The Texas Home Buyer's Guide: Your Duties & Where Your Money Goes

Buying a home in Texas isn't just about finding the right property and getting approved for a loan. As the buyer, you have specific responsibilities throughout the transaction—and understanding where your money goes at closing is crucial to avoiding surprises. Here's everything you need to know.

Disclaimer: Every real estate transaction is unique. This guide provides general information based on typical Texas residential transactions using standard TREC contracts, but your specific situation may differ. Closing costs, timelines, contractual obligations, and requirements vary based on your lender, contract terms, property type, and local practices. Always consult with your real estate agent, lender, attorney, and other professionals for advice specific to your transaction. This is educational content, not legal or financial advice.

Your Duties as a Buyer: The Complete Checklist

During the Option Period (Days 1-10 typically)

1. Pay the Option Fee

• Usually $100-500, due within 3 days of contract execution
• Delivered to the title company or seller
• This money is non-refundable but buys you the right to terminate for any reason in the declared option window timeframe

2. Order and Schedule Inspections

• You hire and pay for the home inspector (not your agent)
• Schedule any additional inspections (foundation, HVAC, roof, pool, septic, etc.)
• Attend inspections (highly recommended)
• Review inspection reports

3. Request Repairs (if needed)

• Submit repair requests/amendment to seller based on inspection findings
• Negotiate which repairs seller will complete
• Decide whether to proceed, terminate, or renegotiate

4. Finalize Financing

• Apply for your mortgage (should be done ASAP after contract)
• Provide all requested documents to your lender (pay stubs, bank statements, tax returns, etc.)
• Respond quickly to lender requests (delays can kill your closing date)

5. Order Appraisal

• Your lender orders this, but you pay for it ($450-700+)
• Make sure it's scheduled during option period if possible

Throughout the Transaction

6. Secure Homeowners Insurance

• Shop for and purchase a policy
• Provide proof of insurance to your lender (required before closing)
• Must be effective on closing date

7. Review the Title Commitment

• Examine the title report for liens, easements, or other issues
• Raise objections if something looks problematic

8. Deposit Earnest Money

• Usually 1-2% of purchase price
• Due within 3 days of contract execution (or per contract terms)
• Held by title company; applies toward your down payment at closing

9. Stay in Communication

• Respond promptly to your lender, agent, and title company
• Don't ignore calls, emails, or document requests

10. Maintain Your Financial Status

DO NOT:

• Change jobs or quit your job
• Make large purchases (car, furniture, appliances)
• Open new credit cards or close existing ones
• Make large deposits or withdrawals
• Co-sign loans for anyone

Lenders re-check your credit right before closing—don't blow it!

Before Closing

11. Do Your Final Walk-Through

• Typically 1-2 days before closing
• Verify agreed-upon repairs were completed
• Confirm property is in the same condition (or better)
• Check that sellers removed all personal property
• Make sure nothing is damaged or missing

12. Review Closing Disclosure (CD)

• Lender must provide this at least 3 business days before closing
• Review all numbers carefully—loan amount, interest rate, closing costs
• Compare to your Loan Estimate to catch discrepancies
• Ask questions if anything looks wrong

13. Wire Your Down Payment/Closing Costs

• NEVER wire money without calling the title company directly (wire fraud is rampant)
• Confirm wiring instructions by phone using a number you look up yourself
• Wire funds 1-2 days before closing so they clear in time

14. Bring Required Items to Closing

• Government-issued photo ID (driver's license, passport)
• Cashier's check if you didn't wire (rarely used anymore)
• Proof of homeowners insurance
• Any additional documents title company requests

At Closing

15. Sign the Documents

• Promissory note (your loan)
• Deed of trust (mortgage lien on property)
• Closing Disclosure
• Dozens of other forms (your title officer will walk you through)

16. Receive the Keys

• Once everything is signed and funded, the property is yours
• Seller typically leaves keys at the property or with the listing agent

After Closing

17. Change the Locks

• Do this immediately (you don't know who has copies of the old keys)

18. Set Up Utilities

• Transfer or establish electric, gas, water, trash, internet, etc.

19. File for Homestead Exemption

• If it's your primary residence, file with the county appraisal district
• Reduces your property taxes (deadline is typically April 30 of the year after purchase)

20. Keep All Closing Documents

• Store them somewhere safe—you'll need them for taxes, refinancing, or resale

Where Your Money Goes at Closing

Now that you understand your responsibilities, let's break down where all that money on your Closing Disclosure actually goes. Understanding this helps you see that most of what you're paying isn't "extra"—it's money you'd be spending anyway.

Prepaid Items & Escrows

Loan & Transaction Fees

Other Expenses (Per Contract)

The Logic Behind Your Closing Costs

Why So Many "Prepaid" Items?

Your lender wants to make sure you're not going to immediately default because you forgot to pay property taxes or let your homeowners insurance lapse. So they collect several months' worth upfront and hold it in an escrow account. Each month, part of your mortgage payment replenishes this account, and the lender pays your taxes and insurance on your behalf.

Why Does Everything Go to the "New Loan Company"?

Most of your closing costs are either:

1. Loan origination fees (underwriting, processing, compliance)
2. Prepaid interest (you're paying interest from closing day until your first payment)
3. Escrow reserves (held by the lender to pay your future bills)

The lender is essentially collecting money to cover their costs of processing your loan and ensuring the property stays insured and tax-current throughout the life of the mortgage.

Who Actually Gets Paid What?

• Title Company gets paid for title insurance, settlement services, and courier fees
• Lender gets the bulk (loan fees, prepaid interest, escrow reserves)
• Tax Office gets your property taxes (either directly or via escrow)
• Insurance Companies get premiums for homeowners, flood, and mortgage insurance
• Inspector/Surveyor/Repair Vendors get paid for services rendered
• Bank gets wire transfer fees (usually $25-50)

Bottom Line

When you see a Closing Disclosure with $15,000 in costs, don't panic. A big chunk of that is money you'd be paying anyway—like property taxes, homeowners insurance, and prepaid interest. The rest covers the actual cost of getting the loan closed and the title transferred legally.

Your lender and title company are basically middlemen collecting and distributing funds to the right places so you don't have to cut 15 different checks on closing day.

Summary: Your Job as a Buyer

✅ Investigate (inspections, due diligence)
✅ Finance (mortgage, insurance, earnest money)
✅ Communicate (respond quickly, stay engaged)
✅ Don't screw up your credit (seriously—don't)
✅ Show up and sign

Your agent and lender will guide you, but you're the one who has to execute. Miss a deadline or fail to provide documents on time? Your contract could fall apart. And when closing day arrives, you'll know exactly where every dollar is going—and why.

Final Reminder: This guide is a starting point, not a substitute for professional advice. Real estate transactions involve significant financial and legal implications. Work closely with your real estate agent, lender, title company, and attorney (if applicable) to ensure your specific transaction goes smoothly. When in doubt, ask questions—there are no stupid questions when it comes to the biggest purchase of your life.

The best time to invest in Texas real estate was five years ago. The second-best time is today.

Contact Lauren Byington
Hill Country Real Estate Specialist
📧 lauren@hillcountryinsider.com
📱 830-556-1091
🌐 HillCountryInsider.com

Disclaimer: The information provided is for educational and general informational purposes only and should not be construed as financial, legal, or tax advice. Real estate markets, lending guidelines, and property values can change rapidly, and past performance is not indicative of future results. All figures, examples, and projections are estimates only. Investors and buyers should independently verify all information and conduct thorough due diligence, including but not limited to: professional inspections, contractor evaluations, surveys, appraisals, title research, and consultation with qualified legal, tax, and financial professionals. Local regulations, zoning, municipal services, and property tax rates may change based on state or local government decisions and can materially affect property performance. You are solely responsible for all investment decisions and outcomes.