Mortgage data firm ClosingCorp determined the top states in the US where closing costs are most affordable. What does this mean for many of the country’s cash-strapped buyers?
More than guts, it takes serious money to buy a home. If you’re like most Americans who just don’t have that liquidity or financial strength to pay for the home in cash, the most common way is to get a mortgage.
Still, even when you’re financing the purchase of a home, you still need to shell out a hefty sum of dollars to satisfy the terms of the mortgage.Need financing? We can help.
In conventional mortgage programs, the borrower must pay at least 20 percent of the home’s purchase price. Good thing, mortgages have diversified throughout the years to accommodate the changing needs of the borrower market. Now, you can find programs that offer low down payment requirements. FHA loans, for example, only require a 3.5 percent down payment as long as the borrower meets the minimum credit score qualification.
Unfortunately, the down payment is far from your only worry. You also need to pay for the costs of closing. Typically, homebuyers would have to pay 2 to 5 percent of the purchase price of the property.
Let’s say the home you are planning to buy costs $200,000 on the market. That means you may have to pay around $4,000 to $10,000 in closing.
According to a recent nationwide survey by mortgage data company ClosingCorp, the average mortgage closing cost stands at $4,876. The number is lower in some state or local levels.
What costs are included at closing?
The costs of closing depend on several factors such the location of the property you’re going to buy or the type of loan you’re financing it with. But no matter the variations, they typically include these universal fees:
- Application Fee
- Attorney Fee
- Closing Fee or Escrow Fee
- Courier fee
- Credit report
- Escrow deposit for property taxes and mortgage insurance
- Flood determination or Life of loan coverage
- Home inspection
- Homeowners association transfer fees
- Homeowners’ insurance
- Lead-based paint inspection
- Loan discount points
- Owner’s policy title insurance
- Origination fee
- Pest inspection
- Prepaid interest
- Private mortgage insurance
- Property tax
- Recording fees
- Survey fee
- Title company title search or exam fee
- Transfer taxes
- Underwriting fee
One of the most common fees that significantly influence the closing costs is the transfer fee. The party or parties who pay/s these taxes can vary by jurisdiction. It’s either the buyer, seller, or both parties may choose to pay transfer taxes based on the property’s sale price when the property is turned over to a new owner.
By running preconfigured loan scenarios against verified rates and fees data that it maintains for service providers and tax authorities, ClosingCorp determined the top 10 states in the country where mortgage closing costs are most affordable:
|Rank||State||Average total closing cost||Average purchase price|
With today’s rising home prices, a low closing cost can definitely attract many cash-strapped buyers. But it shouldn’t be the sole basis for choosing a lender or a loan program. Before you sign yourself up on any transaction, make sure you’ve fully assessed the pros and cons of the program and whether or not these terms serve your current needs and future homeownership plans.Click to See the Latest Mortgage Rates»