Montgomery County Closing Costs - What Buyers Need to Know

Thinking about buying a Rockville condo?

The total sales price shouldn’t be the only number you’re concerned with.

Read on to learn about the closing costs in Montgomery County and how to determine the amount of money you’ll be on the hook for as a buyer.

The Costs

As a general rule, you’re looking in the neighborhood of 3% of total sales price.

If you’re a stickler for details and hate surprises, however, today is your day.

Below, I’ve broken out each of the potential costs and withholding for a condo purchase.

Of course, for full clarity about your specific situation, it’s best to consult with a real estate agent or settlement company.

Loan Costs

Loan costs – as the headline implies – are only applicable in cases where the buyer is financing the property.

These will vary by lender, but here are some of the costs you can expect

Note:  Some of these fees will be paid at closing while others might be paid along the way – OR covered by the lender itself.

Loan Origination Fee/Discount Points (each point = 1 % of loan amt.)

For a full definition of what a loan origination fee and discount points are, follow the applicable links.

Appraisal ($300 to $600)

Appraisals for condos are around $300 to $600 and sometimes paid outside of closing.

Credit Report ($15-$75)

This one is often covered by the bank.

Misc. Loan Fees (Doc. Preparation, Processing, Tax Service, Underwriting, etc.: ($450-$1,000)

Your guess is as good as our as to what your final numbers will be.

Luckily, banks are forced to be more transparent nowadays.

Second Mortgage

In rare financing situations, it’s possible you could take out a second mortgage on a property at the time you buy it.

Prepaid Items

These are items the bank is going to make you pay ahead of time in order to protect its investment.

Again, these amounts will vary by bank

Prepaid Interest on New Loan

This number is usually based on 30 days.

Mortgage Insurance

If you are putting more than 20% down on the purchase, there is usually no mortgage insurance.

If you are putting less than 20%, you will likely pay a few hundred dollars a month.

There are, however, special programs and exceptions to the rule.

FHA or VA Funding Fees

If your loan in an FHA or VA loan, you will pay a lump-sum funding fee.

Homeowner’s Insurance Premium

You’ll pay upfront for one year’s worth of home insurance.

Escrowed Items

These dollar amounts will be “escrowed” by the bank on your behalf, and are also due upfront.

If you’re not sure what “escrow” means, check it out before reading on.

Homeowner’s Insurance

Usually two months premium.

Real Estate Taxes

In Maryland, an estimated 10 months (14 months if the buyer is not an owner occupant).

Title Charges

The attorneys or closing agents who prepare the property for sale (re: make sure the numbers match and the seller has the legal right to sell the property) have an array of charges they incur.

Keep in mind the buyer has the right to select the title company.

Settlement Fees

$500 to $1,000

Title Insurance 

Title insurance is typically purchased for both the lender (to protect the bank) and the owner (to protect the buyer).

This ensures that if there is a defect in title (for example, the person selling the property was not who they said they were and fraud was involved), all parties are protected.

In many cases, a “reissue rate” is available that lowers the price.

Lender’s Coverage Only

$2.80 per $1,000 of loan amount

Owner’s Coverage Only

$4.00 – $4.75 per $1,000 of sale price (MD)

Owner’s & Lender’s Coverage

Add $100- $150 to Owners Coverage

Note: Some or all of the above charges may appear as one lump sum on the final settlement statement.

Additional Charges

Depending on the type of property and the requirements of the bank/loan program, there could some additional costs such as….

Pest Inspection

$50 – $150

Home Inspection

About $300 to $500

Condominium, Cooperative or HOA Dues

Pro-rated amount plus one full month or quarter.

It will depend on the condo’s rules.

Taxes

In Montgomery County, it’s typically agreed upon the buyer and seller will split the County Transfer Tax, State Transfer Tax, and County Recordation Tax costs equally.

In some cases, the buyer will request the seller’s help to cover these.

It’s important to factor any such request into the total net profit for the seller, as well as the net amount due for the buyer.

County Transfer Tax

Assuming the property is worth $70,000 or more (which would cover most any residential property), the county transfer tax is equal to 1% of sales price.

State Transfer Tax

The state transfer tax is equal to ½% of the sales price.

If the buyer is first-time homebuyer in the State of Maryland, the state will pay the buyer’s ¼%.

County Recordation Tax

The count recordation tax is equal to .89% any Sales Price up to $500,000.

It bumps to 1.35% for any amount over $500,000

Subtract $890 if the buyer is using residence as primary residence

Brokerage Commission

This number is typically a percentage, but not always, and reflects the amount negotiated with your agent/broker.

It is usually split with the transaction’s listing agent and brokerage.

Brokerage Admin Fee

In addition to the broker commission, there is also generally a broker “admin fee” that ranges between $0 and $600.

Attorney/Settlement Fee – Release Prep, Release Recording Fee

The attorney/settlement fee costs between approximately $500 to $1,000 and include costs associated for making the sale official.

Note that the buyer has the right to select the title company and it is included as part of the contract.

Other Contract Expenses

There can be some other minor costs here but these are usually minimal.

Home Buyer’s Warranty

This is optional as well, but a warranty for the buyer – assuming the buyer bought his/her own and it was not provided by the seller – could cost approximately $300 to $600.

Adjustments

The title company will make adjustments for any taxes and condo dues the seller has already paid/not paid.

In Montgomery County, taxes are due twice a year – September 30^th and December 31^st.

The fiscal year starts July 1^st.

The payment due September 30^th covers taxes from July 1^st to December of the current year.

The payment due on December 31^st covers taxes from January 1^st to July 1^st of the following year.

Depending on when you close on your property – and when taxes have been paid by the seller (or in many cases, when the bank has paid them on the seller’s behalf) –  these monies added to the buyer’s total costs.

Rent Back and Security Deposits

If there is  a “rent-back” situation – where the buyer has taken possession and agreed to let the seller “rent” the property until the seller moves out (this can be up to 60 days) – the negotiated amount will be credited to you at closing.

Condo Questionnaire

When move into a condo – and are financing – there is a questionnaire banks must receive in order to understand the financial well-being and/or risks associated with the building.

It usually costs $50 to $100 to have this questionnaire filled out, and the bank will often pay for it themselves.

Move-In Fee

Most condos charge somewhere between $150 and $500 as a move-in fee.