The cost of buying a house in Texas is more than the down payment. A first-time buyer should budget for the down payment (0% to 3.5% on most first-time buyer loans), closing costs, prepaid property taxes and homeowners insurance, earnest money, a Texas option fee, inspection and appraisal fees, and any cash reserves the lender requires. Even a 0 down loan still requires cash for these items.
Most first-time buyers start with one number: the down payment.
Lenders, title companies, and sellers look at a bigger number called cash to close.
Let’s break that number down and show what it includes so you can build a budget you can rely on through closing.
What is the total cost of buying a house in Texas?
The total cost of buying a house in Texas is the sum of your down payment, closing costs, prepaid expenses, and escrow deposits, plus money you spend before closing on earnest money, an option fee, inspections, and an appraisal.
Your lender shows most of these on your Loan Estimate, and the final figure appears on your closing disclosure at least three business days before closing.
Cash to close is the amount you must bring to the closing table after credits such as earnest money and seller concessions are applied. It is not the same as your down payment.
On a low down payment loan, closing costs and prepaids can equal or exceed the down payment itself.
For a full overview of buying your first home in Texas, see our complete mortgage guide for Texas home buyers.
When is each cost paid?
Let’s see what each cost is, when it comes due, and whether it counts toward your cash to close.
| Cost | What it is | When it is paid | Credited at closing? |
|---|---|---|---|
| Earnest money | Good-faith deposit held by the title company | Within 3 days after the contract’s effective date | Yes, applied to your down payment and closing costs |
| Option fee | Fee paid to the seller for the right to terminate during the option period | Within 3 days after the contract’s effective date | Yes, credited to the sales price if you close |
| Home inspection | Inspector’s review of the home’s condition | During the option period | No |
| Appraisal | Lender-ordered estimate of the home’s value | After loan application, before closing | No (sometimes collected at closing instead of upfront) |
| Down payment | Your equity in the home | At closing | Not applicable |
| Closing costs | Lender, title, escrow, recording, and third-party fees | At closing | Not applicable |
| Prepaids and escrow deposits | Homeowners insurance premium, property tax escrow, prepaid interest | At closing | Not applicable |
| Reserves | Savings left over after closing, if required | Verified before closing, kept in your account | Not spent |
“The down payment is the number buyers plan around, but cash to close is the number that decides whether they close. We walk every first-time buyer through both before they write an offer.”
— Charlie Cooper, President, Austin Capital Mortgage
How much is the down payment for a house in Texas?
The down payment for a house in Texas on a first-time buyer loan can range from 0% to 3.5% of the purchase price, depending on the loan program.
Putting 20% down is not required on most programs, although a larger down payment lowers your loan amount and may remove or reduce mortgage insurance.
Minimum down payments by loan program:
- Conventional loan: as little as 3% down through programs designed for first-time buyers and eligible income levels, subject to credit and underwriting.
- FHA loan: as little as 3.5% down with a credit score of 580 or higher. FHA mortgage insurance applies.
- VA loan: 0% down for eligible service members and veterans with full entitlement.
- USDA loan: 0% down for eligible properties in USDA-designated areas, with household income limits.
For credit score, DTI, and documentation details on FHA financing, see the FHA loan requirements checklist.
On a $300,000 home, 3% down is $9,000 and 3.5% down is $10,500. These are minimums; loan eligibility depends on credit, income, assets, and program guidelines.
Texas buyers may also qualify for down payment assistance (DPA), which is money from a state or local program that covers part of the down payment or closing costs.
Statewide options run through the Texas Department of Housing and Community Affairs (TDHCA) and the Texas State Affordable Housing Corporation (TSAHC), and some cities run their own programs. Funding, income limits, and availability change, so confirm current terms with a participating lender.
Can a first-time home buyer in Texas really buy with 0 down?
Yes, a first-time home buyer in Texas can buy with 0 down through a VA loan, a USDA loan, or a low down payment loan paired with down payment assistance, if the buyer meets that program’s eligibility rules.
However, 0 down does not mean $0 out of pocket. You still need cash for earnest money, the option fee, inspections, the appraisal, closing costs, and prepaids unless seller concessions or assistance cover them.
“Zero down is a real option for the right borrower, but it’s a down payment number, not a closing number. The buyers who have the smoothest closings are the ones who planned for everything else too.”
— Charlie Cooper, President, Austin Capital Mortgage
What do earnest money, the option fee, inspections, and the appraisal cost?
Earnest money, the option fee, the home inspection, and the appraisal are the costs Texas buyers pay before closing, usually within the first two to three weeks after an offer is accepted. Earnest money and the option fee are credited back at closing. Inspection and appraisal fees are not.
How much earnest money do Texas buyers put down?
Earnest money in Texas is commonly around 1% of the purchase price, though it is negotiable and can be higher in competitive markets. Under the standard Texas Real Estate Commission (TREC) One to Four Family Residential Contract, the buyer delivers earnest money to the title company within 3 days after the contract’s effective date.
The money is applied to your down payment and closing costs at closing. If you back out after the option period without a valid contract reason, you can lose it.
What is the Texas option fee?
The option fee is a payment to the seller that buys you an unrestricted right to terminate the contract during a negotiated number of days, called the option period. Option fees are negotiated and are commonly a few hundred dollars. The fee is non-refundable if you terminate, but it is credited to the sales price if you close.
What should you budget for inspections and the appraisal?
A general home inspection in Texas commonly costs a few hundred dollars and is paid during the option period. Specialty inspections such as foundation, roof, sewer line, or wood-destroying insect reports add to that cost.
The lender orders the appraisal, which is an independent estimate of the home’s value, and the fee is often collected upfront after you apply. Some Texas purchases also require a new property survey if the seller’s existing survey cannot be used.
What closing costs should Texas first-time buyers expect?
Closing costs for Texas first-time buyers are the fees charged to originate the loan and transfer the property, commonly estimated at 2% to 5% of the loan amount before prepaids. The exact amount depends on the loan program, lender fees, the price of the home, and whether you pay discount points.
Common buyer closing costs in Texas include:
- Lender charges: origination, underwriting, and any discount points you choose to buy.
- Lender’s title insurance policy: required by the lender to protect its lien.
- Escrow or settlement fee: the title company’s fee for handling the closing.
- Recording fees: county fees to record the deed and deed of trust.
- Third-party fees: credit report, flood certification, tax certificate, and survey if needed.
The Texas Department of Insurance (TDI) sets the premium rates, so every title company charges the same basic premium for the same policy.
In most Texas resale transactions, the seller customarily pays for the owner’s title policy, though this is negotiable and often shifts to the buyer on new construction. Escrow and other title company fees can vary, so compare them on your Loan Estimate.
Seller concessions, which are seller-paid credits toward your closing costs and prepaids, can reduce your cash to close. Each loan program caps how much the seller can contribute.
A lender credit, in exchange for a slightly higher interest rate, is another option. Rates and payments vary; request a personalized quote to see how these tradeoffs apply to you.
What are prepaid expenses and escrow deposits?
Prepaid expenses are costs you pay at closing for items that cover time after you move in, such as the first year of homeowners insurance and interest from your closing date to the end of the month. Escrow deposits are the starting balance your lender collects to pay future property tax and insurance bills from your escrow account.
Prepaids and escrow deposits usually include:
- Homeowners insurance: the full first-year premium, paid at or before closing. Texas homeowners insurance premiums rank among the higher premiums nationally, so get quotes early.
- Property tax escrow deposit: several months of property taxes collected up front to fund your escrow account.
- Prepaid interest: daily interest from your closing date to the end of that month.
- Mortgage insurance or HOA dues: if your loan or property requires them.
Texas property taxes work differently from many states. They are assessed by local taxing units such as the county, city, school district, and special districts like a municipal utility district (MUD), and bills are paid in arrears, generally due by January 31 of the following year.
At closing, the seller usually credits you for their share of the current year’s taxes, but your lender still collects an escrow deposit so the account can pay the full bill when it comes due. Closing later in the year can mean a larger tax credit from the seller and a different escrow deposit.
“Prepaids are where Texas buyers get surprised. Between insurance and property taxes, that line can run thousands of dollars, and it has nothing to do with your down payment.”
— Charlie Cooper, President, Austin Capital Mortgage
Do lenders require cash reserves for a first home?
Cash reserves are savings you still have after closing, measured in months of your total housing payment.
Many first-time buyer loans on a one-unit primary residence do not have a set minimum reserve requirement, but automated underwriting may require reserves based on your credit, debt-to-income ratio (DTI), and down payment.
DTI is your monthly debt payments divided by your gross monthly income.
Qualification standards can vary by investor and underwriting guidelines, so ask your lender early whether your file needs reserves and how many months. Reserves can usually come from checking, savings, and some retirement or investment accounts, subject to program rules.
Even when your lender does not require reserves, keep a personal cushion after closing. New homeowners face move-in costs, utility deposits, and early repairs that are not part of cash to close.
How much will your monthly mortgage cost in Texas?
Your monthly mortgage cost in Texas is principal and interest plus escrowed property taxes and homeowners insurance, often called PITI, along with any mortgage insurance and HOA dues.
In Texas, property taxes and insurance can make up a large share of the payment because Texas has no state income tax and local governments and school districts rely heavily on property taxes. Combined local rates vary widely by county, city, and district.
Your monthly payment typically includes:
- Principal and interest: based on your loan amount, rate, and term.
- Property taxes: your annual tax bill divided by 12, collected through escrow.
- Homeowners insurance: your annual premium divided by 12, collected through escrow.
- Mortgage insurance: required on many low down payment loans.
- HOA or MUD-related charges: if the property is in an HOA or a special district.
The Texas residence homestead exemption can lower your property tax bill once you own and live in the home. Texas voters approved an increase in the school district homestead exemption from $100,000 to $140,000 of taxable value in November 2025. You file the exemption with your county appraisal district, and your lender may adjust your escrow payment after it takes effect.
A Real Borrower Scenario
A first-time buyer in the Austin area went under contract on a $300,000 home with an FHA loan and asked how much cash she would actually need. The challenge was that she had saved about $11,000, believing the 3.5% down payment was the full cost.
Her estimated figures (illustrative only; actual costs vary):
- Earnest money of $3,000 and a $300 option fee, both credited at closing
- Inspection and appraisal fees of about $1,250, paid before closing
- Down payment of $10,500
- Closing costs of about $6,500
- Prepaids and escrow deposits of about $5,000
Her loan officer negotiated $4,500 in seller concessions toward closing costs. After credits, she wired about $14,200 at closing. Her total out-of-pocket cost came to roughly $18,750, not $10,500. She added savings for 60 days and closed with about two months of housing payments left in reserve.
“A Texas first-time buyer using FHA on a $300,000 home may need roughly $18,000 or more in total cash, not just the 3.5% down payment.”
— Charlie Cooper, President, Austin Capital Mortgage
Your Next Steps
- Write down your total savings and set aside the portion you want to keep as a post-closing cushion.
- Estimate earnest money at about 1% of your target price and add a few hundred dollars for the option fee.
- Budget for a home inspection, any specialty inspections, and the appraisal fee before closing.
- Get homeowners insurance quotes for your target area so your prepaid estimate is realistic.
- Look up the property tax rate for the county and school district where you want to buy.
- Request a Loan Estimate to see your itemized cash to close and monthly payment.
Ready to move forward? A loan officer can build your cash-to-close estimate with real numbers.
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