Mortgage closing rates are trending downward, and this only highlights the importance of shopping around for the right loan. According to new research from Bankrate, the average total cost a borrower has to pay to close a loan has decreased. Between 2014 and 2015, it looks like the cost of closing on a home loan has decreased by just over seven percent. Lenders can play a critical role in helping borrowers find the right fit for them.
In order to arrive at these numbers, Bankrate analyzed Good Faith Estimates in a highly populated city in each state as well as Washington, D.C. for a typical $200,000 mortgage. The parameters of the loan were that it was to be used for a single-family home for a borrower who possessed a 20 percent down payment and outstanding credit.
The numbers provided by the lenders encapsulate original fees as well as other costs like inspection services and appraisal of the property. In addition, other more variable costs were factored in, such as:
- Title insurance and taxes
- Homeowners insurance
- Discount points
- Other prepaid items
What the inclusion of these variable costs mean is that the final charges on the day of closing are likely to be higher than those found in the survey results. The average found in the research was $1,847. Variable costs, though, could add up to another $3,000 depending on your geographic area. Other interesting information discovered in the survey was that average third-party fees were up by almost 22 percent, even though original fees were down by about the same amount. While there is no clearly reported reason for this just yet, industry experts speculate that origination fees likely dropped as a result of falling mortgage rates, while third-party fees rose as a result of costs associated with providing these services and inflation.
Mortgage lenders have begun to comply with new requirements about the documents they must provide to potential borrowers. Four forms are being combined into two less complicated documents that are given to borrowers on application.
According to compliance officers, though, the costs of staying in line with these new rules are putting pressure on lenders and increasing their costs. While it is not believe that the higher costs will be passed onto borrowers just yet, those in the market for a home loan might reasonably expect these higher compliance costs to show up sometime down the road. That is why now, with better rates, is a great time to consider moving forward with a home loan. Title insurance costs are also on the rise, and it is expected that borrowers might see an increase of up to a few hundred dollars per loan. It’s time for lenders to help their borrowers see the value of moving forward now.