Reprinted from DSnews.com
Written by Esther Cho
Home affordability has reached the highest peak since 1970, which is when the data was first recorded, according to National Association of Realtor’s (NAR) housing affordability index. The index rose to 206.1 in January, and an index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced single-family home, assuming a 20 percent down payment and 25 percent of gross income for mortgage principal and interest payments.
“This is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home,” said Moe Veissi, NAR president.
While projections about future mortgage rates and home prices have been mixed, NAR expects little change and anticipates affordability levels will stay high through 2012.
“Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country,” Veissi said. “If access to credit improves, we could see a much more meaningful increase in home sales and broader stabilization in home prices with modest gains in areas with stronger job growth.”
The index is based on the relationship between median home price, median family income, and the average mortgage interest rate.
Housing prices may be dropping across the country, but closing costs are on the rise nationwide. The average origination and title fees on a $200,000 home are $4,070 according to Bankrate’s most recent survey of closing costs for 2011. That is a jump of 8.8 percent from 2010 when the average rate was $3,741. New York is leading the pack with average closing costs being $6,183, and is followed by Texas at $4,944. The cheapest closing costs nationwide are Arkansas, North Carolina and Indiana where the average is $3,400.
Now that the facts and figures have been established the question to be asked is: Why are closing costs going up? The biggest bulk of that answer lies in direct lender fees. Mortgage lenders claim the reason their fees have increased is because of tighter mortgage regulations implemented by the government over the past two years. Strict regulations require more personnel to ensure complete compliance. Next in line are third party fees including title, appraisal, postage/courier, and survey charges averaging around $2,456, up 7.9 percent from 2010. Among these third party fees title insurance has changed very little compared to last year.
Even though closing costs have risen since 2010 that doesn’t mean you have to be chained to the highest fees on the market. You can shop around and negotiate most fees. When shopping around be sure to get good faith estimates (GFE’s) from at least three different lenders and use a reputable lender who you can access. A good GFE will include a breakdown of estimated closing costs, rate and payment information.
If you’re going to shop around for title insurance you want to make sure the savings is going to be worth your time spent shopping. Some states regulate title insurance premiums while in other states they vary. The Bankrate survey discussed above indicates the average premiums for title insurance was $1,653 nationwide. North Carolina has the cheapest average at $993 while New York is the most expensive at $2,811. Whether you live in a state that regulates title insurance premiums or not it never hurts to shop around. But remember with anything, sometimes you get what you pay for….usually if you find someone who is far less is costs than the majority of the service providers out there, typically you will find they deliver a substandard product.
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