Housing Prices are Falling and Closing Costs are Rising

 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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