WHAT ARE YOUR CLOSING COSTS WHEN BUYING A HOME IN HOUSTON?
When buying a house in Houston, there are other costs you need to know about other than your down payment. Most home buyers don’t know all these “hidden fees” because no one talks about them. Well, I’m here to break them all down for you so when it comes time for you to buy a house in Houston, you can make the most educated decision possible. Let’s go!
First and most obvious – your down payment.
The minimum all depends on the type of loan you are going with and is a percentage of the sales price. 3%, 3.5%, 5%, 0%? Make sure you check out the videos listed below to find out more about down payments and loan types.
How Much is the Down Payment to Buy a Home
LOAN ORIGINATION FEES
This is a fee from your lender and is something you can shop for. It’s common to see 1% of the loan amount as an origination fee. But some lenders charge less than that. So be sure to shop lenders to get not only the best interest rate, but a cheaper origination fee.
The origination fee will be the largest fee that your lender charges, but they also charge other fees as well. Be sure to ask your lender for an initial disclosure showing all of the fees that will be associated with your purchase.
So, this part all depends on what time of year you are buying a house and your lenders standard procedures. If you close on the house in April, you will receive a tax credit from the seller for January through April. But your lender could want 3, 6, or even a years worth of property taxes paid upfront in your escrow account. It’s best to speak with your lender on this one if you want exact figures, but for now, just know this is something that has to be paid regardless.
Here is something you can shop for! And in my experience, going with a local agency is better than going with those big box companies you see on tv. But to each their own! Again, every lender is different on their requirements, but I would go ahead and plan for paying the policy premium for 1 year up front at closing.
If you would like our recommendation on a great local insurance agent (which we personally use), contact us and we will provide their information!
Another thing to consider here, especially when buying a house in Houston, is getting flood insurance. If the house you are purchasing is in a flood zone, your lender will require flood insurance and will have you pay for up to 1 year of the policy up front at closing.
Even if you aren’t in a flood zone, we recommend getting it anyways. Ever since hurricane Harvey, people now realize that it’s better to have it and not need it, than to need it and not have it. Protect yourself. If you are not in a flood zone, the policy is around $600 for the year. That’s pretty cheap considering just one inch of floodwater in your home can cause about $25,000 in damage, per FEMA.
If you are located in a flood zone and required to get flood insurance by your lender, you will also need an elevation certificate. This is a document, which can typically be provided by a survey company, that shows the elevation of your property. This costs around $300 depending on the company providing it and the property size.
Yes, another type of insurance for your home. Living near the coast definitely has its perks, but it also comes with a cost.
If you are new to the Houston area, you may not know this, but hurricanes are a regular occurrence around here. And with hurricanes happening often, that means we have to have windstorm insurance to protect against any damage that a potential hurricane may cause.
If you are purchasing a home in one of the counties closest to the coast line, Brazoria County or Galveston County, you will be required to get windstorm insurance. This is another insurance fee that will be required of you to pay up front.
These prices can range drastically depending on the insurance carrier that you decide to go with, so speak with your insurance agent for a quote and ask the lender how many months they will want up front at closing, to get a good idea of how much this will cost you at closing.
Again, if you would like our recommendation on a local insurance carrier, who covers homeowners, flood and windstorm insurance (and even auto if you wanted to combine that with it as well), contact us and we can provide you with their information.
This is a requirement from your lender if you are financing your home. The appraisal fee depends on how complex or unique a property is. On average though, the cost to get one is around $450. And most of the time, your lender may want you to pay for this upfront before they send someone out.
A survey is also a requirement from your lender. But, you may be able to avoid this fee if the seller has an acceptable survey to provide you. In this case, you may not have to purchase a new one.
If you do have to end up purchasing a new survey, the average cost is $500, unless of course you have acreage. If you are purchasing acreage, the survey cost can run you about $750 or more.
If you are needing to purchase a new survey in the Houston area, we recommend ProSurv. We use them quite frequently and have even used them for the purchase of our own home.
There are a TON of small miscellaneous items that you will see on the final settlement statement at closing. These items range from recording fees, escrow fees, document prep fees, attorney fees, lender title policy, notary fees, etc… all of which should be less than $1,000 total.
WHAT ABOUT YOUR REALTOR?
Don’t worry about them, you don’t have to pay their commissions (in most cases). You have enough to worry about. But be sure to check out the video we did covering how agents get paid to learn more about that topic.
HOW TO GET CLOSING COSTS COVERED BY THE SELLER
You may be thinking to yourself, “this is a lot to come up with after your down payment.” Don’t panic! There are some ways that you can receive help.
First, you and your agent need to come up with a strategy that works for you. But, if you need help with closing costs, you can potentially get them covered by the seller. There are a few different ways to go about doing this, which can get detailed and confusing for a buyer sometimes. So the best thing is to schedule a time to talk with us or with the agent you have hired to help you purchase a home.
Another way to get help with all of this money that you will need to bring to closing, is a down payment assistance program. Now, before you get too excited about this, this will only apply to certain people. There are several different requirements to be able to receive this, so it is best if you speak with your lender about if you qualify or not. If you would like to reach out to one of our preferred lenders, they will be able to answer questions you have about this as well.
That is it. That is the majority, if not all, of the costs that you will see at closing on your settlement statement. We understand that it can be overwhelming and a lot to process all of the fees (and how much money) you will be required to pay at closing when purchasing a home. Feel free to reach out to us if you have any questions about any of this. We are here to help you in any way we can!