When you buy a house in Maryland, there are fees associated with such a purchase to be paid at the closing of the transaction. Those fees are referred to as the closing costs. The closing cost fees are to be paid at the point when the property title will be transferred from the seller to the buyer. Closing costs are incurred by either the seller or the buyer.
Closing costs vary according to where you live, the type of property you buy, and the kind of loan you choose. The following is a list of closing fees that may be included in the closing costs in Maryland. The list includes many items, but your loan may not include those listed here. Get a mortgage calculator ready and look at these Maryland closing things to consider.
- Application Fee – This fee is the amount required for the lender to process your application. It will be a good idea to ask your lender what the fees cover before you apply. The application fee may include items such as credit check for your credit score and appraisal. Some lenders do not charge the application fee. In situations where lenders charge an application fee, the amount is usually negotiable.
- Appraisal Fee – This is the amount charged by the appraisal company to determine the fair market value of the home.
- Attorney Fee – This is the fee paid for an attorney in Maryland to review the closing documents, either on behalf of the seller or the lender. This is not a requirement in all states.
- The Escrow or Closing Fee – This amount is paid to the escrow company, title company, or attorney conducting the closing. The escrow or title company oversees the closing as an independent party in the home purchase. Some states may require the presence of a real estate attorney at closing.
- Courier Fee – This amount covers the cost of transporting documents to complete the transaction of the loan as quickly as possible.
- Credit Report – Your credit score and history will be pulled from a Tri-merge credit report. It will play an important role in determining the interest rate you will get on your mortgage loan.
- Escrow Deposit for Property Taxes & Mortgage Insurance – The buyer is often required to put down two months of property tax and mortgage insurance payments at closing.
- FHA Up-front Mortgage Insurance Premium – If you are applying for an FHA loan in Maryland, you will be required to pay the UPMIP of 1.75% of the base amount of the loan. If you prefer, you can roll this into the cost of the mortgage.
- Flood Determination or Life of Loan Coverage – This fee is paid to a third party who will determine if the property you are buying is located in a flood-prone zone. If the property is found to be in a flood zone, you will have to buy flood coverage, which you are going to pay separately.
- Home Inspection – Your home needs to be inspected as a way of verifying its condition and to check for the needed home repairs before closing.
- Home Owners Association Transfer Fees – The seller will pay for the transfer to indicate that the dues are currently paid, the dues that are payable, a copy of the financial statement from the association, minutes and notices. The buyer must review the documents to determine if it has enough reserves to avert any special assessments in the future, check for special assessments, legal actions, or any other items that might be of his concern. The buyer needs to get also a copy of the association’s by-laws, rules, and regulations.
- Homeowners Insurance – This insurance will cover possible damages to your home before the closing. The first year of insurance premium is usually paid at closing.
- Lender’s Policy Title Insurance – This is an insurance policy to assure the lender that you are the owner of the home and the lender’s mortgage is a valid lien. It is supposed to protect the lender if there is a problem with the title.
- Lead-based Paint Inspection – It covers the cost of evaluating the risk of lead-based paint, which is an important rule followed in Maryland.
- Loan Discount Points – One point is equivalent to 1% of the amount you loaned. This lump sum payment lowers the monthly payment for the life of your loan.
- Owner’s Policy Title Insurance – This insurance protects you in case someone will challenge your homeownership. This insurance is optional.
- Origination fee – This is the amount to cover the administrative cost of the lender. It is typically 1% of the total loan amount. Some mortgages do not charge an origination fee.
- Pest inspection – Some states, including Maryland, require inspection of the house for termite or dry rots when applying for a government loan. There is a fee for such an inspection.
- Prepaid Interest – Most lenders require borrowers to pay in advance for interest payments accruing between the date of closing and the date of your first mortgage payment.
- Private Mortgage Insurance – When making a less than 20% down payment for the Maryland home you are buying, you will be required to pay the PMI, the first month of payment is due at closing. Mortgage rates vary from area to area so you may need to use a mortgage calculator to determine the mortgage rates. Or, you can consult a mortgage lender for a mortgage loan.
- Property Tax – Maryland closing property tax is due within 60 days of purchase by the loan services, paid at closing.
- Recording Fees – This is an amount charged by the local recording office for the recording of public land records.
- Survey Fee – This is an amount paid to a survey company that will verify property lines and shared fence on the property.
- Title Company Title Search or Exam Fee – This is the fee paid to the title company who will do a thorough search of the records of the property. The title company will ensure that no one else has a claim to the same property.
- Transfer Taxes – A tax paid when the property title is transferred from the seller to the buyer.
- Underwriting Fee – This amount goes to the lender to cover the cost of whether to approve or not your loan.
- VA Funding Fee – This applies only when you have a VA loan. This is a percentage of the loan amount that the VA will use to fund your VA home loan program.
Closing Costs for Maryland Real Estate Buyers
You typically need a down payment when you buy a home in Maryland. The down payment is only part of your financial responsibility. The closing costs are not typically included in the monthly payment of your mortgage, which means that you have to prepare to pay them the moment you get possession of the house.
A buyer in Maryland is responsible for a large portion of the closing costs. You must know ahead of time how much you have to pay. When you work with an experienced real estate agent, he can help you set realistic expectations on the total cost of buying a home.
Closing costs vary from state to state. It also varies according to market conditions. There are cases when the buyer can negotiate with the seller to share the payment of the closing costs, thus relieving the buyer from much of a financial burden.
Across Maryland, the average home sells, on average, a low of $300,000 and a high of $400,000. Many homebuyers in the state pay for a property within that price range. A buyer of a home within the $300,000 to $400,000 price range should be prepared to pay closing costs between $10,018 and $17,810 after taxes. In general, the percentage of the closing cost to home sale price is from 3.34% to 4.4%.
The range of closing costs mentioned did not take into account several variable costs, such as taxes, title search, discount points, escrow fees, title insurances, recording fee, and other fees that may be required by the government. If you want to play it safe, set aside between 2% and 5% of the final sale price of the home you want to buy.
In Baltimore, the median value of a home is $118,000, with closing costs between $2,360 and $5,900.
Would-be buyers of a home in Maryland should consider many other factors, in addition to the loan payments and the closing costs. The down payment for the house and closing costs usually involve a large sum of money. But these costs are nothing in comparison to the ongoing costs of owning a home. People who are considering to buy a home in Maryland should consider the big financial picture of owning a home before signing the dotted line in a contract to purchase. It would also help if you have a loan application on standby in case you need to make additional repairs or pay for other things like the owner s title insurance.
Once you become a homeowner in Maryland, you have to shoulder the payment of the annual property taxes, which in the state averages 1.085T of the assessed home value. The good news is that this is slightly lower than the national average tax rate of 1.211%, which varies by state and county.
You will also have to shoulder the homeowner’s insurance, which you have to pay for the duration of your mortgage, utilities, and maintenance costs which will also eat up a portion of your finances.