mortgage
New York tops closing costs study

New York, Texas, Florida. For the second straight year, those are the most expensive states in which to get a mortgage.

Nationwide, the average origination and title fees on a $200,000 mortgage this year totaled $3,118, according to Bankrate's annual survey of closing costs. The fees in the survey don't include taxes, insurance or prepaid items such as prorated interest or homeowner association dues.

Fees in New York City were highest, averaging $4,016 in Bankrate's survey. Houston came in second, with fees that averaged $3,975. After that came Buffalo, N.Y., with fees averaging $3,845, and then Miami, at $3,683.

North Carolina had the least expensive closing costs in the survey, at an average of $2,650. The previous year, Indiana took the last spot.

The annual survey of online lenders is conducted by obtaining fee estimates for a $200,000 mortgage in each state's most populous city. Bankrate also surveyed Springfield, Ill., Buffalo, San Francisco and Sacramento, just in case Chicago, New York and Los Angeles were unrepresentative. It turns out that it didn't matter much. Cities in the same state weren't far apart in total closing costs.

Why New York is tops

New York tops the list for the fourth year in a row for two reasons. First, origination fees are swollen by taxes that the state levies directly on lenders, which are passed along to consumers. Second, lawyers customarily conduct closings in New York. Many closings are attended by at least three attorneys (for the buyer, seller and lender). In some other states, especially in the West, closings are conducted by title agents and escrow officers who charge less than lawyers.

When comparison shopping for a loan, pay attention to the origination and title fees. In most places, those are the costs that are subject to negotiation. Taxes aren't negotiable, and most prepaid costs, such as prorated interest, vary depending on the day of the month when you close the loan.

Study the GFE

Even as the housing market has slumped in the last three years, fees have gone up, says Mike Kratzer, president of FeeDisclosure.com, a Bankrate company, which provides consumers with information to help cut their mortgage transaction costs.

He says appraisal fees have crept up recently, as lenders ask appraisers to do more thorough, time-consuming work. During the housing boom, lenders favored appraisers who did the job quickly and inexpensively. Above all, lenders favored appraisers who justified house prices that, in retrospect, were too high.

Now lenders want appraisers to document trends: not just prices for comparable homes in the past 60 days, but also whether prices are higher or lower than they were six or nine months ago. Kratzer says lenders are stricter about what appraisers can use for comparables. As a result, he says, some appraisals take more time, and therefore cost more.

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As for lenders' fees, Kratzer sees two opposite trends. Some lenders consolidate fees. Instead of charging separate fees for underwriting, processing and document preparation, they lump them into a lender's fee. Often, this lender's fee is more than the formerly separate fees added together. On the other end of the spectrum, some lenders have added e-mail, PDF and document-printing fees.

"You would think that with technology, they would charge less, not more," Kratzer says.

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