Purchasing a home is the most expensive, single item an individual can pay for in a lifetime. No wonder you’re nervous about buying a home. The buying process is long and tedious, and a lot goes into it. If you’re considering buying a home, you might be wondering about the closing costs. Here, you can get an idea of what it may cost for you to buy a home.
Although it’s not commonly considered a closing cost, the down payment can be the most expensive expense you’ll face when buying a home. Depending on your financing type, you may pay anywhere from 2 to 5 % of the purchase price in down payment. Some loan types require 3.5% down, some require 0% (like VA loans). If you’re looking to buy a home that costs $200,000, for example, a typical down payment would be $7,000. (*contact us to see if you can qualify for any down payment assistant programs).
You may also be interested in: Estimated closing costs when selling your Maryland home.
If you’re thinking of buying a home, fill out our Buyer Profile. It will provide us with detailed information on your perfect home. We will use this information to set you up on automatic e-alerts for homes that match that criteria!
💰Buyer Closing Costs in Maryland
Buyer closing costs can be categorized into 5 different ‘buckets:’
Mortgage Fee (the fee to obtain a mortgage)
Title Fee (title insurance, settlement charges, etc.)
Legislative Charges (transfer and recordation taxes) – view our 2018 Tax & Recordation table here
*These costs are in addition to the down payment on your home, and are not a line item in the chart below, but, rather, are added to the row titled “Cash to Close”*
1. Mortgage Fee
Mortgage application or loan origination fees are part of the buyer closing costs. The lender charges this fee to process the loan application. This amount can be paid prior to, or at closing.
2. Title Fees
In Maryland, the average cost of title fees is around $750. The optional owner’s title insurance* averages around $450. This insurance protects the buyer from title defects that weren’t discovered during the original title search, including fraud, omission of information, forgery, liens and unpaid mortgages. Lender’s title insurance averages $550. The total costs of title fees and insurance amount to around $1,750.
Title insurance protects you from possible property loss or damage due to liens, encumbrances or defects in the title to the property.
The most common types of liens are:
- Mechanic’s Lien – general contractors, plumbers, electricians, etc., may file a mechanic’s lien to ensure the company receives payment.
- Tax Lien – filed if federal, county or state taxes go unpaid.
- Judgement Lien – filed to ensure that the individual who won the judgement receives what he or she is owed.
What happens if the home I want to buy has a lien?
Once the home is under contract, the title company will search for any liens that may have been filed against the subject property. If a lien is found, the transaction will be put on hold. Mortgage companies will not agree to finance a home until the lien is paid off, or satisfied, by the seller.
Each county in Maryland has its own rate for state recordation tax and transfer tax. These taxes are typically split 50/50 between the buyer and the seller, and are a percentage of the purchase price.
EXAMPLE: Baltimore County home with a purchase price of $300,000
State Recordation Tax: $5.00 per $1,000
$300,000/$1,000 = $300
$300 x $5.00 = $1,500
Transfer Tax: 2.0% (1.5% for county and 0.5% for the state)
$300,000 x .02 = $6,000 tax.
The total state recordation and state and county transfer taxes are $ 7,500. Since the cost is split 50/50, the total cost for the buyer is around $3,750.
**to determine the tax and recordation rates for your county, click here.
If you choose to have home inspections done on the property, hire a general contractor or home inspector to inspect all major house systems, from top to bottom, including the roof, electrical and heating systems, plumbing, foundation, and more. This can take two or three hours and cost you from $200 to $500, depending on the type of home, location, age, and size.
We recommend that you accompany the home inspector at the time of inspection. This way, you can learn more about the maintenance and preservation of the house, ask questions, and get a real sense of which problems are serious and which are relatively minor.
Home inspections are an up-front cost. Although these costs are not paid at the time of closing, you will still have to ensure enough money is set aside for inspections.
Lenders require an initial escrow deposit to start an escrow account. You’re often asked to put down 2 months of property tax and mortgage insurance payments at closing.
When do I enter escrow?
Escrow, or the closing process, begins when the buyer and seller have agreed on a price of the home and all conditions for the sale. In conjunction with signing the sales agreement, your real estate agent will collect an agreed upon percentage of the sales price that will be placed in an escrow account.
The money put into escrow is also known as earnest money. This lets the seller know that you are a serious buyer. Think of it as a deposit.
We get this questions all the time: “Is commission part of buyer’s closing costs?”
No, buyers do not pay a commission fee.
Typically, the seller pays all commission to the listing and buyers agent from the sale proceeds. In Maryland, Realtors typically charge around 5% commission for selling a home. This amount is typically split 50/50 between the listing broker and the buyers agent.
Additional Buyer Closing Costs to expect:
- Home warranty
- Property Insurance
- Property Taxes
- Attorney fee
- Courier fee
- Credit report
- HOA transfer fees
- Homeowner’s insurance
- Prepaid interest
- Multiple/different home inspections (radon, lead-based paint, pest, etc.)
- Survey fee
- Underwriting fee
➗Buyer Closing Costs: Math Breakdown
💸 Expected Maryland Closing Costs for BuyersThis estimate is based on a home with a sale price of $300,000. This table is meant to be a simple example of what you can expect at closing. (IF ON MOBILE DEVICE, SCROLL TABLE TO THE LEFT TO SEE MORE)
|Conventional 30-yr fixed||FHA 30 fixed||VA 30 fixed|
|Loan Amount||$285,000 (5%)||$294,566 (3.5%)||$309,900 (no down payment)|
|Cash to Close:|
(closing costs + down payment)
*Disclaimer: The results above are based on (i) information provided by you, (ii) estimates of interest rates, your ability to save, your tax bracket, closing costs and other amounts, (iii) currently available loan programs and (iv) information and assumptions discussed with your advisor, all of which might change over time.
📈Estimate Your Own Closing Costs
How to use the calculator
Enter the loan amount. An estimate will show. Click ‘View/Edit Closing Costs Details.” You can modify the fees/rates here.
Here’s some tips when calculating your own closing costs:
- Leave discount points at zero. Lenders don’t usually use this unless you’re buying the rate down.
- Loan Origination fee’s are typically 1% of the loan amount – but depending on the lender, the fee can be lower.
**PLEASE NOTE! This is just an estimate! The purpose of this calculator and blog, is to give you an idea of how much closing costs you can expect when purchasing a home. To get a true estimate, contact us and we can put you into contact with our trusted lender.
Closing Cost Estimator
|View/Edit Closing Cost Details|
Maryland Loan Programs Available
To view Maryland loan programs, click here!
We offer a closing sheet, as a courtesy! We can estimate your closing costs off of the purchase price. If you’re planning on buying a home in Maryland, we hope this article was helpful. If you have any questions about Maryland closing costs or the buying process in general, please do not hesitate to contact us!
Are you thinking of buying or selling a home, or have a friend or family member who is? Contact The Pivec Group today by calling 443-692-8800 or visiting our website! We look forward to hearing from you and helping you find YOUR dream home!