Buying a Maryland Home in 2025 - Closing Costs
Welcome to my series on Buying A Maryland Home in 2025. Some of the topics I will cover in this series are closing costs, down payment options, credit -be sure to check back and check out the post I wrote on the importance of the pre-approval!
Let's get started with closing costs. You’ve probably heard about “closing costs,” but what are they, exactly? Let’s break it down:
What Are Closing Costs?
Closing costs are the fees and expenses you pay to finalize your home purchase. They usually add up to 3%-6% of the home’s price. The lower the price of the home, the greater the percentage of the home's price. There are fixed costs and variable costs, some vary by lender, by program or loan type. For the purposes of this post, I am going to include taxes and insurance and the escrow account as part of the closing costs, though this is actually separate.
What’s Included?
- Loan Origination Fee: This is what your lender charges to process your mortgage. This fee includes points (a point is 1% of the loan amount, most often used to lower the interest rate) processing and underwriting.
- Appraisal Fee: The cost of having the home’s value assessed, comparing the home you are buying to similar homes, in close proximity and similar in scope that have sold recently.
- Credit Report and Flood Cert: 3rd party costs for items needed to evaluate the credit worthiness and verify that the property does or does not stand in a flood zone (which could add an extra cost for flood insurance)
- Title Insurance: Protects you and the lender if there are any legal disputes over the property that could come up after closing.
- Title fees: The costs associated for the title company to review the tax records and any loans/transfers done on the property prior to a purchase to ensure that there are no outstanding debts/encumbrances on the property being purchased.
- Transfer and Recordation Taxes: Maryland has both county and state transfer taxes that are typically split between the buyer and the seller. If the buyer is buying their first home in Maryland, the buyer's half of the state transfer taxes are waived as a one-time benefit. There are also fees to record the note and deed at the courthouse.
- Home Inspection: A property inspection done by a licensed contractor to review the soundness of the home and the systems in the home to not only help the buyer to understand potential property issues, but to have an idea of potential future costs associated with the purchase.
- Homeowner’s Insurance: 1 year is paid at closing.
- Property Taxes: Taxes in Maryland are typically paid in July and December for a primary residence. They are paid annually in July for an investment property. Depending on when a purchase is completed, the buyer may pay the seller back for taxes already paid, when the new owner will occupy the home. The title company will ensure that any taxes due are calculated so they may be paid prior to recording the deed.
- Escrow Account-An account set up at the servicer to collect 1/12th of the property tax and insurance bills, collected each month as part of the mortgage payment, plus a cushion amount allowed by law. The account is started at closing with an amount to start the account so that by the time the first tax and insurance payments are due, there will be enough in the account to pay the bill.
- Additional Fees depending on the property and closing date can include: Homeower's Association or Condo dues/transfer costs, front foot fees, leasehold/ground rent, pest, well and/or septic inspections, realtor admin fees, realtor fees, property survey, interest from the day of closing through the end of the month.
When Do You Pay Them? Some of the costs are paid at the time of service including inspections and the appraisal fee. Some lenders will charge a credit report fee at application. The rest of the fees will be paid on your closing day, usually wired to the title company along with the downpayment costs.
Understanding these fees helps you plan your budget better. Let me know if you'd like to talk about costs for a specific property or want to go more in depth about the costs/fees assocated with a Maryland home purchase in 2025!
There are ways to get help with paying some or all of these costs, stay tuned!
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