Earlier this week, Bankrate, Inc. released its “2010 Closing Cost Survey” which revealed that the costs associated with buying a home are seemingly on the rise. Ultimately, the study found the average origination and title fees on a $200,000 mortgage in 2010 totaled $3,741, up 36.6 percent from $2,739 in 2009.
Bankrate surveyed one area in 49 states, two areas in California (Los Angeles and San Francisco), and the District of Columbia. Researchers selected a zip code from one of the area’s largest cities and request the closing costs for $200,000 loans. Researched specifically focused on fees for 30-year fixed-rate mortgages for borrowers with a 20 percent down payment and good enough credit to buy a single-family home. Bankrate’s survey includes lenders’ origination fees and title and settlement fees, but does not include taxes or prepaid items.
The survey found New York to have the highest fees in the nation with an average fee of $5,623. Texas, Utah, San Francisco, and Los Angeles followed closely behind. In 2009, Texas held the survey’s number one spot with New York at number two. In the past four out of five years, Texas and New York have held the top two spots. Arkansas was found to be the least expensive, with an average fee of $3,007, replacing Nevada from last year’s survey. This year Nevada is ranked at number 34. Other states with the lowest fees included North Carolina, Iowa, Montana, and Wisconsin.
Researched for Bankrate feel the rising rates are due to the new regulations implemented in January of this year. Lenders are now required to provide a potential buyer with a Title and Closing fee estimate within 10 percent of what the final cost will be with providing a Good Faith Estimate (GFE). Before these regulations were in place, estimates could fall much lower on the scale without the lender being penalized.
Fees charged directly by lenders went up 22.8 percent this year and fees charged by third parties, such as appraisals and title insurance, went up 47.2 percent. For lenders, this is because it now takes more labor to approve a loan than it did in the past. Before the new regulations, only around 10 percent of mortgages were double-checked before closing. But now, Fannie Mae’s “Loan Quality Initiative” requires the borrowers tax documents be checked against IRS transcripts, and lenders must match the borrower’s social security number against fraudulent checks and pull their credit reports. This means, fees have to go up. Origination fees charged by lenders now average at $1,463, up 22.8 percent from last year at $1,192.
Written by Kelly Mellott