Closing Costs Decrease 7%

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

Federal conventions have successfully reduced the cost of closing mortgage loans, noticeably helping new homebuyers.

According to a recent survey, mortgage closing costs have decreased at an average of 7.4% over the last year. This summer, homebuyers have been and will be saving hundreds of dollars on closing costs when compared with averages from 2011.

Closing costs for a loan tend to total up to more than most people expect due to the various origination fees, including application fees, charges for credit checks, and fees from third-party title searches and insurance.

According to a senior financial analyst, the drop in price of closing costs is the result of new procedures that make it necessary for lenders to be more accurate when making estimates for borrower’s closing costs.

The regulation, a section of the Real Estate Settlement Practices Act that was instated two years ago, requires that lenders give a “good faith estimate” within 10% of the final amount that the borrower will have to pay.

The large decline in third-party fees demonstrates that lenders are improving at cost estimating, said the senior analyst.

In terms of state rankings, New York ranked in as the state with the highest closing costs, where origination and closing charges totaled up to more than $5,400 for a $200,000 mortgage. Among other states with expensive closing costs, Texas, Pennsylvania, and Florida ranked much higher than the national average.

On the other end of the spectrum, Missouri ranked as the state with the cheapest closing costs, with borrowing costs averaging slightly above $3,000. Other states with low closing fees include Colorado, Kansas, and Iowa.