Nathan Zarcaro
Preparing For Closing Costs in Maryland in 2023
Updated: Oct 22
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First-time homebuyers, especially those with student loan debt, need to pay close attention to all of the fees that can really add up during the home buying process. The largest expense you'll face will be your closing costs, which actually consists of a group of expenses that you'll be expected to pay for at time of closing.
These closing costs can vary somewhat greatly by state and region, with Maryland unfortunately being near the top of the list.
What are closing costs?
Closing costs are the fees that you'll pay for when you close, and oftentimes come out to about 5% of the home's purchase price, excluding any down payment that you make. And while somewhere in the range of 5% is normal, it is possible to pay anywhere in the range of 3-6%.
We like to tell people that closing costs are the housing equivalent of paying sales tax on a new car. it isn't money that you're paying for the item itself, but it is an expense that you'll need to cover to get the item that you paid for.
Related: A first-time home buyer guide
What fees are included in closing costs?
Closing costs may include some or all of the following:
Loan application fee
Underwriting fee
Attorney fees
Closing fee
Credit report fees
Flood certification (to gauge if you live in a flood zone)
Homeowner's insurance
Title insurance
Prepaid interest
Property tax
Origination fee
Other miscellaneous fees
Closing costs in Maryland
Closing costs in Maryland average about 3.5%, according to Bankrate. This means that, if you purchase a $300,000 home, you can expect to pay about $10,500 in closing costs, a hefty sum of money. And depending on the way that the process is handled, you may be on the hook for other fees in addition to this. For reference, the average closing costs for a home in Maryland, including property tax, are a little over $12,000.
In fact, the Easton, Maryland area has the highest average cost of any real estate market in the entire country, at $19,475. For those keeping track at home, Salisbury, MD is fifth. Thanks again to Bankrate for the analysis.
What fees are included in Maryland's closing costs?
While the actual fees will vary somewhat across different areas of the state (you can expect to pay more in Baltimore where taxes are higher, for example), you can think of your closing costs as belonging to one of three categories:
Paying annual fees (these will recur)
Mortgage fees (mostly one time fees)
House based fees (one time fees)
Let's start with the most expensive fees over the long run, those that you will be on the hook for at closing and then again each year.
Yearly fees
At the time of closing, some of the fees you are going to pay will be assessed to you annually for as long as you are the home owner. These fees include your property taxes and home insurance.
1. Property taxes
In Maryland, the annual property tax averages 1.085% of the home's value, though this can vary by town and county. This figure is lower than the national average, but more affluent areas will usually pay more.
This means that, with an assessed home value of $300,000, you can expect to pay $3,255 per year. Of course, the exact value will change over time as the value of your home changes. This may be the largest component of your actual closing costs.
2. Homeowner's insurance
Most lenders require that you prepay a year's worth of homeowner's insurance as a condition of closing. But after that, it will become a recurring expense, albeit a really important one!
Though it is not mandated by state law, even if you find a lender that will proceed without it, it is not a good idea.
Note that, if you are moving to a community that has a homeowner's association (HOA), those fees will be recurring as well.
Maryland mortgage fees
Also due at the time you close are a bunch of mortgage based fees. Among them are:
Credit reporting fees
Attorney fees
Loan origination fees
PMI
1. Credit reporting
It is common in Maryland and across the country for lenders to pull your credit as part of the mortgage loan underwriting process. Getting copies of your credit history from the large reporting bureaus - Experian, Equifax, and TransUnion - costs the bank money, which they will pass on to you.
It is normal to be charged under $30 for this.
2. Attorney fees
Most of the time, you'll need a real estate attorney through the process. Your real estate lawyer will prepare and verify the legal documents required to transition ownership of the home to you.
In Maryland, and throughout the rest of the Northeast, it is normal to pay fees somewhere in the range of $500 and $1,500 per closing, depending on the documents you need and the complexity of the transaction.
3. Loan origination fees
Lenders in Maryland typically charge loan origination fees somewhere between 0.5%-1% of the loan amount in fees. This may include underwriting fees, application fees, and more.
It never hurts to ask your lender if there are any aspects of the fee that can be waived though.
4. Private mortgage insurance
Private mortgage insurance, or PMI, is required by most all lenders if your down payment is less than 20% of the home's purchase price. PMI is the only expense within this category that is paid more than once, as you will pay it monthly with your mortgage payment until you reach a minimum of 20% equity in your home (though laws mandate that it come off by the time you reach 22% equity.
You can expect to pay between 0.5-1.5% of the loan amount in PMI.
One-time fees
Maryland based homebuyers are also subject to a litany of other one-time fees, including:
The home inspection
The title search/insurance
The home appraisal (usually paid before closing)
Real estate transfer tax
1. Home inspections
Inspections, as well as appraisals, are oftentimes paid at the time the service is performed, well before closing. But for the sake of accurate modeling, we'll include them here.
Generally, the average home inspection cost in Maryland is between $300 and $500, and while this may seem hefty, it is far cheaper than the replacement cost of any defective systems or house problems the inspection may uncover.
As such, it is never a good idea to buy a house without an inspection, though it is not a requirement, per se.
2. Title searches and insurance
The settlement agent that you work with will conduct a title search on your property to ensure that there are no liens on the property or claims on the property. In Maryland, title searches usually cost somewhere between $100 and $250 for a single-family home.
Title insurance is oftentimes mandated by lenders as a way to protect the asset you're funded. It protects you in the event that the title search did not pick up on something correctly. For properties costing between $250,000 and $500,000, title insurance in Maryland usually costs about $4.10 per $1000. So for a $300,000 home, you'll pay $1,230.
3. Home appraisals (ordered by lender)
Home appraisals are the second item on this list that are usually paid for before closing, but this may be lender specific. The bank that you're working with gets to pick the inspection (or has to rotate through a list of selections), so you don't get to pick your own, but you do get to pay the bill.
Related: What do home appraisers look for?
4. Real estate transfer tax
Finally, Maryland real estate transactions, like many other states, are subject to a real estate transfer tax. Maryland transactions are subject to a 0.5% transfer fee rate (0.25% for first time homebuyers).
More information about the tax can be found through the Maryland Courts website.
More: Learn more about closing costs in neighboring Virginia
How to lower your Maryland closing costs
Unfortunately, many closing costs are fixed expenses or variable based on how much house you buy. This means that without buying a smaller home, there is not a ton of wiggle room. There are, however, things that you can do to make the entire homebuying process more affordable.
Homebuyers with student loan debt may consider the Maryland SmartBuy 3.0 program, for example.
Beyond this program, there are a few other strategies that you may consider in an attempt to lower your closing costs:
Avoiding private mortgage insurance (PMI)
Shop some services
Negotiate with the seller
Close at the end of the month
1. Avoiding PMI
PMI, or private mortgage insurance, is required by most Maryland and other lenders in the event that you do not put 20% of the purchase price down as a down payment. Taking a little extra time to get to 20% of the home price n the range you are shopping in can help you to lower your closing costs down the line.
Of course, these savings can either be negated or extended based on what happens to interest rates in the meantime, but avoiding PMI altogether is definitely a strategy worth considering.
2. Shop some services
Another option you have is to shop around for quotes on the services you need completed to close. Ask prospective attorneys what their fees are for title searches, for example. And while you don't necessarily want to just choose the cheapest attorney you can find, you'll definitely want to get quotes so that there are no surprises.
3. Negotiate with the seller
Depending on the real estate conditions in your local market at the time in which you are house shopping, you may have the leverage to negotiate and ask the seller to pay some or all of the closing costs.
This is especially true if any of the following are true:
It is a buyer's real estate market
The home is in need of repairs/significant updates
The house is unlikely to sell on the open market in the short to medium term
4. Have your closing at the end of the month
Closing on your new home towards the end of the month can help you save some money in prepaid mortgage interest. This event is the only time throughout your mortgage repayment where you'll ever prepay mortgage interest (through the end of the month), but if you close on the 29th or 30th, you'll only have to pay for an extra day or two.
How to prepare for Maryland closing costs
One of the most popular things we get asked as a business is how to prepare for these expenses. And, while our exact answer may depend on your exact financial situation, there are a number of principles you can use to assure you're staying on track.
1. Estimate how much they will cost you
How are you supposed to start saving money to use for your closing without having an estimate on how much money you'll need to save? Googling is fine here, but we recommend that you do research as to what you can expect for expenses in your state and at your price range.
Sites like Zillow and SmartAsset may prove helpful here.
Once you know how much you'll need to close on your new Maryland home, you can proceed to step 2.
2. Open a special savings account
We recommend that you open a special savings account to help you prepare for homeownership. It will help you stay organized and track your progress more easily.
You may consider opening a money market account with a participating bank if you're looking to earn a little extra yield too. CIT Bank is a great option for this.
3. Save over a period of time
Saving up for anything, your home closing included, is easier accomplished when done over a period of time. So don't wait until you've found a home you love to begin preparing.
And even if you think you are a year or more away from buying a home you love, it is never too early to begin preparing.
Download our MD closing cost calculator
With high interest rates and high home prices much more mainstream than they were just a couple of years ago, every dollar counts. And this includes your closing costs. For those that want to understand how much their closing costs will run in the Maryland, we built a calculator especially for you.
Our calculator can help you to:
Plan for all the expenses associated with the home buying process
Understand how soon you may be able to buy a home
And more!
Get your free calculator by clicking the button below!

Tips and tricks
When my wife and I bought our first home in May 2022, we felt this same closing cost caused stress. We found that shopping ahead of time for certain services, such as our home inspection, title search, and other services helped us get a good idea as to how much money we'll need to have on hand.
And if you have enough time before your Maryland home purchase, you may consider saving for these expenses out of your current budgeting. Cutting extraneous spending, even for just a month or two, may be enough to help you keep more of your savings in tact for when you move in.
That way, you'll be able to do things like buy furniture or start early renovations!
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