Bankrate’s 2011 Closing Costs Survey demonstrated that while home prices are tumbling, closing costs are still on the rise in most states–with an increase of 8.8 percent nationwide, compared to 2010. Nationwide, the average closing cost is now $4,070 (on a $200,000 purchase).
New York had the highest closing costs at $6,183, followed by Texas at $4,944; both states have been known to have the highest closing costs for five years now. Arkansas is the most affordable of all the states, at $3,378. All states were ranked, although two cities (Los Angeles and San Francisco) in California were included, as well as the District of Columbia.
Illinois fell somewhere in the middle, claiming the 26th spot (in a tie with Delaware) for an average total of $3,967–$1,538 of this being origination fees, and $2,430 being title and third-party fees. You can find a further breakdown of Illinois’ average costs here.
“I’ve asked the question to insurance commissions in some states on why their (title) costs are so much higher than in neighboring states, and the answer is, ‘We don’t compare states,'” said Joseph Eaton, co-author of the book “The American Title Insurance Industry: How a Cartel Fleeces the American Consumer” to Bankrate.
Bankrate says that, “Most of the jump in closing costs is tied to fees charged directly by lenders. On average, lenders charged about $1,614 in origination fees this year, up 10.3 percent from last year.”
Strict mortgage regulations from the government are the primary reason that lenders and mortgage professionals found to be responsible for the hike in origination fees.
Additional fees coming from third parties (“title, appraisal, postage/courier and survey charges”) were also up 7.9 percent this year, to $2,456.
“It’s ironic to hear that the consumer has to pay more to get a fair product,” Barry Zigas, director of housing policy for the Consumer Federation of America said to Bankrate. “But if it means the mortgage they are getting is more likely to be tailored to their needs, they should be happy to pay.”