Mortgage Closing Costs Differ from State to State

An annual survey of mortgage closing costs in the fifty states brings up some substantial differences in its 2006 edition. The survey is partial to some extent, because it does not reflect taxes, other government costs or escrow fees. Nevertheless, it can provide an accurate sense of the variation that you will find from state to state on charges that are involved with every home loan settlement. All of the following statistics were based on a fixed rate mortgage of $200,000 for people with good credit ratings who made a twenty percent down payment.

These statistics were collected from nine lenders in each state, in the largest city of each state with one exception. Buffalo was substituted for New York City, because the Big Apple is in a league of its own. Nevertheless, New York finished first (or last, depending on your point of view) with its high title and settlement costs. The other states in the top five for mortgage closing costs were Texas, Hawaii, Ohio and Florida.

The national average for mortgage closing costs was $3,024. In New York, the figure was $3,907. Home buyers in Missouri currently pay the lowest closing costs, at $2,713. The rest of the bottom (or top) five are Michigan, New Hampshire and Montana.

Mortgage closing costs can be divided into three categories. The first is loan fees, which are charged by the lender. The second is title and settlement fees charged by parties other than the lender. This survey includes all of these charges. The highest lender's fees are found in Hawaii at over $1,900 while the lowest are in New Hampshire, at $1,400. The national average is $1,672 with two thirds of the states within $113 of that figure.

There was a wider variation in title and closing charges. Fees averaged $1,353. In most states, title insurance averages less than $600, but in New York and Texas title insurance premiums are well above $1,000 on a $200,000 loan. In Texas, title insurance fees are set by the state - $1,453 on a $200,000 loan. However title companies are allowed to tack on additional fees and surcharges in order to beef up their participation in mortgage closing costs.

The third category for mortgage closing costs is taxes and prepaid items, such as homeowners insurance, association fees, property taxes, county recording fees and prorated interest. The survey did not include these costs, although in some states some of these fees are already incorporated into the settlement fees in some fashion. It is also true that national companies charge different fees in varying states. The confusion is palpable, which is why flat fee home loans have come into being.

The variation in fee structures and names can be a major problem for loan shoppers because it becomes impossible to compare mortgage closing costs for different loans on a side-by-side basis. Different lenders have varying terms for fees and varying fees for services. Flat fee home loans make this a moot point.

Lenders use their own terms for services and will often fold charges for one service into another. For that reason, flat fee home loans are an attractive alternative. With this type of mortgage, the mortgage broker presents you with a bottom line for all necessary services and charges that will satisfy the lender, the seller and you. A good tool for attempting to compare mortgage closing costs can be found at:
http://www.federalreserve.gov/pubs/settlement/worksheet.htm