Worried about surprise fees on closing day? You are not alone. If you are buying in Bethesda or anywhere in Montgomery County, it helps to know what you will owe beyond the down payment. This guide explains typical buyer closing costs, who usually pays what, how Maryland’s transfer and recordation taxes work, and a simple worksheet to estimate your cash to close. Let’s dive in.
What closing costs cover
Closing costs are the one-time expenses due when you finalize your purchase. For buyers in Montgomery County, a good rule of thumb is 2% to 5% of the purchase price, not including your down payment. Your exact number depends on lender fees, title and settlement costs, prepaids, escrows, and any negotiated credits.
Common buyer cost categories include:
- Lender fees and points. Loan origination, application, underwriting, discount points, and a credit report.
- Appraisal and other third-party items. Appraisal, flood certification, and a survey if required.
- Title and settlement fees. Lender and owner’s title insurance policies, settlement/closing fee, document prep, and recording fees.
- Prepaids and escrows. Prepaid interest, homeowners insurance, property tax prorations, and initial escrow deposits for taxes and insurance.
- Government and recording charges. Recording fees for your deed and mortgage, and any applicable county or state taxes tied to your loan.
- Miscellaneous items. Wire and courier fees, pest or other inspections, and condo or HOA transfer documents.
Who pays what in Montgomery County
Customary practice in many Maryland transactions is that sellers pay the conveyance or transfer tax tied to the sale price. Buyers typically pay the recordation tax on their new mortgage, plus lender, title, prepaids, and recording fees. Local practice can vary by transaction, and everything is negotiable in your contract, so confirm the split with your agent and settlement company before you write an offer.
Transfer vs. recordation taxes in Maryland
It helps to separate two different taxes you may hear about:
- Transfer tax, also called conveyance tax, applies when ownership transfers from the seller to you. It is usually calculated as a percentage of the sale price.
- Recordation tax applies when a deed or mortgage is recorded. Buyers usually pay this on the new mortgage amount.
These taxes are separate from flat recording fees. Rates and exemptions change over time at both the state and county levels, so verify current amounts with your title company for your exact address and loan.
How to estimate your total
Use this simple method to budget your cash to close:
Start with price and loan amount. Write down your purchase price and your expected loan amount based on your down payment.
Apply common ranges. As a quick estimate, total buyer closing costs often land between 2% and 5% of the purchase price. Break that into:
- Lender fees and points: about 0.5% to 1.5% of price, plus quoted flat fees.
- Title insurance and settlement: about 0.3% to 1.0% of price.
- Appraisal, credit, inspections: add your quotes.
- Recording fees: budget a few hundred dollars up to about one thousand dollars.
- Prepaids and escrows: often 0.25% to 1.0% of price, plus several months of tax and insurance reserves if your lender escrows.
Add a small buffer. Set aside 500 to 1,500 dollars, or about 0.25% of price, for small line items.
Confirm taxes and credits. Ask your title company for the current recordation tax estimate on your mortgage and confirm who pays any transfer tax in your contract. Subtract any seller credits you negotiated.
Compare to the 2% to 5% rule. If your number is outside that range, review which category is driving the difference and ask for line-item quotes.
Example: $800,000 Bethesda purchase worksheet
Below is a simple illustration for a conventional loan with 20% down. Exact fees will vary. Use it to organize your own quotes.
Assumptions:
- Purchase price: $800,000
- Down payment: 20% → Loan amount: $640,000
- Target estimate for buyer costs (excluding down payment): around 3% of price
Illustrative line items:
- Lender fees and points (0.8% of price): $6,400
- Appraisal, credit, processing: $700
- Title insurance and settlement (0.6% of price): $4,800
- Recording fees and document prep: $400
- Prepaid property taxes and prorations: $4,000
- Prepaid homeowners insurance: $1,200
- Initial escrow deposits for taxes and insurance: $5,000
- Miscellaneous (courier, wire, HOA docs): $500
Estimated buyer closing costs subtotal: about $23,000
Next steps to finish your estimate:
- Add any recordation tax on your $640,000 loan amount. Your title company will quote this based on current Maryland and Montgomery County rates.
- Confirm whether the seller pays the transfer tax per your contract, or whether any portion is assigned to you.
- Subtract any seller credits you negotiated.
The result is your estimated cash to close, separate from your down payment.
Ways to reduce your cash to close
- Shop two to three lenders. Compare Loan Estimates side by side and look at both rate and fees.
- Negotiate seller credits. If market conditions allow, ask the seller to contribute to closing costs and use those funds to reduce your cash due.
- Adjust points vs. costs. If you plan to refinance or sell sooner, consider lower upfront points. If you plan to stay a long time, paying points for a lower rate might make sense.
- Time your closing. Closing right before a property tax due date can increase your prepaid tax at settlement. Ask your title company how timing affects your number.
- Review title endorsements. Some are optional. Discuss coverage with your title company so you understand cost and benefit.
Local tips for Bethesda buyers
- Condo or HOA fees. Budget for association transfer or estoppel fees and request them early so they do not delay closing.
- Property tax prorations. Montgomery County billing cycles affect how much tax you prepay at closing. Your settlement company will calculate it based on the closing date.
- Escrow planning. Many lenders require several months of tax and insurance reserves at funding. Build this into your cash plan.
- Clarify taxes in your offer. Spell out who pays transfer and recordation taxes in the contract to avoid surprises later.
What to verify before you sign
- A title company estimate. Ask for an itemized quote for your exact price and address, including current recording fees and any applicable taxes.
- Your lender’s fees. Review the origination, underwriting, points, and credits on your Loan Estimate.
- Insurance and escrows. Confirm your homeowners insurance premium and the lender’s initial escrow deposits.
- Credits and prorations. Make sure seller credits, HOA dues, and tax prorations are reflected correctly on your closing figures.
If you want a clear, local estimate for your Bethesda purchase and help negotiating who pays what, connect with the team that does this every day. Reach out to Pearlman Meekin & Co. for a quick consult and a personalized closing cost roadmap.
FAQs
How much are buyer closing costs in Bethesda?
- Buyers typically budget 2% to 5% of the purchase price for closing costs, excluding the down payment. Your total depends on lender fees, title costs, prepaids, escrows, and negotiated credits.
Who usually pays transfer and recordation taxes in Montgomery County?
- By common practice, sellers pay the transfer or conveyance tax, and buyers pay recordation tax on the new mortgage plus recording fees. The contract can change this, so confirm terms with your agent and title company.
What is the difference between transfer tax and recordation tax in Maryland?
- Transfer tax is charged on the sale when ownership changes and is tied to the price. Recordation tax applies when a deed or mortgage is recorded and is often calculated on the loan amount.
How can I lower my cash to close as a buyer?
- Shop multiple lenders, negotiate seller credits, weigh points versus upfront costs, review optional title endorsements, and consider timing near tax cycles to manage prepaids.
Are there first-time buyer programs that help with closing costs in Maryland?
- Some state or local programs may offer down payment assistance or credits for qualified buyers. Ask a participating lender and your agent to review options for your situation.
When will I know my exact cash to close?
- Your lender provides a Loan Estimate early and a final Closing Disclosure before settlement. Your title company will update recording fees, taxes, and prorations so you know the final amount to bring to closing.
