By John Lairsen and the Travis Real Estate Team
Closing costs in Texas work differently than in many other states. Buyers moving into the Lake Travis area also face a few additional layers most out-of-state buyers don't expect. Here's how closing costs in Texas actually work and what to prepare for.
Key Takeaways
- The Texas Department of Insurance sets Texas title insurance rates, and they are identical at every title company statewide, with rates reduced by 6.2% effective March 1, 2026.
- Texas buyers pay two separate deposits: an option fee of roughly $100 to $200 paid directly to the seller and a larger earnest money deposit held in escrow.
- A property survey or T-47 affidavit is required at closing, and a new survey typically costs $400 to $700 if the seller can't provide an existing one.
- Many Lake Travis area properties sit within a Municipal Utility District, adding a separate MUD tax on top of county, school, and city rates.
Understand Texas's Unique, Regulated Title Insurance System
Texas takes an unusual approach to title insurance. The premium itself isn't something you can shop around for.
What Makes This System Different
- The Texas Department of Insurance sets promulgated rates that every licensed title company in the state must charge for the same coverage level
- The base premium on a $400,000 home is identical whether you close with one title company or another
- Effective March 1, 2026, the TDI reduced these base rates by 6.2%, the first reduction since 2013
- Service fees like escrow charges and document preparation vary by company and remain negotiable, unlike the base premium
By custom, Texas sellers typically pay for the buyer's owner title policy, though this remains negotiable and should be spelled out clearly in your purchase contract.
Know the Difference Between Earnest Money and the Option Fee
Texas contracts include two separate deposits that often confuse first-time buyers in the state. Knowing the difference upfront clarifies exactly what you're paying and why.
How These Two Deposits Actually Work
- The option fee, typically $100 to $200, is paid directly to the seller and grants a defined period to inspect the property and potentially walk away
- Earnest money, generally one to several thousand dollars, is held in escrow by the title company rather than paid to the seller directly
- The option fee is non-refundable once the option period ends, while earnest money can be refunded depending on how the contract is structured
- Both amounts, along with the option period's length, are negotiated directly between buyer and seller
Understanding this distinction before you write an offer helps you negotiate a fair inspection window without confusing it with the money actually at risk.
Budget for a Survey or T-47 Affidavit
Every Texas closing requires evidence of the property's boundaries. This line item catches many buyers off guard on their closing disclosure.
What to Expect on This Requirement
- If the seller has a current survey, they can sign a T-47 affidavit certifying nothing has changed, saving you the cost of a new survey
- When no acceptable existing survey is available, a new one generally costs $400 to $700
- Texas contracts specify that if the seller fails to provide an existing survey or affidavit in time, the buyer must obtain a new one, often at the seller's expense
- This fee does not go to the title company, so it's easy to overlook when estimating total closing costs
Confirming early whether an existing survey is available can save real money and prevent delays as your closing date approaches.
Factor in MUD Taxes if You're Buying Near Lake Travis
Many properties in the Lake Travis area sit within a Municipal Utility District. This adds a meaningful layer to your ongoing tax bill that isn't always obvious from the listing price.
What Buyers Should Understand About MUD Taxes
- A MUD is a special taxing district that funds water, sewer, drainage, and road infrastructure outside city utility service
- Texas Water Code Chapter 49 requires sellers to disclose a property's MUD status, tax rate, and any outstanding bond debt before a buyer signs a contract
- County taxes in parts of the Lake Travis area run approximately $0.24 per $100 of value, while local MUD rates can add another $0.20 to $0.50 or more
- Homestead exemptions generally reduce school and county tax burden but typically don't reduce the MUD portion of the bill
Reviewing the required MUD disclosure before your option period ends gives you a realistic picture of your total annual tax obligation, not just the sale price.
Frequently Asked Questions
Can I shop around for a lower title insurance rate in Texas?
No. The base premium is set by the Texas Department of Insurance and is the same at every title company, though service fees on top of that premium vary and are negotiable.
What's the difference between the option fee and earnest money in Texas?
The option fee is a small, non-refundable amount paid directly to the seller for the right to inspect the property, while earnest money is a larger deposit held in escrow that may be refundable depending on contract terms.
How do I know if a home is in a Municipal Utility District?
Texas law requires sellers to provide a written MUD disclosure before you sign a contract, though you can also check with the county appraisal district for current tax rate information.
Work With a Team That Knows Lake Travis Closings Inside and Out
Travis Real Estate delivers unparalleled results backed by an expert team of agents and support staff. After graduating from UT with a bachelor's degree in economics and a minor in real estate, John Lairsen formed Travis Real Estate, a boutique brokerage built around service that exceeds client expectations. John is one of Central Texas's leading luxury residential real estate brokers, and our in-house team provides top-notch transaction, marketing, and listing support so our agents stay focused on client needs. If you're preparing to buy or sell near Lake Travis, we would love to help.
Connect with John Lairsen and the Travis Real Estate Team today.
Connect with John Lairsen and the Travis Real Estate Team today.
