A Beginners Guide to Closing Costs | Statutory Fees
A closing cost is a payment required to finalize a home loan and is separate from a down-payment. When focusing on mortgage financials, many get lost in focusing on just the down payment and forget to plan for any closing costs they may encounter. "Closing" is the last step of buying and financing a home and when the property is officially transferred from the seller to you. At Closing, you and all the other parties in the mortgage loan transaction sign the necessary documents.
Don’t neglect to learn about closing costs until it’s officially closing day for your home. Keep reading for a beginner's guide to closing costs and an inside look into the statutory fees on a property’s closing date.
Statutory Closing Costs
Statutory closing costs refer to any expenses, tax, or another type of charge that is paid at closing and imposed by the federal, state, local, or another form of a government entity. Even if you paid cash for a property, these expenses are still required at closing.
Some examples of possible statutory closing costs that might come about during your property’s closing day are transfer taxes, deed recording fees, pro-rated taxes, and state and local fees.
Transfer taxes are required by some localities to transfer the title and deed from seller to buyer on closing day. In Maryland, transfer taxes are about five percent of the actual consideration price, unless the buyer is a first-time home buyer in the state of Maryland. Then, the transfer taxes are about twenty-five percent of the actual consideration price if they are purchasing their first Maryland principal place of residence.
Deed Recording Fees
Deed recording is usually paid by the buyer, recording their new deed and mortgage on closing day. This fee is to pay for the County Clerk to record the deed and mortgage, and to change the property tax billing. Costs may vary depending on the size and length of the deed document. In Maryland, deeds under nine pages have fees of around ten dollars.
Property taxes may need to be split between the buyer and the seller since they are due at different times of the year. For example, if taxes are due in October and you close in August, you would owe taxes for 2-months, and the seller would owe for the other 10-months. Prorated taxes are common amongst closing fees, as they ensure the buyer and seller pay their share of taxes at closing.
Pro-rated taxes are usually paid based on the number of days, not months of ownership. Some lenders may require you to set up an escrow account to cover these bills. If not, you may want to set one up yourself to insure the funds are set aside for these important expenses.
State and Local Fees
Other state and local fees may be added during your property’s closing date dependent upon your area and type of property. Additional mortgage taxes may also be required. Ask your local mortgage advisors any questions you may have regarding additional state and local fees upon closing your property.
At Equity Mortgage, we work with a variety of clients with varying degrees of mortgage needs. We offer our clients alternative options to their current loan programs with our wide range of mortgage products and flexible lending practices.
* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.