Home Buyers Enjoying Lower Closing Costs

By Ryan Dosen

 

Today’s home buyers are not only enjoying historically low interest rates; they are also paying less in closing costs. Bankrate.com, a leading online aggregator of financial rate information, recently surveyed lenders from across the country to determine just how much the average borrower is paying to close a home loan. The good news for buyers is that costs are down a decent amount, making the ability to lock in such low interest rates all the more enticing.

 

Bankrate.com’s Lender Survey

Bankrate.com polled up to 10 lenders in a large city from each state and Washington D.C., requesting Good Faith Estimates for closing a $200,000 mortgage.  The hypothetical loan applications were for well-qualified borrowers (with “excellent” credit and a 20 percent down payment) purchasing a single-family home. Closing costs were calculated by including loan origination fees charged by lenders, plus third-party costs (those not charged directly by the lender) such as credit reports, appraisals, flood certifications, and home inspections. “Highly variable costs,” such as homeowners insurance, loan discount points, title insurance, and taxes, were excluded because, according to Bankrate, “those costs vary so much from house-to-house.”

Bankrate found that average closing costs have dropped 7.1 percent, from $1,989 in 2014 to $1,847 in 2015. Again, these costs do not reflect many “highly variable costs” that must also be paid at closing. According to Michael Becker of Sierra Pacific Mortgage, these variable costs could add up to another $2,500 or $3,000 for a $200,000 loan.

 

Lender Fees Down, Third Party Fees Up

Bankrate’s survey revealed that third-party fees rose 22 percent in the last year while average loan origination fees fell by 22 percent. Becker speculates that “third-party fees went up because of inflation and an increase in the cost of providing those services.” He says that loan origination fees “probably dropped because of a drop in mortgage rates.”

Bankrate advises you to shop lenders and to shop third-party service providers to make sure that you’re minimizing your closing costs. However, as with many things in life, you should always be aware that the cheapest route may not be the best route.

 

Saving on Costs May Cost You

It is certainly possible to save a few hundred dollars on your closing costs by shopping vendors and lenders. However, do not forget that you are about to make one of the most important purchases of your entire life and that this may not be the best place to cut corners.

Your real estate professional will likely have a list of recommended providers that you should carefully consider in the home buying process. The vendors on that list are there for a very good reason: they have (probably unfailingly) helped your agent close business in the past. Take this fact lightly at your own peril.

We have seen deals blown up by bargain basement home inspectors that do not accurately assess the condition of homes or properly document their findings. We have also seen buyers put out of contract by giant national lenders that fall short on customer service and treat their clients more like numbers than people.

Do not underestimate the value in aligning yourself with a well-oiled team that gets deals closed. Yes, even if it costs a few dollars more. Especially now. According to Bankrate, you’re already playing with house money. You hired your agent to help you buy your home. You’ve found your home. Now let your agent put you in the best position possible to help you accomplish your goal of buying the home.

 

– Ryan Dosen manages The Wayne Megill Real Estate Team of Keller Williams – Brandywine Valley in West Chester, PA. Contact Ryan Dosen to inquire about buyer or seller representation or to learn more about a career in real estate by emailing ryan@waynemegillteam.com or calling 610-399-0338.

 

This article was published by 21st Century Media and the Daily Local News (West Chester, PA). To read this article on the the newspaper’s site, please visit the Daily Local News.

To view all of Ryan Dosen’s 21st Century Media real estate columns, visit http://www.dailylocal.com/search?text=dosen.