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Oct142011

Which States Have the Highest and Lowest Closing Costs?

Friday, October 14, 2011 at 5:38PM

Buying property is never cheap but for many purchasers, the real sting in the tail comes from the closing costs.

But what many people do not fully realize is that the costs can vary significantly between states, making out of pocket expenses shoot up much more than they originally budgeted for.

Using a mortgage calculator can help reduce the shock of how much you might be expected to pay, but this figure should only ever be viewed as an estimate.

A mortgage calculator is a helpful tool but the final cost will involve not just the state in which you live, but also the firms used, some of which can be more expensive than others in the same industry.

The average cost for a $200,000 mortgage is $4,070 across all states, an 8.8% increase on the previous year's costs.

New York has the highest average closing costs, with Texas in second place and Utah coming in at a close third. New York charges its homebuyers $6,183, while closing costs in Texas and Utah average at $4,944 and $4,906.

New York and Texas have held the dubious honor of having the most expensive closing fees for the last five years, with their rates increasing by 10% and 5% respectively in the last 12 months alone.

At the opposite end of the table, Arkansas, North Carolina and Indiana hold the bottom three positions, being the cheapest three states for closing costs with averages of $3,378, $3,410 and $3,430.

Typical closing costs encompass a range of things including title insurance, taxes, commission and warranties and survey, mortgage and application fees.

One of the reasons the closing cost can vary is the agency that is used. While many brokers may be able to provide suitable contacts to purchasers, it should not be compulsory to use their people and looking around can sometimes chip away at the costs.

But while you should be wary of any agent that insists you use their recommended providers, shopping around will not significantly lower the costs as there is so much competition in the industry, a factor which tends to drive down prices naturally.

However, the other primary reason the closing costs can vary is simply down to differences in legislation between states, with some charging more to record the mortgage than others.

There are many ways to estimate closing costs but try to use a mortgage calculator that has been designed for the state in which you are making the purchase, as quite apart from rates, there can be other differences that apply.

For example, in some regions across the US, obtaining a termite or pest inspection is considered a mandatory requirement but in other states, this is not necessary. These differences can alter closing costs significantly and provide either a nice surprise or a nasty shock to the purchaser.

While variations in closing costs between states can be substantial, one of the other pressures that has pushed prices higher is the impact of tougher regulation on the lending industry.

Despite the regulation having been supposedly in place for some time, it is only now that lenders are realizing they have no choice but to comply, a factor which they claim is increasing their costs in areas such as increased staffing. Unfortunately, in most cases, the cost is passed on to the consumer making closing fees more expensive than ever, unless you live in Arkansas, of course.

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