LiveMARYLAND Buyer Tip: Buyer Closing Cost to Budget For

Let’s Talk About Buyer Closing Costs.

When purchasing a home, everyone knows you need a down payment, but many people don't realize that in addition to your down payment, more funds are needed to cover your closing costs. Closing costs are fees that can include title insurance, tax and utility reimbursements, transfer tax, conveyancing fees, and miscellaneous smaller fees for services like notaries and wire transfers.

If you are getting a mortgage, your lender could also require funds to be held in escrow for taxes and insurance, and charge underwriting and application fees. This may all sound like real-estate slang, so let we break it down for you…

How much should you budget for closing costs? We typically tell our buyers to budget anywhere between 3-4% of the price of the home. Here is a quick breakdown of what you may need to factor into your total out-of-pocket when buying a home:

• Appraisal fee: $665 - $850 depending on the type of mortgage and property size

• Underwriting and application fees: $1,250 to $1,450

• Title insurance: 0.5-1% of the purchase price  - varies per title company

• Transfer tax: 1.5%-3% of the loan  - varies depending on the county. Transfer taxes are sometimes split between the buyer and seller.

• Mortgage insurance: 0.5-1.5% of the loan (if applicable) – will vary for Conventional Loans depending on the down payment(3%, 5%, 10%, or 15%) and the buyers credit scores.  FHA Loans charge an upfront mortgage insurance of 1.75% which is typically financed into the loan amount and a monthly premium of 0.850%

• Prepaids: typically a full year of your property taxes and homeowners insurance are required upfront.  Prepaid property taxes are paid semi-annually for primary residences and annually for second homes and investment properties. The first year Homeowners insurance premium is paid at closing and a couple months of insurance are put into escrow to pay future premiums on an annual basis.

• Any HOA/condo fees or capital contributions:  HOA and Condo Dues vary per the community but could be paid monthly, quarterly, semi-annually or annually. Depending on how the HOA bills the dues, you should plan to prepay at least six months, and possibly the first year, if your HOA fees are included with your mortgage payments.

As home prices and interest rates continue to rise, it's more important than ever to make sure your plan includes budgeting for closing costs. Keep in mind that these fees vary depending on location, loan program, and lender.

Fortunately, here in Maryland, we work with several lenders local lenders that offer down payment assistance programs that can help cover some, or all of these costs! Are you ready to start your journey on the LiveMARYLAND Path to Homeownership? Message, text, call, or email us at shari@livemaryland.com, and we’ll find out more about your circumstances to get you connected with the right program for you!