s a good idea to have a property inspected before purchasing.
- Appraisal fee – Appraisal fees pay for an appraiser to identify the property’s value. Lenders typically require this and can have them range between $300 to $500 based on certain land characteristics such as size, location, and property type. Even if it isn’t mandatory, you should still get it done to ensure that it’s a fair market value and avoid overpaying.
- Prepaid costs – When a buyer acquires their loan, the lender might have them cover expenses, including property taxes and homeowners’ or rental property insurance, ahead of time. The lender will list these fees in a calculation of closing costs known as the Good Faith Estimate.
- Loan Origination Fees – Loan origination fees are upfront charges the lender will charge to compensate for fees paid for a new loan application. These loan origination fees are often 1% of the rate of the mortgage amount and can be discussed if the risk factor of both the loan and the borrower is reasonable.
Seller’s Closing Costs
- Homeowners association documentation – This documentation lays out the rules and regulations new property owners will need to follow.
- Mortgage payoffs – Sellers may need to pay off a mortgage in full before selling the property.
- Real estate agent commissions – If a land seller hires a real estate agent to sell their property, they will need to pay for that service at closing.
- Outstanding bills – Any outstanding bills associated with the property will need to be paid.
- Seller concessions – Sellers may offer to pay for part of a buyer’s closing costs to sweeten the deal.
- Private mortgage insurance – This is paid by lenders to protect them in case borrowers default on their loans.
What Either or Both Might Pay
- Attorney fees – Sellers or buyers may hire a real estate attorney to ensure the purchase is legal and airtight.
- Escrow fees – If your purchase utilizes an escrow company, you may need to pay a fee.
- Recording fees – Governments require land buyers to register property documents, such as mortgage loan agreements.
- Notary fees – Most often paid by the buyer, these are charges for the administration of the purchase.
- Title search – A title search is used to guarantee that the property is free of any and all obligations and that no individual has claimed the house due to unpaid dues, legal suits, or other things.
- Title insurance – Title insurance is a type of indemnity insurance provided by title companies that insure against losses caused by defects in the title, such as liens, outstanding taxes, mortgages, and violations belonging to prior owners.
- Home warranty – A home warranty pays for the replacement of home equipment damaged through everyday wear and tear.
Typical closing costs can be higher than you might expect, so it’s important to get a good idea of what you’ll need to pay before the day actually comes.
How Much Are Closing Costs in Texas? Determining Average Closing Costs
The amount you can expect to pay in closing costs can differ from home to home, and the price paid by sellers is often different from the price paid by buyers. While buyers can expect to pay between 2% and 6% of the home’s sale price in closing costs, sellers’ typical closing costs are, averaging out at between 6% and 10% of the sale price. You can get a quick idea of your estimated closing costs by multiplying the price of the home by the upper and lower average percentage.
Other Costs To Consider When Buying Land in Texas
Closing costs aren’t the only expense that you should keep in mind when buying a home in Texas. While closing costs do cover the additional fees and expenses you can expect to pay when you buy the property, there are other things you’ll need to start paying soon after the purchase, including:
- Homeowners’ insurance
- Utilities
- Maintenance
- Property taxes
It’s a good idea to start planning for these expenses before you decide on which property to buy. For instance, if considerable maintenance is needed or utilities are particularly high, it could have a major impact on your decision.
How to Save on Texas Closing Costs
One of the best ways to reduce what you owe in closing costs is to buy land through seller financing or owner financing. Owner financing is a method for selling land in which the buyer and seller make a loan agreement directly with each other, rather than relying on a bank or other lender as an intermediary. Traditional mortgage closing costs, including things like loan application fees, can be avoided through seller financing.
Rather than paying the high costs associated with getting a loan from a traditional lender, you can gain access to favorable interest rates and lower total closing costs with seller financing. Avoid high monthly mortgage payments and mountains of red tape by buying owner-financed land in Texas.
Find the Right Seller-Financed Land for Sale in Texas
The purchase price is far from the only thing that will impact the cost of land ownership. From title fees to home insurance premiums, there are countless expenses that may be associated with closing a land purchase. The good news is that there are ways to save.
If you’re looking to buy land in Texas, seller financing might just be the solution you’ve been looking for to make that dream a reality. Seller financing lets buyers access favorable rates with lower closing costs, even if their credit is poor.
Reach out to the team of real estate experts at SRC Land to learn more about your options for buying affordable land in Texas. We can help you find the perfect place, at the perfect price.
