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Home » Texas Jumbo Loan Closing Costs: What to Expect

Texas Jumbo Loan Closing Costs: What to Expect

Texas mortgage closing costs

Understanding Closing Costs for Texas Luxury Homes

Jumbo loans, designed for high-value properties that exceed conforming loan limits, are common in Texas due to the state’s luxury real estate market. Whether you’re purchasing a home in an affluent area of Dallas, Houston, or other upscale neighborhoods across the state, understanding the costs associated with jumbo loans is critical.

Closing costs on Texas jumbo loans tend to be higher than those for conventional loans given the larger loan amounts. In this post, we’ll break down some of the different fees involved, how these costs vary across Texas counties, and offer expert tips on how to manage them effectively. Let’s explore what you should expect when closing a jumbo loan.

Breakdown of Common Jumbo Loan Closing Costs

Jumbo loan closing costs include several fees that may be unfamiliar, particularly if you’re used to conventional loans. One of the most significant fees is the origination fee which lenders charge for originating the loan.

For jumbo loans, origination fees often range from 0.5% to 2% of the loan amount depending on the lender. This can be substantial based on the size of these loans. For example, on a $1.5 million loan, you might pay $15,000 in origination fees alone if the lender charges 1 point or 1% origination.

Appraisal fees also tend to be higher with jumbo loans. Since luxury homes often come with unique features, they require more thorough property valuations sometimes needing two appraisals. Appraisal costs could range from $600 to over $1,500 depending on the property’s value and complexity.

Another common cost is title insurance which protects against title defects. With jumbo loans, the premium for title insurance increases along with the loan amount. Closing costs also include escrow fees which cover the management of property taxes and insurance. Lenders typically require a larger escrow fund for high-cost properties which adds to the overall expense.

Understanding these costs early in the homebuying process helps avoid sticker shock at the closing table. For many borrowers, knowing what to expect can make a significant difference in their financial planning.

How Jumbo Loan Closing Costs Differ from Conventional Loans

Jumbo loan closing costs are notably higher than conventional loan closing costs for several reasons. The most significant differences lie in the amount paid for origination fees, title insurance, and escrow funds.

Origination fees, which cover the lender’s costs for processing the loan, can be a much as 0.5% to 1% of the loan amount. With a $2 million jumbo loan, this fee alone could range from $10,000 to $20,000—far more than the origination costs on a conventional loan.

Title insurance in Texas is considerably higher than in other states due to its state-regulated fee structure. For a $1 million home in Texas, title insurance can cost around $5,575, while for a $2 million home this jumps to about $9,085. These figures are significantly higher than title insurance premiums in states like California or Florida where rates are typically 50% lower and more negotiable.

The key factor that impacts this rate is the loan amount as title insurance is calculated based on the purchase price or loan value, whichever is higher. Given the size of jumbo loans, Texas homeowners pay more for protection against title defects.

Another difference is how escrow funds are handled. For jumbo loans, lenders require larger reserves for property taxes and homeowner’s insurance. This could mean setting aside several months’ worth of taxes and insurance payments at closing—more than what would typically be required for a conventional loan. 

Understanding these differences in closing costs highlights why careful planning is essential for jumbo loan borrowers. While these fees can be daunting, there are strategies to reduce them such as negotiating lender credits or exploring loan options through brokers who may offer better deals.

Closing Costs Variation Across Texas Counties

Texas is a large state, and the specific closing costs associated with jumbo loans can vary from one county to another. Transfer taxes, school taxes, and other local fees play a significant role in determining the final amount you’ll pay at closing.

For example, Houston and Dallas may have similar property tax rates, but there are additional nuances when it comes to specific county or city taxes. In Austin (Travis County), homebuyers may find themselves paying higher transfer taxes than in more rural counties. On a $1 million home, this could add several hundred dollars to your closing costs.

Meanwhile, Williamson County, just north of Austin, has slightly different regulations and tax structures, particularly when it comes to school taxes. In both Travis and Williamson counties, homeowners may be required to pay school taxes upfront as part of their closing costs. For luxury property buyers this can be yet another higher expense.

In Houston, located in Harris County, you may see differences even between neighborhoods. For instance, Memorial’s wealthier areas could incur higher closing costs due to school taxes or additional property-related fees that vary based on the school district.

On the other hand, counties like Montgomery (home to The Woodlands) may have different tax structures, particularly for properties outside of highly developed urban centers.

These regional differences underscore the importance of understanding not just the overall closing cost structure but how local taxes and fees influence your final bill. Speaking with a mortgage broker or real estate agent who understands the ins and outs of Texas taxes can help you get a clearer picture of what to expect in your county.

Closing Fees in Houston’s Affluent Neighborhoods

Houston’s luxury housing market, particularly in neighborhoods like Memorial, The Woodlands, and Sugarland is a hotspot for jumbo loans. These areas attract buyers looking for high-end homes that exceed conventional loan limits but with these properties come higher closing costs.

For example, in Memorial, where the average home price sits well above $1 million, closing costs can range from 2% to 5% of the loan amount. This means a buyer purchasing a $1.5 million home might face closing costs between $20,000 and $50,000. The specific fees included in this total are largely the same as in other parts of Texas but on a much larger scale due to the property values.

The Woodlands area, located in Montgomery County, offers a slightly different tax structure but jumbo loan borrowers in this affluent neighborhood can still expect to pay similarly high closing costs when factoring in title insurance and escrow requirements.

A $2 million home purchase here could incur over $9,000 in title insurance fees plus origination and appraisal fees that can push the total closing cost significantly higher.

In Sugarland, part of Fort Bend County, buyers might encounter slightly lower closing costs compared to Memorial or The Woodlands, though the overall percentage remains consistent with the home price. Regardless of which Houston neighborhood you’re eyeing, working with a knowledgeable mortgage broker can help manage these costs through lender credits or strategic loan structuring.

Who Has Lower Closing Costs? Mortgage Broker or a Texas Bank or Credit Union?

Choosing between a mortgage broker, a Texas bank, or a credit union for your jumbo loan can significantly influence your closing costs. Each option offers distinct advantages and disadvantages tailored to Texas homebuyers seeking high-value properties.

A mortgage broker acts as an intermediary, connecting you to various lenders to secure the best loan terms tailored to your specific needs. This flexibility often results in more competitive rates and an increased opportunity to reduce closing costs through lender credits or waived fees.

Many brokers negotiate lower origination fees based on established relationships with lenders. While they may charge fees for their services, typically ranging from 0.5% to 2% of the loan amount their ability to find you the best deal can lead to substantial overall savings. In addition, the process with a broker is more efficient when you need to close quickly vs. 45 days with a bank when it’s a busy period.

When considering Texas state banks, options like Texas Capital Bank and Veritex Community Bank may offer competitive rates and a straightforward process for jumbo loans. These banks often have specific requirements which include a higher down payment, typically around 20% or more for jumbo loans.

Although they might offer loyalty discounts to existing customers this can come with less flexibility in terms and conditions. Borrowers should weigh these benefits against the stricter qualification standards commonly associated with larger financial institutions like the large national banks.

Credit unions such as Texas Trust or Amplify Credit Union are known for their competitive rates and lower fees. However, they also have specific membership requirements, and while they might charge less, they often impose stricter qualification rules. For example, even if you find a favorable interest rate, you might face more stringent criteria regarding credit scores and debt-to-income ratios, which can be particularly challenging for jumbo loan borrowers.

As a licensed mortgage originator, I advise potential borrowers to carefully evaluate their financial situation and determine what they prioritize most—flexibility, lower closing costs, or a process where your income and debt ratios must fit in a perfect box.

Employing the services of a mortgage broker can often yield better overall closing on time success and sometimes savings but if you prefer working with a Texas bank or credit union better make sure you fully understand their requirements to avoid unexpected obstacles in your loan application and closing date. It’s not uncommon in purchase contracts to have a clause where the buyer is obligated to pay $200-$500 per day extra for a delayed closing date.