A Line-by-Line Breakdown of Option Fees, Earnest Money, Title Insurance, and Everything Else Due at Closing

You’ve saved for a down payment. But there’s usually a second number people don’t budget for: closing costs, and in Texas, that number typically runs 2% to 6% of the purchase price on top of your down payment. On a $400,000 home, that’s realistically $8,000 to $24,000 due at or before closing — money that’s easy to underestimate if you’ve only been tracking the down payment.

The Texas-Specific Costs Most First-Time Buyers Don’t Expect

Two costs in particular catch first-time buyers off guard because they’re due early in the process, not at the closing table itself:

• The option fee. This is a small, non-refundable payment — typically $100 to $500 — that buys you an option period, usually 3 to 10 days (5 to 7 is most common), during which you can walk away from the contract for any reason without losing your earnest money. If you move forward with the purchase, the option fee gets credited toward your purchase price at closing.
• Earnest money. This is a separate, larger deposit — commonly around 1% to 2% of the purchase price — that shows good faith on the contract. It’s held in escrow and applied toward your closing costs or down payment if the deal closes, and it’s generally protected as long as you terminate within your option period or a contract contingency.

These are two different checks, due at two different points, and confusing them is one of the more common first-time-buyer mix-ups.

What Else Shows Up on a Closing Statement

Beyond the option fee and earnest money, expect line items like:

• Loan origination and lender fees — charged by your mortgage lender for processing the loan
• Appraisal fee — required by your lender to confirm the home’s value
• Title insurance — protects against ownership disputes; worth noting, the Texas Department of Insurance cut title insurance premiums by about 6.2% starting March 1, 2026, so this cost is modestly lower than it was last year
• Escrow or attorney fees — for handling the closing itself
• Recording fees — paid to the county to officially record the sale
• Prepaid property taxes, homeowners insurance, and HOA dues — prorated for the portion of the year you’ll own the home, which matters more in Texas than in lower-property-tax states

What This Means for You

If you’re budgeting for your first home, treat closing costs as their own line item from day one, not an afterthought once you’ve found a house. Ask your lender for a Loan Estimate early — it itemizes these costs before you’re under contract, so there’s no guessing later. And remember: the option fee and earnest money checks come due almost immediately after your offer is accepted, well before the rest of your closing costs, so having that cash accessible matters just as much as having your down payment ready.

FAQ

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What’s the Difference Between Earnest Money and an Option Fee in Texas?

The option fee (typically $100–$500) buys you a short window, usually 3 to 10 days, to walk away from the contract for any reason. Earnest money (typically 1–2% of the purchase price) is a larger good-faith deposit that’s applied toward your purchase if the deal closes.

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How Much Are Closing Costs for a First-Time Buyer in Texas?

Generally 2% to 6% of the home’s purchase price, on top of your down payment, covering lender fees, appraisal, title insurance, escrow fees, recording fees, and prorated taxes and insurance.

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Can Closing Costs Be Negotiated or Covered by the Seller in Texas?

Some closing costs are negotiable, and sellers can sometimes agree to cover a portion as a concession, particularly in a buyer’s market — it depends on the specific deal and what both sides agree to in the contract.

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If you’re getting ready to buy your first home in Dallas-Fort Worth and want a realistic number for what you’ll actually need at closing — not just the down payment — we’re happy to walk through it with you before you start touring homes.