National closing costs rising
Across the nation, closing costs are on the rise and are up 8.8% over the last twelve months. Origination and title fees on a $200,000 home loan average $4,070 nationally according to Bankrate Inc.’s 2011 Closing Costs Survey.
The four most expensive states are New York with average closing costs of $6,138 followed by Texas at $4,944, Utah with $4,906, and California with $4,832 rounding out the top spots. For the last five years, Texas and New York have taken the top two spots in Bankrate’s survey. Arkansas is the least expensive state averaging $3,378.
Why have closing costs risen?
Closing costs have jumped nearly 10% over the last year because of fees lenders are now directly charged. “New regulations require more staffing and cost more money,” says Jason Auerbach, division manager of First Choice Loan Services in New York City. Banks are requiring extra employment verification and the like to keep loans in shape for Fannie Mae and Freddie Mac, and although these regulations “have been in place for a couple of years already, the mortgage industry takes them more seriously now. New forms and regulations that are still in discussion are influencing lenders already.”
Bankrate said, “On average, lenders charge about $1,614 in origination fees this year, up 10.3 percent from last year. Origination fees include lender charges for services, such as underwriting and processing.”
“Interest rates get a lot of attention, and rightfully so, but it’s also important for consumers to compare lender fees when shopping for a loan,” said Greg McBride, CFA, senior financial analyst for Bankrate Inc.
Do the “new” rules really raise costs?
New rules (or rules that lenders now take seriously) cost more money to meet, Director of Housing Policy for the Consumer Federation of America, Barry Zigas told Bankrate in their study that it is difficult to determine how much of the additional costs are actually a direct result of regulatory changes.
“It’s ironic to hear that the consumer has to pay more to get a fair product,” Zigas said. “But if it means the mortgage they are getting is more likely to be tailored to their needs, they should be happy to pay.”
States like New York and Texas are accustomed to high closing costs, but should a state like Arkansas with a lower median and rising closing cost average “be happy to pay” or is lending passing on a cost that should have been built in in the first place?
Analysts on both sides make good points, what do you think of the rising closing costs?