How Much Are Closing Costs in Maryland?

Closing costs represent the various fees and expenses incurred by both buyers and sellers to finalize a real estate transaction. These costs extend beyond the property’s purchase price, encompassing charges for services necessary to transfer ownership and secure financing. In Maryland, these costs generally average around 3.7% of the home’s sale price, not including real estate commissions.

Buyer Specific Closing Costs

Buyers in Maryland typically face a range of closing costs that generally fall between 2% and 5% of the property’s purchase price. These expenses cover various services crucial for securing a mortgage and legally transferring the property.

Loan origination fees are charged by lenders for processing the mortgage application and are commonly around 1% of the loan amount. This fee compensates the lender for their administrative work in underwriting and preparing the loan.

Appraisal fees are a mandatory expense for buyers obtaining a mortgage, as lenders require an independent valuation of the property. In Maryland, these fees typically range from $300 to $600, though they can vary based on the property’s size, complexity, and location. For a standard single-family home, the average appraisal cost is around $625.

Credit report fees cover the cost incurred by lenders to pull a buyer’s credit history from major credit bureaus. This small charge helps assess the borrower’s creditworthiness and determine interest rates. While sometimes included within a larger application fee, it may appear as a separate line item.

Lender’s title insurance is a required policy that protects the mortgage lender against financial losses due to unforeseen title defects or claims against the property. This policy typically costs around 0.5% of the loan amount. Recording fees are governmental charges for officially registering the new deed and mortgage in public land records. These fees vary by county and generally range from $50 to $100, plus a $40 surcharge for each instrument recorded.

Prepaid expenses, often deposited into an escrow account at closing, cover initial property taxes and homeowner’s insurance premiums. Lenders commonly require two months of these payments upfront to establish the escrow account. Additionally, buyers typically pay prepaid interest, which covers the interest accrued from the closing date until the first mortgage payment date. If a down payment is less than 20%, the first month’s private mortgage insurance (PMI) payment is also due at closing.

Home inspection fees are paid to a professional inspector to evaluate the property’s condition. In Maryland, these inspections generally cost between $300 and $600, depending on the home’s size. A survey fee may also be required, ranging from $400 to $1,200, to determine the property’s legal boundaries.

Seller Specific Closing Costs

Seller closing costs in Maryland are generally higher than buyer costs, typically ranging from 3.73% to 10% of the home’s sale price, with a significant portion attributed to real estate commissions. Excluding these commissions, other seller-specific costs usually amount to between 2% and 3% of the sale price.

Real estate commission is often the single largest expense for sellers. In Maryland, the average total commission is approximately 5.13% of the home’s sale price, though rates can range from 5% to 6%. This commission is customarily split between the listing agent and the buyer’s agent.

Owner’s title insurance protects the buyer from future claims against the property’s title. While benefiting the buyer, it is traditionally paid by the seller in Maryland, though this can be negotiated. This policy typically costs between 0.5% and 1.0% of the home’s sale price, with rates starting around $4.80 per thousand for the initial $100,000 of value.

Deed preparation fees are incurred for drafting the legal document that formally transfers property ownership from the seller to the buyer. These fees are set by the attorneys or title companies handling the transaction. Sellers are also responsible for paying off any outstanding mortgage balance, including accrued interest up to the closing date, and potentially any prepayment penalties associated with their existing loan.

Property taxes are prorated at closing, meaning the seller pays their share of taxes for the portion of the year they owned the property. Similarly, any outstanding homeowners’ association (HOA) fees may also be prorated and settled at closing.

Shared and Negotiated Costs

Certain closing costs in Maryland are commonly shared between the buyer and seller or are subject to negotiation. These shared expenses contribute to the overall transaction cost and require agreement between the parties. Understanding how these are typically divided can influence the final financial outcome for both sides.

State and county transfer taxes are levied on the transfer of real property ownership. In Maryland, the state transfer tax is 0.5% of the consideration, which can be reduced to 0.25% for first-time Maryland homebuyers. County transfer tax rates vary by jurisdiction. By default, these transfer taxes are presumed to be shared equally between the buyer and seller unless explicitly stated otherwise in the sales agreement. For first-time Maryland homebuyers, one-half of the state transfer tax may be waived, with the remaining half typically paid by the seller.

Recordation tax is another excise tax imposed for recording the property sale in the public land records. This tax rate also varies by county, often calculated per $500 of the consideration. Similar to transfer taxes, recordation tax is customarily split equally between the buyer and seller in Maryland. These taxes, along with the state and county transfer taxes, collectively represent a significant portion of the shared governmental fees in a real estate transaction.

Escrow or settlement fees are paid to the title company or attorney overseeing the closing process. This fee covers the administrative costs of coordinating the transaction and ensuring all documents are properly executed. In Maryland, this fee is often split between the buyer and seller, typically ranging from $300 to $600. While general customs exist, many of these shared costs can be negotiated between the parties during the contract phase.

Understanding Your Closing Cost Estimates

Prospective homebuyers receive a Loan Estimate document, which provides a detailed breakdown of their anticipated closing costs. Lenders are required to furnish this estimate within three business days of receiving a loan application. This document outlines the estimated loan terms, projected payments, and the various closing expenses the buyer can expect to pay.

As the transaction approaches closing, both the buyer and seller receive a Closing Disclosure. This critical document, mandated by the TILA-RESPA Integrated Disclosure (TRID) rule, is provided at least three business days before the scheduled closing date. The Closing Disclosure presents the final, itemized list of all costs associated with the transaction, clearly indicating who pays each fee. It serves as the definitive statement of all financial debits and credits for both parties.

Reviewing the Closing Disclosure against the initial Loan Estimate is an important step to ensure accuracy and identify any significant changes in costs. While the Loan Estimate provides a projection, the Closing Disclosure details the exact amounts due at settlement. Understanding these documents empowers individuals to verify all charges and ask questions before finalizing the property transfer.