Ask your lender or agent to calculate closing costs


November 21, 1993

QUESTION: How do you calculate closing costs? What are the major components, and how do they vary among the city and the surrounding counties?

ANSWER: The best way to calculate closing costs is to simply go to a lender, real estate agent or title company -- they are usually happy to do the math for a potential customer. In general, closing costs in Maryland are about 5 to 6 percent of the purchase price.

The major components of the closing costs are the state and local transfer and recording costs, about 13 months escrow for real estate taxes and lender charges. It has been well-documented that Maryland has one of the highest closing costs in the country -- mostly because of the high local and state government transfer and recording costs and the state-imposed requirement that real estate taxes be paid one year in advance.

Excluding the upfront taxes and government fees, private closing costs in Maryland are about the national average, or about 1 percent of the purchase price.

Each jurisdiction in Maryland sets its own transfer and recording charges; thus closing costs vary in the state from county to county. For example, Baltimore charges 2.05 percent for transfer and recording costs; Baltimore County, 2.1 percent; Anne Arundel County, 1.7 percent; Carroll County, 0.66 percent; Harford County, 1.66 percent; and Howard County, 1.5 percent. All these are in addition to the 0.5 percent the state charges for transfer tax.

Also, the amount of advance property taxes required will vary by jurisdiction based on the property tax rate. The amount in Baltimore -- with a tax rate of about 6 percent a year -- will be much more than that in Baltimore County -- where taxes are closer to 3 percent a year.

For a $100,000 house in the city, 13 months of taxes would equal about $2,600. In the county, the same-priced house would require about $1,300. Of course, you probably would have to pay more for the same house in the county.

All of this does not include the down payment -- which will add thousands of dollars to the money that the buyer will have to come up with to buy the home -- traditionally, between 5 percent and 20 percent of the purchase price.

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