As Mortgage Lender Costs Rise, So Do Closing Costs
Rising home prices and lender costs helped push buyers’ closing costs up 13.4% in 2021, to an average of $6,905, analysis shows published Thursday by CoreLogic’s ClosingCorp.
This figure includes transfer fees, which are often the largest component of closing costs and are based on the sale price of a home.
But even when transfer taxes are excluded, closing costs for single-family home buyers averaged $3,860 in 2021, an 11.2% increase from the previous year. These closing costs include lender’s title policy, owner’s title policy, appraisal, settlement, registration fees, surveys and transfer taxes.
The increase in closing costs, even excluding transfer taxes, could partly reflect the fact that purchase loans – which are more labor intensive and less profitable for lenders – represented a greater proportion of mortgage originations in 2021.
Lenders surveyed by the Mortgage Bankers Association made a average profit of $2,339 on every loan they issued in 2021, up from a record high of $4,202 per loan in 2020.
Loan production expenses — which include fees, compensation, occupancy and equipment — hit an all-time high of $9,470 per loan during the fourth quarter of 2021, the MBA said in a statement. separate report. In a period dating back to the third quarter of 2008, loan production expenses averaged $6,758 per loan.
As a result, lenders may be less inclined to compete for homebuyer business by subsidizing their closing costs.
“As the mortgage industry emerges from two years of record low interest rates and soaring consumer demand, lenders are now pivoting to weather growing headwinds from rising loan origination costs and the decline in edit volumes,” CoreLogic director Bob Jennings said in a statement. . “The Mortgage Bankers Association recently reported that lender origination costs are showing a 13.2% year-over-year increase, which closely matches the 13.4% increase we are seeing on mortgage closing costs. As the market tightens in 2022, it will be interesting to see how lenders and borrowers react and how these key indicators evolve. »
Although mortgage lenders may pass higher costs onto consumers, there is considerable variation in closing costs at the state, county and local market level.
Nationally, mortgage closing costs (including transfer taxes) were 1.81% of the average sale price of a property, up from 1.85% in 2020.
At the state level, closing costs ranged from a high of 5.4% of the sale price in Delaware to a low of 0.7% in Tennessee.
At the county level, homebuyers in New York, New York, paid closing costs equal to 5.3% of the average home sale price of $1.1 million, kicking off a hefty $58,619 bill. dollars at the closing table.
In neighboring Queens, New York closing costs averaged 4.4%, meaning a homebuyer paying the average sale price of $581,653 could be required to cover $25,848 in costs. Closing.
The 10 states with the highest average closing costs, including transfer taxes, were:
- Delaware ($17,859)
- New York ($16,849)
- Maryland ($14,721)
- Washington ($13,927)
- Pennsylvania ($10,634)
- Connecticut ($8,821)
- Florida ($8,554)
- New Hampshire ($8,183)
- Massachusetts ($7,964)
- California ($7,953)
Washington, DC homebuyers paid higher closing costs, on average, than residents of any state: $29,888.
The 10 states with the lowest purchase loan closing costs, including transfer fees, were:
- Missouri ($2,061)
- Indiana ($2,200)
- North Dakota ($2,501)
- Wyoming ($2,589)
- Mississippi ($2,756)
- Nebraska ($2,781)
- Kansas ($2,793)
- Oklahoma ($2,893)
- Alabama ($2,986)
- South Dakota ($3,105)
The five counties with the highest closing costs, including transfer taxes, were:
- New York, New York ($58,619)
- Dukes, Massachusetts ($28,724)
- Kings, New York ($28,239)
- Queens, New York ($25,848)
- Richmond, New York ($24,579)
The five metropolitan areas with the highest closure costs (including transfer taxes) were:
- Vineyard Haven, MA ($28,724)
- Bremerton-Silverdale-Port Orchard, Wash. ($16,003)
- Salisbury, Md. ($15,723)
- Dover, Delaware ($13,799)
- New York-Newark-Jersey City ($13,596)
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Email Matt Carter