When shopping for a mortgage it's easy to get tunnel vision, focusing only on the interest rate. Closing costs are an easily overlooked, but potentially very expensive part of buying a home. Shedding light on the subject is Bankrate's annual look at closing costs and here to talk about that study is Holder Lewis, he's the Senior Mortgage Analyst here at Bankrate.com.
Holden, the average cost to close on a $200,000 home is over $3,700 dollars, but there are some huge variations on that. What can John Q. Public expect?
Your regular person can expect to see a really wide range in mortgage fees from lender to lender. And by that I mean one lender could cost hundreds of dollars more than another for the same comparable loan; for the same house. And there's also a lot of variation state by state. For the third year in a row in our survey, the two most expensive states were New York and Texas. And this year Missouri was the lowest cost state. And the difference was more than $2400 dollars. New York, the average closing cost for a $200,000 loan was $5,435 and Missouri is $3,006
And when shopping around, what are the fees that you should pay close attention to?
When you apply for a mortgage, pay attention to everything that the lender charges that goes directly to the lender. Lenders will call their different fees different things. You know, one lender might call it an origination fee and another might call it a documentation fee. Don't get hung up on what those fees are named. Look at the bottom line cost of all the fees that the lender charges directly and that's in one column in the good faith estimate that you'll get when you apply for a loan. Now after that there are also third party fees. And a lot of those you can't negotiate. And one of the main ones is the appraisal. The bank hires the appraiser, picks the appraiser and pays the appraisers fee. And that's really between the bank and the appraiser and you can't negotiate that cost.
Now, Title insurance was included as part of the study with the average cost being more than $2,000. It seems like a homebuyer stands to save money by shopping around there.
You can save tons of money by comparison shopping title insurance, at least in most states. This is an area where there can be tremendous variation in the fees charged, not only for title insurance, but for titles and closing services. So go to 2 or 3 different title agencies or escrow companies and compare the cost of the title insurance and the closing. Your lender might be a little bit reluctant because your lender might have a favorite title agency or escrow agent but if that particular favorite agent is really expensive you might have to insist on getting the cheaper one.
Great tips as always. Thanks for joining us Holden. Of course, you can see all the findings of this year's closing cost study and shop around for a mortgage while you're at it right here at Bankrate.com. I'm Lucas Wysocki.