Settlement and Taxes
Closing costs and settlement costs are just different names for the same thing. When you purchase a home there are a number of fees that are collected at a settlement or closing before you take possession of your new home. At the settlement on your new home, you'll finalize your home purchase by signing all the papers which make the home officially yours. You'll have to pay closing costs which are approximately 4% of the sales price. The seller may offset these costs.
Loan Originated fees- Usually 1% of the loan amount. Not charged if assume an existing loan; however, there will be a loan assumption fee= $150-$500.
Discount points- Depends on your interest rate. Not charged if you assume an existing loan.
Settlement Attorney's fee document preparation, title search, title insurance binder, and courier fee to/from lender of approximately $400. The people who do title searches have an extremely important job. They must ensure that sellers really own the property being sold and that all liens against the property are being paid off as a result of the sale. The preliminary title report will also show any easements that run with the property. The Title Company will go back many years, examining what is called the "chain of title". If you learn that the property you are buying has title problems, don't panic. Most of them are resolved easily and in plenty of time to avoid delays in closing.
Lender fees for underwriting, tax service fee, document preparation fee (approximately $275- but higher for ARMs $450)
Title Insurance- the lender requires that you only cover the loan amount; however for a small one-time fee you should also cover yourself up to the sales price. Although a title search has been conducted to prove the property is free and clean of all encumbrances, sometimes a human error occurs. And it may not be during your title search- it may have occurred many title searches before that, but it will still affect your title.
Transfer and Recordation Tax Rates
Montgomery County, Maryland (effective March 1, 2008)*
County Transfer Tax------1%
State Transfer Tax--------0.5%**
State Recordation Tax----0.69%*** ($6.90 per $1,000)
per MD law, all transfer and recordation taxes are shared equally unless otherwise negotiated. There will be an additional recordation tax of .31% on any consideration over $500,000.
District of Columbia (effective October 1, 2006)
Transfer tax (Seller)-------1.45%****
Recordation Tax (Buyer)--1.45%****
(Over $400,000 and Above is 1.1% Split)
Commonwealth of Virginia (effective January 1, 2008)
County Recordation Tax: (Paid by Buyer)- 0.0834%
Deed - $0.834 per $1,000 of Sales Price
Deed of Trust (each) - $0.834 per $1,000 of loan amount
State Recordation Tax: (Paid by Buyer)- 0.25%
Deed - $2.50 per $1,000 of Sales Price
Deed of Trust (each)- $2.50 per $1,000 of loan amount
Total Transfer and Recordation- 0.3334%
State Grantors Tax: (Paid by Seller)
$1.00 per $1,000 of Sales Price- 0.1%
*For illustration purposes, Montgomery County is selected. Please request infomation for other county/city transfer and state recordation taxes.
**Request Info for First Time Homebuyer Exemption Information
***If Purchaser intends to live in the property for 7 of the next 12 months, State Recordation tax only is calculated on purchase price less $50,000.00
****Applies to transactions of $400,000.00 or more. For transaction of less than $400,000.00, transfer and recordation taxes remain at 1.1% each.
Survey: $200-$300; Appraisal: $300; Credit Check: $50-$60; Upfront Private Mortgage Insurance (avoided if possible); Home Inspection: Varies; Hazzard Insurance: Lender requires only fire and hazard insurance on new home. Full policy for personal liability. Pay full year advance and two weeks before settlement. Interest: interest paid in arrears while principal paid upfront. Tax Escrow: Lenders require at least 3 months of tax payments. Hazard Insurance Escrow: Usually Escrow 2 months. Mortgage Insurance Escrow: 2 months usually. Mortgage Insurance on FHA (upfront fee 2.25%, zero for condo and Conventional Loans (speak w/lender)
Washington Luxury Properties have had success with the following Preferred Settlement Firms:
www.montgomerycountymd.gov/estimatedtax. By simply entering the address of a residence, the approximate tax obligation of a potential new homeowner will be available within seconds.
Property Tax Assessment Appeals: If you (or your client) received a property tax assessment that you believe is too high, or if you (or your client) purchased a home for less than the assessed value, you possibly may appeal the property tax assessment—even if you are in the middle of the three year assessment cycle. Also, if you reside in Montgomery County, Maryland, you may contact the local assessment office and ask for Roberta Ward, who is extremely helpful and can walk you through the process. Her email is firstname.lastname@example.org, and her phone number is (240) 314-4511. HOME CLOSING 101
District of Columbia -Taxpayer Service Center