The Cost of Buying a Home

Learn More About Closing Costs & Other Fees

If you’re a first-time home buyer, you’ve probably heard that at closing, you will need to provide a down payment that’s based on the total sales price of your home.

What you may not know is that in addition to the down payment, you’ll also have to come up with the money needed to pay closing costs.

What are Closing Costs?

Closing costs are fees and expenses that you have to pay on your house beyond the down payment. Think about it like this: when you go to purchase a new car, you not only have the total sales price of the car, but you also have:

  • Title fees
  • Tags
  • Dealership delivery fees
  • Other potential dealer fees


You have all these additional fees that you have to pay on top of the agreed upon price for the vehicle. The same kind of thing happens when you're purchasing a home. These are the closing costs. 

Understanding Your Closing Costs

As a general rule of thumb, 4% of the sales price or the loan amount, (depending on which is higher), is going to be your closing costs.

For example, let's say you're purchasing your first home for $300,000. To calculate your closing costs, you would take 4% of that $300,000, which equals twelve grand.

Even if you're doing a VA loan with 100% percent financing, you still are going to have to pay those closing costs. This is important to know when we’re looking at how much money we need in the process of buying a home.

Finding a Deal that Works for You

There are some cases where we may be able to get some of that money covered by the seller, which you can learn more about by watching my video about closing costs.  

Either way, the main takeaway here is that when it comes to buying a home, closing costs are something you have to think about. If you're curious about what makes up these closing costs, the big bulk of it is taxes.

The state of Maryland has three major taxes:

  • Your transfer tax to the state
  • A recreation tax for most of the counties here
  • A stamp tax


The Bottom Line

In addition to these taxes, you may also have a loan origination fee for the lender, document preparation, and other lender fees. And don’t forget about your title company fees as well.

The title company does all the prep work to make sure they can transfer the house to you without issue. Other costs may include:

  • Title Insurance
  • Home Survey 
  • Home Value Appraisal 

All of these things add up. So, if we take the fees for the lender, the fees for the title company, the fees for the government, maybe an admin fee and a transaction fee to the real estate agent, it all adds up to about 4% of the cost of your home. 

Have questions? Leave me a note in the comments below, watch my video about closing costs, or reach out to get started with your home buying journey today.   

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