Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
Right now, for homeowners who are looking to refinance and homebuyers taking out a purchase mortgage, there’s a lot of good news when it comes to closing costs. Closing costs have fallen this year almost as much as they rose last year, though they can vary dramatically depending upon where you live. Plus, if you’re willing to put in a little legwork, you can save even more.
Closing costs include the fees and expenses lenders charge to originate your loan, such as the application fee, the rate lock fee, and origination points. Additionally, closing costs include third-party fees covering services and expenses charged by other vendors that are necessary to complete the lending process, like title insurance, appraisals, credit reports, taxes and transfer fees paid to local governments, and inspections.
The average cost to close on a $200,000 mortgage in the United States dropped 7 percent over the past year, to $3,754, according to Bankrate.com’s eighth annual closing costs survey. Title insurance and other third-party fees fell 12 percent from 2011, while origination fees edged down 1 percent. Closing costs work out to a little less than 2 percent of a mortgage—considerably less than the 5 percent often cited as a standard.
Because of state laws, local practices, and local costs for services, closing costs vary widely by state. New York has ranked the highest in recent years, with an average of $5,435. The next most expensive states are Texas, Pennsylvania, Florida, and Oklahoma. The least expensive state was Missouri ($3,006 on average), which was joined by Kansas, Colorado, Iowa, and Arkansas among the five cheapest states.
Last year, however, the average closing cost in Bankrate’s survey rose 8.8 percent over 2010, when it was $4,070 on a $200,000 loan. A big factor in this change was higher charges by lenders. On average, lenders charged about $1,614 in origination fees last year, up 10.3 percent from 2010. Origination fees include lender charges for services such as underwriting and processing. Fees imposed by third parties, including title, appraisal, postage/courier, and survey charges, averaged $2,456, up 7.9 percent from 2010.
Controlling closing costs with a good faith estimate
Consumers have a new secret weapon they can use to control closing costs, though most don’t take advantage of it. It’s called a good faith estimate, or GFE. Under law, all lenders are now required to provide a GFE when your loan application is accepted. The GFE includes accurate estimates of the costs the lender will charge as well as estimates of third-party costs that must be within 10 percent of what you finally pay.
Most consumers use the GFE simply to prepare for what they will need at closing, but you don’t have to stop there. Smart consumers use the GFE to shop around for lenders and for third-party service providers to see if they can do better. You can save hundreds, even thousands, with a little legwork on the Internet. Title insurance costs and escrow costs, for example, can vary by $500 or more each.
Consumers should shop around for at least three different estimates. While no one is going to move to a new state just because closing costs are lower, it’s important for people to realize that there is variation even within their neighborhood—and that they can save by being an educated consumer.
Saving a little on closing costs can mean a lot when you are facing a down payment on top of moving and decorating expenses. Closing costs require hard cash at closing in addition to your down payment, but it’s possible to finance them through your lender.
Today, many lenders offer a no-closing-cost loan where the lender pays your settlement costs for you, but be aware that you may end up paying a lot more over the life of the loan than you would at closing. If you choose this option, you will be taking out a higher loan amount, which could negatively affect your loan-to-value ratio and result in a dramatically higher interest rate. Some lenders may cover all costs, while others may still charge you for certain third-party fees such as appraisal, inspection, title, escrow, and even mortgage points.
Steve Cook is editor of Real Estate Economy Watch and covers real estate and mortgage finance for leading news sites. He is a member of the board of the National Association of Real Estate Editors and was twice named one of the 100 most influential people in real estate. Cook was vice president for public affairs for the National Association of Realtors.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.