Closing Costs Increased in 2013
As 2013 wraps up, new data shows that the average amount lenders charge to close home loans has increased over last year.
According to Bankrate’s annual closing-cost survey, a home loan applicant looking to borrow $200,000 is paying an average of around $2,400 in total fees. These include origination fees as well as fees associated with third parties like appraisals. This number is a 60% increase from the year before!
The biggest portion of that increase is coming from the loan originators themselves as opposed to third party providers. Origination fees were up around 8.4% over last year.
Why Fees Have Gone Up
With increased stimulus from the government to keep interest rates low, mortgage rates in 2013 dropped significantly. These low rates increased demand for new mortgages and mortgage refinancing. With a giant wave of people looking to get a loan, lenders were no longer having to fight for customers and could increase their fees.
In addition, the banks know they need to make hay while the sun is shining. Interest rates are going up and look like they will stay up for the time being. This will reduce demand as more people cannot or will not want to borrow at higher rates. Also, the higher rates go, the less likely a refinance will save borrowers money if fees are too high.
All of this will force lenders to lower their fees and make less money. So, they have been taking advantage while they can.
Banks Blame Compliance
Next year, the Consumer Financial Protection Bureau is implementing new and stricter regulations. In order to comply with those regulations, lenders have to increase their staff and implement other changes that are costing them more money.
Even though the laws are not in place yet, the lenders have had to prepare for them and therefore claim that their costs have gone up because of that.
Rates and Geography
How much you will pay for closing costs depends on where you live. Some states, due to additional regulations or shortages of professionals associated with the lending profession have higher rates on average than others.
Hawaii clocks in as the most expensive and that honor is mostly due to the lack of mortgage related workers on the island. There just aren’t enough loan officers, appraisers and others involved in the process to meet the demand, so prices are higher.
Some of the other most expensive states are:
- South Carolina
The least expensive states are:
Get the Best Deal
Just because you are in state that has higher average closing costs doesn’t mean you’re stuck paying whatever they want you to.
No matter where you live, you can comparison shop and see who is going to give you the best deal. Every lender must give you a form called the “good faith estimate”. This form breaks down all of the fees that you will be paying to close the loan. Take these forms and compare them to see which option gives you the best all around deal