Mortgage calculators are an excellent tool to help you estimate what you’ll spend on a home. We offer several of these to prepare prospective buyers for homebuying expenses. However, there are some costs that aren’t factored in upfront. Called closing costs, these are expenses associated with finalizing your home purchase. It’s important to understand what each of these are, and how much they can cost. This helps avoid any last-minute surprises that can throw a wrench in finalizing your purchase. Below you can explore all of the potential closing costs in Maryland you might face.
Which closing costs apply to your mortgage depends on location, the size of the home, and the type of mortgage that you take on. Even though you will not have to pay every closing cost that is listed, it is best to become knowledgeable about all of the potential expenses in order to prepare yourself as much as possible.
What are Seller Concessions for Closing Costs in Maryland?
While the buyer is responsible for paying the majority of the closing costs, the seller also has the ability to take some on themselves. These are called seller concessions and they exist to incentivize the buyer. Sellers are only allowed to pay up to a certain amount in closing cost assistance. This amount is based on the type of loan, how many people are living in the home, and the percentage of the down payment. For conventional loans in primary residence homes, those who put a downpayment of 25% or more can receive up to 9% of their home’s purchase price or appraised value. Those who put down 10-24.99% can get up to 6% while down payments of 10% or less can only get 3%.
If it is your second home, the return percentages are the same except for those who put in a downpayment of less than 10%. In this scenario, they would not be eligible to receive any seller concessions. If it is an investment property, you may only receive up to 2% of the home’s sale price in seller concessions regardless of downpayment. In the case of FHA loans, you may only receive up to 6% of the home’s value in seller concessions. VA loans have a more unique approach. They allow up to 4% of the purchase price to be placed into an escrow account, however, the seller may provide an unlimited amount towards closing costs such as credit report fees, discount points, origination fees, and appraisal.
How Much are Closing Costs in Maryland?
Closing costs are different for everyone. Depending on where the home you purchase is located, which government requirements apply to you and which lender you chose. Before you sit down with the seller to sign the closing documents you will receive a closing disclosure that goes over all of your closing costs. Before going into your closing meeting, it is highly recommended to develop a solid understanding of all of your potential closing costs so that you may be properly prepared.
The application fee is a charge from your lenders for them to process your loan request. This non-refundable fee can be up to $500.
The appraisal is when the lender sends out a professional to determine the value of the desired home. This is typically outsourced to a third party. The amount that they determine the home is worth will dictate the amount you are able to receive for a loan. They range in price but expect to pay around $450 for an appraisal.
You are required by Maryland law to have an attorney present during the home sale proceedings. They will assist in organizing your paperwork as well as managing your closing. The price for an attorney highly depends on the attorney you decide on as well as local rates.
In Maryland, you are legally responsible for having an attorney conduct and sign off on your closing meeting. These fees again vary depending on the attorney and your local rates.
Mortgage documents must be transported and with that comes a courier fee of around $30.
Credit Reporting Fee
To receive a loan for your home your lender must first run a credit score check. These typically cost about $25.
Discount points are one of the best ways to decrease your interest rate. By paying more upfront, you have to option to purchase discount points which will greatly reduce the amount of interest you pay over the life of the loan. If you can comfortably afford it, discount points will save you a significant amount of money over a longer period of time.
A valuable asset, some lenders will require you to deposit money into an escrow account in order to cover your expenses for several months after signing the closing documents. The lender will make payments on necessary expenses for you.
FHA Mortgage Insurance
FHA loans require you to pay for mortgage insurance. This will cost you around 1.75% of your total loan. It is not all paid at closing, but in monthly installments during your loan.
Flood Certification and Flood Insurance
Purchasing a home that is prone to flooding? You may be required to pay around $20 for a flood certification. If your home is within a federally designated floodplain, you will also be legally required to obtain flood insurance.
HOA Transfer Fee
If the home you are buying is in a community that has a homeowners association, you or the seller may have to pay a fee to transfer the HOA’s fee collection and homeowner information.
Required by most lenders, homeowners insurance is crucial to avoid having to pay for damages to your home. A majority of lenders will require that you pay for a year of homeowners insurance when you close. The cost of homeowners insurance can be expected to be $35 for every $100,000 in home value, every month.
Loan Origination Fee
Expect to pay around 1% of your loan amount towards origination fees. These cover the expense required to process and underwrite your mortgage loan.
Lender Title Insurance
If you lose your home to a claim on the title, the lender’s title insurance protects the lender from loss. This is a one-time payment due at closing that can cost up to $1000.
Lead-Based Paint Inspection
Any home built before 1979 is required to have a lead-based paint inspection performed. These inspections can cost around $300.
Pest Inspection Fee
A pest inspection fee is required by law as one of the closing costs in Maryland. These usually cost around $100.
Private Mortgage Insurance
If you decide to put less than a 20% down payment on your conventional loan, you will be required to pay for private mortgage insurance. Private mortgage insurance usually costs around $50 for every $100,000 in home value.
It is not uncommon for a lender to require a buyer to pay a full year’s worth of property taxes as a closing cost. The amount of property tax you will owe depends on the home’s location and value.
Rate Lock Fee
If you wish to lock in your interest rate during the time between preapproval and closing, your lender may offer you the option to lock your rate by paying a one-time fee. These can either be free depending on the rate locks terms or .25% – .5% or your loan’s total value.
When you purchase a home, the local government has to update its public records. This usually costs around $125.
Title Search & Transfer Fees
A title search fee will look for and find any current claims on the property you are purchasing and the transfer fee will cover the cost of changing the title over to you. These can cost up to $400.
Your lender has to verify that your loan paperwork is accurate. For this, expect to pay up to $800.
How to Budget for Closing Costs in Maryland
As you can probably tell by now, closing costs in Maryland are abundant. With the process of mortgaging a home being so complex, all of the moving parts and involved parties must be compensated for their assistance. To budget for closing costs, the best thing you can do is be prepared. Quantify all of your potential closing costs and make sure that you have more than enough ready to pay for them. Maryland has the ninth-highest average closing costs in the county, coming in at around 2-5% of the home’s final purchase price. With that number in mind, you can properly allocate funds to pay for the closing costs in Maryland.
Professional and Comprehensive Mortgage Lenders and Brokers
If you are ready to purchase your dream home, do it with the confidence that comes with having Federal Hill Mortgages’ team of professional lenders and brokers working with you. At Federal Hill Mortgage, we work closely with all of our customers to ensure that they receive the best and most favorable mortgage terms available. Call or contact us today to begin the journey toward securing the home of your dreams!