While interest rates remain at historic lows, it’s clear that many would-be homeowners are still struggling to afford homes. Sure, the run-ups of last year have left prices at some of the highest levels we’ve seen since the bubble’s collapse, but are high prices really all that are keeping buyers off the market? Well, you may be surprised to find out that new regulations are driving up the closing costs of mortgages, straining homebuyers’ checkbooks and keeping some off the market.
According to a recent survey released by Bankrate.com, mortgage closing costs jumped 6% over the past year, with an average closing cost on a $200,000 loan hitting $2,539 nationally in June, compared with $2,402 a year earlier.
The increase came primarily from the fees lenders charge to originate home loans. Those fees rose 9%, while third-party fees — such as those for appraisals — climbed just 1%, Bankrate said.
A series of new mortgage regulations this year helped drive up closing costs, according to Bankrate analyst Holden Lewis. The rules, designed to ensure borrowers have the ability to repay their loans, took effect in January.
However, closing costs were already rising before the rules took effect. In 2013, Bankrate also reported a 6% increase in closing costs nationwide.
So which state leads the way in most expensive closing costs? According to the survey, Texas had the highest fees in the nation this year, where losing costs, including origination and third-party fees, reached $3,046 on average for a $200,000 mortgage.
Things remain a little brighter for those of us dealing in the Golden State. California was the 22nd-most-expensive state for closing costs, where the fees stood at $2,542 – essentially the same as the nation as a whole.
Do you think these rising costs are slowing down the market? What are your thoughts?
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