Who Pays Closing Costs in Maryland?
Whether you’re buying a house or selling one, there are fees you must pay. Those fees are called closing costs. It doesn’t matter whether you’re working with a realtor or doing it on your own, you’ll have fees either way. And those fees differ depending on whether you’re the buyer or the seller. What are the fees you’ll have to pay? You’re about to find out.
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 average closing cost fees for buyers can range from about 3% to 6% of the sales price. Likewise, the average closing cost fees for sellers can range from about 8% – 10% of the sales price. Let’s talk about the most common closing costs.
Loan Closing Costs
The 1st set of closing costs involves the loan. If you’re the buyer and you’re getting a mortgage loan to buy a house, 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
Credit Report Fee: Yes, your lender will pull your credit report, and you will be charged for it at closing.
Flood Certification Fee
You will be charged a flood certification fee. Flood certification determines if a property is located in a flood zone. If it is, you’ll also be required to buy flood insurance.
Mortgage Insurance Premium
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.
Loan Origination Fee
Your lender may charge you a loan origination fee. That’s the same thing as a loan application fee.
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.
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.
If you’re the seller and you’re still making mortgage payments on your house, you will have a few closing cost fees of your own. There will be a fee to pay off your loan. If you want your proceeds wired to a bank account, you will be charged a fee for the wire.
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. 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 typically conduct the settlements in Maryland, and there are a variety of fees for their services.
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 Insurance 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.
There’s also the 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 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 when the home insurance policies don’t overlap over the same time frame.
What fees are sellers responsible for paying to the title company? Sellers may or may not be charged a fee to conduct the closing. This varies from one tittle company to another.
Real Estate Broker Fees
Who pays REALTOR® fees in Maryland? There is great news for 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 as part of your closing costs. 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.
If you’re the seller and you listed your house with a REALTOR®, you will be paying the commission, which then gets divided between the real estate companies involved in the sale of your house. This is how the real estate companies AND the realtors involved in the sale of house, get paid. You may also be responsible for paying a flat fee to the brokerage that listed your house (in the range to $250-$500), so the administrative costs are covered.
Other Closing Costs
If you’re the buyer, 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 & 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.
If you had a termite inspection as part of your new purchase and haven’t paid for it yet, it will be included in your 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 you’re the seller, your “other” closing costs might include a home warranty, if you’re providing one for the buyers. Likewise, if you’re the buyer and you choose to purchase your own home warranty, it can be paid at closing and included in your closing costs.
If you’re crediting any money to your buyers, such as seller help towards their closing costs, or money in lieu of making certain repairs, that money will become part of your closing costs, and will be deducted from your proceeds.
If you’re the seller and have any bills that need to be paid in regards to selling your house…for example, paying off a lien or paying for any contractor repairs that are still due…that money will be collected as part of your closing costs and will also be deducted from you proceeds.
How Do You Know What Your Actual Closing Costs Will Be?
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. If you’re the buyer, your lender will prepare an estimate of your closing costs. It’s called a Closing Disclosure, or….CD for short. If your choose Melissa Spittel as your buyer’s agent, she will use a “Maryland Closing Costs Calculator for Buyers” that allows her to estimate you closing costs. She will provide you a copy so you can see the various fees you can expect you’ll need to pay. 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.
Likewise, if you’re selling your house, Melissa can use her “Maryland Closing Costs Calculator for Sellers” to estimate not only your closing costs, but how much you can expect to profit from the sale of your house. She will provide you a copy so you can see the various fees you’ll be expected to pay. Melissa’s “Closing Costs Calculator of Sellers” will also be used to compare the different offers on your house, to help you choose the offer that will net you the most money. Again, it’s an estimate, 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.