Closing costs are going up. Shop around to get the best deal
Record low mortgage rates were available to homebuyers last year, but those who purchased property also forked over more in closing costs, according to a recent survey by Bankrate.com, a financial rate and personal finance website.
Over the past year, closing costs averaged more than $2,400 across the country, a 6 percent increase from 2012 — based on good faith estimates for a $200,000 mortgage and 20 percent down payment for purchasers with preferred credit.
Third-party fees (which cover the appraisal, credit check and other expenses) rose to $672 (up 1 percent), while lender origination fees crept up to $1,730 (up 8 percent).
“It’s not surprising that these fees are up, because government regulations and the cost of compliance continue to be a significant financial burden on lenders,” says Christie Huff, senior vice president of ClosingCorp in La Jolla, Calif. These fees are then passed on to the consumer in the form of closing costs.
It’s also possible that lenders are inflating fees now to cash in before rates increase, which would potentially sour many prospective borrowers from purchasing.
Chip Poli, founder and CEO of Poli Mortgage Group, Inc., Norwood, Mass., says the best way to ensure getting a good deal on closing costs is to shop around.
“Get referrals from others on lenders they were happy with and who kept to their original estimates on closing costs,” Poli says. “And when you compare costs from one lender to another, it’s critical to compare apples to apples. Lenders are required to put all fees on their good faith estimate, so be sure to read this document thoroughly and ask questions.”
Many in the industry, including Bruce Ailion, agent with RE/MAX Greater Atlanta in Marietta, Ga., believe closing costs will only get more expensive, considering that the number of lenders continues to contract and regulatory oversight of mortgage lending requirements may increase.
“My advice is to buy now while mortgage rates remain near historic lows,” Ailion says. “When rates are 6, 7, 8 or even 10 percent, you may not be able to afford to buy another home.”