Well, in addition to rising interest rates and continued uneasiness in the money markets, it seems that home mortgage closing costs are also going up, according to a new mortgage cost study by BankRate .
Now, with all the news about home foreclosures and problems with financial institutions these days, that’s hardly surprising.
But the way its happening should be an eye opener to consumers looking to finance a home purchase or refinance their home loan.
Closing Costs Vary by State
If you live in New York or Florida then you’ll be disappointed to hear that closing costs are higher in these 2 states than elsewhere in the US. The national average origination and title fees on a $200,000 mortgage are around $3,118.
New York City tops the scale at an average $4,016 according to Bankrate’s survey. Houston, Texas was second highest at an average of $3,975. Buffalo, New York averages $3,845, and Miami, Florida was $3,683.
If you live in North Carolina congratulations; closing costs there are the lowest in the nation at an average of $2,650. The survey also shows that costs don’t vary much within a given state.
Look Closely at Your Good Faith Estimate
One thing consumers can do to protect themselves against over-inflated loan closing costs is to study the document called the Good Faith Estimate (GFE) and look for line items that may be duplicated or inflated; as always the smart consumer will question charges on this important loan document and compare the charges between multiple lenders before making a purchasing decision!
Things to watch for in this down market include lenders charging higher appraisal fees and “consolidated fees” that combine things like underwriting, processing and document preparation; it seems that some lenders, in an attempt to make up for their declining profits are lumping these costs together and somehow the combined cost is higher than what they previously would have charged for the line items separately. No surprise here; hit the American consumer when things are less than rosy for the shareholders!
Look closely at each line item and question your loan officer or mortgage broker about any inconsistencies you find in the GFE from one lender versus another. The line numbers on GFEs should be relatively consistent from one lender to another, using a line numbering system similar to the Dewey Decimal System. Line in the 800 and 1100 sections are particularly important for consumers to examine.
Some Lenders and Mortgage Brokers Try to Charge Junk Fees or Double Dip
Lender’s fees are typically shown in section 800; line 801 will indicate the origination fee, while 804 shows the credit report fee, and 808 is the broker’s fee (shop online and you could save the cost of line 808 altogether). In the 1100 section you will find title fees such as the title search fee and title insurance  premiums.
This is where you really have to watch out for “junk” fees or duplicated costs that could be thrown in; things like doc prep or administrative fees are typically such unwarranted costs and you should insist that they be waived or go to another lender for another GFE!
If you see an origination fee on line 801 and a broker fee on 808, that’s a sure sign of double dipping! Sadly, since the whole loan application and closing process is so obscure and not something most of do every day, it’s easy to overlook these details; if you don’t question every line item you’re likely to overpay!
Remember It’s Up to You!
When shopping for a home loan its absolutely critical to remember that interest rates and payments aren’t the only costs involved; you may sacrifice a higher cost to get into your home loan if you shop for a loan based purely on the interest rate and payment.
While regulators have tried to protect consumers from such fees and overcharging, only you can take the reigns and ensure you are charged fairly. But that doesn’t mean that lenders won’t be creative in how they charge you for fees on your home loan closure.
Always get quotes from multiple lending resources and compare not only every line item in the GFE, but also the overall costs of each before you decide which lender to go with; in this market people with good credit and solid income have the upper hand over lenders who are competing for far less business than they did 2 or 3 years ago!