Thanks to a recent tightening of federal regulations, homebuyers are paying less in closing costs, according to the latest survey by Bankrate.com.
The average amount a buyer paid in closing costs on a $200,000 home loan with a 20 percent down payment in June 2012 was down 7.4 percent to $3,754, from one year earlier. That’s a savings of roughly $300 from June 2011.
“This is the third year lenders are required to estimate closing costs within 10 percent of the final costs,” says Holden Lewis,financial analyst at Bankrate.com in a U.S. News & World Report article. The new Real Estate Settlement Practices Act went into effect in 2010, part of which was to prevent buyers from a shock at the closing table. “They’re becoming more accurate,” he added.
Closing costs are the fees charged by lenders for drawing up a loan, including things like application fees, title searches and credit check fees. They also include third-party charges like appraisals and title insurance. The Bankrate survey did not include fees like taxes, property insurances or prepaid interest.
Greg McBride, Bankrate’ssenior financial analyst agrees with Lewis.
“The big drop in third-party fees indicates the lenders are doing a better job at estimating what the costs will be,” he said in a CNN Money piece.
Among the states, New York held the record for the most expensive closing costs, at an average of $5,435. Others in the top five were Texas, Pennsylvania, Florida and Oklahoma. Yet even in some of those states, closing costs are down. In Texas, for instance, the average closing cost price tag in June was $4,610 which was down 6.6 percent from last year.
On the other end was Missouri with the cheapest closing costs, at an average of $3,006. The next cheapest states were Kansas, Colorado, Iowa and Arkansas.