Size matters
Shenanigans aside, the states with the biggest populations tend to have the highest mortgage-related fees. The five most expensive states are among the seven most populous: New York is third in population, Texas is second, Florida is fourth, and Pennsylvania and Ohio are sixth and seventh.

The exceptions stand out. Illinois, No. 5 in population, ranks 49th in average closing costs, mainly because of the low price of title insurance. Population champ California ranks 17th because lender fees are a little below average (while title and other third-party charges are a bit higher than average).

Efforts to lower fees
Over the past 20 years, the federal Housing Department has tried several times to reduce mortgage fees by amending the regulations that govern the marketing of home loans. The most recent effort was shot down in flames three years ago. The title industry and small lenders vigorously opposed reducing closing costs because it would have cut into their profits.

Some lenders have adopted flat pricing, charging the same fee to everyone. ABN-AMRO was one of the first lenders to offer such a deal, with a product called OneFee. This spring, Bank of America rolled out its No Fee Mortgage PLUS product, in which the borrower pays no fees and no mortgage insurance.

"We believe that any change that simplifies the mortgage finance process and reduces costs to our customers is a good thing," says Floyd Robinson, president of Bank of America's consumer real estate financing group. "If industry leadership would drive this type of simplicity, we would hear a lot less about regulatory changes."

Flat-fee and no-fee products don't eliminate the need to comparison shop. Bank of America executives say their no-fee loan has competitive rates, and customers say the rates tend to be slightly higher. But it's a tempting deal for buyers making down payments of less than 20 percent because it doesn't require mortgage insurance, resulting in lower total mortgage-related costs for several years.