Average Closing Costs in Maryland

Closing costs can be broken down into two categories: lender origination fees and third-party fees. The average closing costs in Maryland on a $200,000 loan, as of August 2015, amounted to $1,835, consisting of $1,153 in lender fees and $742 in third-party fees. While this figure included various service fees, the true total closing costs must include title fees, insurance, prepaid interest, taxes and escrow to be realistic. Typically, Maryland homebuyers should expect total closing costs to run between 2 to 5% of the property purchase price before adding real estate broker fees of up to 6%.

Using Montgomery Country, Maryland, as an example, the total closing costs for a $200,000 property with a 5% interest rate loan closing on the first day of a 30-day month brings the total to approximately $8,753, or 4.37% of the property price before factoring in the real estate broker commissions of $12,000 for a total of $20.753 for closing costs or 10.37% of the property value. This figure may fluctuate depending on the lender and the associated third-party fees as well as actual real estate broker commissions. Homebuyers hoping to roll the closing costs into the loan can inquire about a no-closing-cost mortgage, which comes with higher interest rates. Sometimes, the seller may cover the closing costs.

What Goes Into Closing Costs?

A lender is required to supply a closing disclosure statement at least three business days prior to the closing. Lenders vary on what additional items may be included in the fees, many of which are negotiable. The average origination fee that lenders charge to process the paperwork in Maryland is $1,093. Document preparation fees are $80, and the tax service cost is approximately $75. This brings the total average loan origination fee to $1,153.

Third-Party Fees

The average third-party fees are $413 for appraisals, $369 for a settlement attorney, $21 for a credit report, $10 for a flood certification, $125 for a pest inspection, $400 for a lead inspection if the house was built before 1970, $100 for postage and courier services, and $515 for a survey to verify the property lines. Some lenders may charge for all or some of the aforementioned third-party fees, which can total up to an additional $1,953 or more.

The following fees and factors add to the complete total closing costs for a property in Maryland.

Title Fees and Insurance

Title companies confirm and validate property titles for legitimacy and accuracy through an intense title search process. Once everything is verified, it proceeds to provide title insurance to lenders and owners against claims arising from potential titles disputes. The title company collects and maintains escrow accounts to ensure the funds are available and used properly at the closing. It collects the closing costs and distributes the money.

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.

State Recordation and Transfer Fees

Each county in Maryland has its own rate for state recordation tax and transfer tax. These taxes are split 50/50 between the buyer and the seller of the property. The state recordation tax is a flat rate per $1000 for the property above $50,000. The first $50,000 is exempt for owner-occupied property. For Montgomery County, the rate is $6.90 from $50,000 to $500,000 and $10 per $1,000 above $500,000. This amounts to a $1,035 tax on a $200,000 property. The transfer tax in Montgomery County is 1.5% (1% for county and 0.5% for the state) of the property cost. This amounts to a $3,000 tax. The state transfer tax is exempt for first-time buyers, but sellers are still responsible for payment on their portion at 0.25%. The total state recordation and state and county transfer taxes are $4,380 on a $200,000 property purchase in Montgomery Country. Since the cost is split 50/50, the total cost for the buyer is around $2,118.

Escrow

Every lender collects property taxes to place in escrow. Assuming yearly property taxes are $3,000, this would be split into semi-annual payments of $1,500 every six months. Many lenders require eight months of reserve escrow in Maryland for property taxes and three months of homeowner's insurance (average cost of $780 annually). That amounts to $2,195 paid up front in escrow.

Prepaid Interest

Depending on the day of the month when the buyer closes, the remaining interest for the month is prepaid at closing. The yearly interest on a $200,000 loan at 5% interest rate is $10,000, or $27.39 per day in interest charges. If the buyer closes on the first day of the month, then a prepayment of $795 added to total closing costs. This is why experienced buyers try to close near the end of the month.

Real Estate Broker Commissions

The average real estate broker commission in Maryland is 6%. This equates to $12,000 additional costs for commissions due at the closing.

Mississippi (MS): Average Closing Costs

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