Closing costs dropped 7.1 percent year-over-year, falling from $1,989 in 2014 to $1,847 in 2015, according to a newly released Bankrate.com survey. For its analysis, Bankrate requested Good Faith Estimates from up to 10 lenders in the nation’s largest cities for a hypothetical $200,000 mortgage for a single-family home assuming a 20 percent down payment.
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While average origination fees were down about 22 percent in this year’s survey, average third-party fees rose nearly 22 percent.
“My best guess is that third-party fees went up because of inflation and an increase in the cost of providing those services,” says Michael Becker, branch manager for Sierra Pacific Mortgage in White Marsh, Md. “Origination fees probably dropped because of a drop in mortgage rates.” Becker adds that borrowers are paying less to secure a better rate nowadays than they were in 2014.
However, industry leaders are warning that mortgage lending and its costs will likely rise, notably on title insurance.
Overall, regulatory compliance is increasing for lenders and those costs are usually passed on to borrowers, says Pava Leyrer, chief operating officer at Northern Mortgage Services in Grandville, Mich.
“For the most part, our borrowers, on a purchase, are going to see a pretty hefty increase in title insurance,” Leyrer says. “A couple hundred bucks is a lot on a loan.”
Becker urges borrowers to shop around for a mortgage and take a close look at the costs that vary from lender to lender.
“Make sure you’re comparing apples to apples,” he says. “Take into consideration the interest rate and the lender fees out there.”
Source: “Even as Mortgage Closing Costs Drop, You’d Better Shop Around,” Bankrate.com (Aug. 3, 2015)