Maryland Closing Costs for Buyer
Closing Costs Definition
When buying a house, there are fees you must pay. Those fees are called “closing costs”. It doesn’t matter whether you’re working with a REALTOR® or trying to buy a house on your own (not sure why you would do that, a buyer’s agent will represent you, make sure you are protected during the home buying process, and will cost you NOTHING!) you’ll have fees either way.
If you’re a Maryland first time homebuyer, you will have the same closing costs as other buyers, with one exception (see “Government Recording and Transfer Charges” below). What are the closing costs for a buyer in Maryland?
Average Closing Costs in Maryland
Closing is what happens when a house is sold and ownership changes. Closing costs can vary from one home sale to another. That’s because the terms of sales contracts can vary. The typical closing costs for a buyer in Maryland range from about 3% to 6% of the sales price. Let’s talk about the typical closing costs when buying a home in Maryland.
When are Closing Costs Due?
Closing costs are due (and collected) at closing (also known as settlement). When applying for a mortgage loan, home buyers will receive an estimate of their closing costs from their lender. It’s strictly an estimate, and can (and usually does) change. However, it provides a rough idea of how much money you will need by the time you actually buy the house. Sometimes, the seller will agree to pay for a buyer’s closing costs, if it’s included in your contract of sale. This must be agreed upon BEFORE you apply for your loan. In a seller’s market, it can be difficult to find a seller who will pay for your closing costs, although sometimes it does happen.
What’s Included in Closing Costs for Buyers in Maryland?
*Costs Related to Your Mortgage*
If you’re getting a mortgage to buy a house in Maryland, there will be fees associated with your loan. Those fees are paid when you actually buy your new house, and are included in your closing costs. Those fees can include:
Unless you’re paying cash for a house, an appraisal will be required. Most lenders require you to pay for it in advance, but if they don’t, it will be included in your closing costs.
Credit Report Fee
Another fee is the credit report fee. Yes, your lender will pull your credit report, and you will be charged for it at closing.
Flood Certification Fee
A flood certification fee (also known as a flood determination fee) is another fee paid by buyers when they are getting a loan to buy a house. This fee is for the research that is done to determine if the house being purchased is in a flood zone. If it is, you can still buy the house. However, you will be required (by Federal law) to purchase flood insurance. Flood insurance is separate from homeowner’s insurance.
Mortgage Insurance Premium (MIP)
If you put less than 20% down as your down payment for some types of loans, you’ll also be charged a mortgage insurance premium. This part of a buyer’s closing costs is used to protect the lender from losses if the buyer defaults on the loan.
Loan Origination Fee
Your lender may charge you a loan origination fee. This is the same thing as a loan application fee. It covers the services provided to buyers during the loan approval process.
Your lender may also offer you the ability to pay points on your loan. Points are additional costs paid at settlement so you can have a lower interest rate. 1 point is 1% of the total amount of the loan. Some buyers choose to pay 1 point, or multiple points, to “buy down” their interest rate.
Upfront Funding Fee
Some types of loans have an upfront funding fee. This makes it important to know which type (or types) of loans you qualify for. It’s a fee that gets paid at closing for FHA, USDA and VA loans. The amount is a percentage of the total loan amount. This percentage changes from time to time, and from one type of loan to another. When determining which type of loan is best to use, it’s a good idea to take this fee into consideration.
*Government Recording & Transfer Charges*
Unless other arrangements have been agreed upon, government fees are typically divided evenly between buyers and sellers in Maryland. These are simply the taxes and charges to change ownership and record the new deed in the public records. The actual cost of these fees will vary based on the sales prices and area in which the property is located. If you’re a first time Maryland homebuyer, you get a break on this closing cost. 1st-time Maryland homebuyers receive a 1-time tax break and are exempt from paying their half of the Maryland transfer tax.
*Title Company Fees*
Title companies do all the research on a house and typically conduct the settlements in Maryland They also charge fees for their services that are included in a buyer’s closing costs. Buyers will have a title search fee to pay. Land records, deeds, and other sources are searched to make sure the sellers truly own a property and have the right to sell it.
Lender’s Title Policy
Buyers will also pay them for the title policy to protect their lender. Title policies are a type of insurance that protects lenders against any events that occurred during past ownership of a property. If a buyer is paying cash for a house, this fee will not apply.
Title Examination Fee
This is a search that is done to make sure there are no liens on a property. The title examination goes back through the history of the property, from the current owner to the original owner. If a lien is found, it will need to be paid by the seller before the property can be sold.
Title Insurance Binder
Yet another fee for buyers is the title insurance binder. This is a temporary form of insurance coverage used to protect both buyers and sellers. It covers the time when the home insurance policies don’t overlap during the transition of home ownership.
Buyers may or may not be charged a fee to conduct the closing. This varies from one tittle company to another.
*Real Estate Broker Fees*
There is great news for Maryland home buyers in this category!
In Maryland, buyers do NOT have to pay any commissions. If you’re hiring a buyer’s agent who wants to charge you a commission, you might want to think twice and ask why you’re being asked to pay this fee. Buyer’s agents in Maryland are free, you are not obligated to pay a commission as a buyer.
You may, however, be charged a flat fee to the brokerage. This fee can vary and be anywhere from $250 to $500. This fee reimburses the real estate company for all the administrative costs involved in your home purchase.
*“Other” Closing Costs*
When buying a house, you’ll need to pay for homeowner’s insurance. It will be paid for in your closing costs. Then, the title company will send the check to your homeowner’s insurance company so it’s officially paid.
Buyers also pay their property taxes as part of their closing costs.
HOA or Condo Fees
If your new home has an HOA fee, condo fee, or both, you’ll be paying some of those fees at settlement as well.
Termite Inspection Fee
If a buyer had a termite inspection as part of their new purchase and haven’t paid for it yet, it will be included in their closing costs. The exception is when a buyer is getting a VA loan. In that case, the seller pays for the termite inspection.
Owner’s Title Policy
Another “other” fee for buyers is their owners title policy. Just like your lender requires you to pay for a title policy to protect them, you’ll want to have one that protects you as well. The owners title policy protects buyers against any events that occurred during past ownership of the property.
If buyers are purchasing a home warranty for their new home, they have the option to include it in their closing costs, or pay for it separately.
Calculating Buyer Closing Costs
By now you might be asking yourself “How do I know what my actual closing costs will be?” There’s no magical, standard formula. But, there are 2 ways to find out:
Your lender will prepare an estimate of your closing costs. It’s called a Closing Disclosure, or….CD for short. It will include the terms of your loan, your projected monthly mortgage payment, and your closing costs. It must be issued at least 3 days prior to closing.
If you choose to work with Melissa Spittel as your buyer’s agent, she will use a reliable “Closing Costs Calculator” to estimate your closing costs as well. Keep in mind, they are estimates, because certain factors can change as you go through the buying process. But, you’ll have a pretty close idea of what to expect.
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About the Author:
Melissa Spittel is a local real estate expert who serves Carroll County and the surrounding areas in Maryland. Her knowledge, skills and experience are invaluable when it comes to buying or selling a house. Her experience working with out-of-state buyers and sellers makes her a great relocation REALTOR®, and she is part of Coldwell Banker’s Relocation Team. Do you need a real estate expert in another part of Maryland? Or even in another state? Melissa can easily connect you with a REALTOR® from her wide network of real estate pros.
Have Your Questions Answered Promptly. Contact Melissa Today.