Closing costs are required in any mortgage transaction, whether for a purchase or a refinance. Recent data from San Diego-based ClosingCorp revealed how much consumers pay at closing on an average, which costs would vary depending on where they live.
Mortgage closing costs can cost between 2 and 5% of the total loan amount. Being paid upfront and hefty, one can’t help but wonder, “Is there a way to close my mortgage without paying for closing costs upfront?”
Nationwide Mortgage Closing Costs
Closing costs represent fees and charges associated with a real estate transaction to be paid at the closing date. In the case of a home purchase, closing occurs when the owner transfers the title of the property to the buyer.
The average American pays $4,876 mortgage closing costs on a $271,363 purchase price, according to ClosingCorp. This is based on the latest information gathered by the closing cost insights company from 20,000 real estate providers across the United States.
These mortgage costs go to the following items, as per the ClosingCorp data:
- Lender’s title
- Owner’s title
- Transfer taxes
- Recording fees
- Inspection fees
- Land surveys
There are also closing cost items that are unique to a loan program. For example, FHA loans have upfront mortgage insurance premiums, VA loans have funding fees, and USDA loans have guarantee fees.
For conventional homebuyers, they will be required to pay mortgage insurance application fees if they put down less than 20% of their home’s purchase price. Some conventional lenders may require at least a year’s worth of mortgage insurance premiums be paid upfront.
States with Lowest, Highest Closing Costs
“Closing costs can vary significantly, depending on the state or county a homebuyer lives in,” confirmed Bob Jennings, CEO of ClosingCorp.
The following states have the highest average costs to close a mortgage:
- District of Columbia (DC) – $12,573
- New York – $9,341
- Delaware – $8,663
- Maryland – $7,211
- Vermont – $6,839
Meanwhile, these five states spend the least to close a mortgage — below the national average:
- North Carolina – $3,206
- Iowa – $3,138
- South Dakota – $2,996
- Indiana – $2,934
- Missouri – $2,905
These counties in the U.S. have the most expensive mortgage closing costs, going over the nationwide average or even their statewide average.
- Kings, NY – $13,388
- District of Columbia – $12,573
- Queens, NY – $12,476
- Bronx, NY – $11,549
- Richmond, MY – $11,414
- Suffolk, NY – $11,289
- Westchester, NY – $10,747
- Pitkin, CO – $9,702
- Sussex, DE – $9,462
- Montgomery, MD – $9,384
What could have driven these costs in those counties to go up? In the case of Kings, Bronx, Queens, Suffolk and Richmond, some of them have the highest transfer taxes.
No Closing Costs?
Closing costs are paid by the buyer or the seller to a certain extent. The seller can contribute up to 9% on conventional loans, 6% on FHA loans and USDA loans, and 4% on VA loans.
Notwithstanding seller concessions, a buyer like you may still have to shoulder all or a portion of the closing costs.
So, is there a way to not pay such costs at closing or at least defer paying them upfront?
As their name suggests, no closing cost loans are mortgages without closing costs. The tradeoff is a higher rate. This option is ideal when you can refinance to get a lower rate and you’ll be occupying the home for a few years, which makes it counterproductive to pay high closing costs upfront.
Other lenders have limits on their no closing cost loans. For instance, they will not charge one-time costs like appraisal, credit report and recording fees. These loans don’t cover recurring charges like insurance premiums that occur throughout the life of the loan.
Moreover, certain loan programs allow for closing costs to be financed or rolled into the loan. One perfect example of this no-out-of-pocket-closing-cost loan is the VA’s Interest Rate Reduction Refinance Loan.
Closing costs are inevitable but you can always shop around for loans that allow for higher seller concessions, or that the closing costs be financed into the loan, to at least relieve your pockets and lower your upfront expenses.Click to See the Latest Mortgage Rates»