This article examines the factors that have led to this price increase, such as higher mortgage rates and an increase in demand for home purchases. The report also explains the various types of closing costs, such as appraisal fees, title insurance, and origination fees, and how these costs are likely to continue to rise in the coming months.
The past year has seen a dramatic surge in housing demand, fueled by low interest rates, attractive inventory, and an overall strong economy. Unfortunately, these market conditions have also caused an increase in home purchase rates, resulting in higher closing costs for those who are buying homes. According to the National Mortgage News report, the average closing costs on a $234,000 loan jumped from around $3,700 in 2020 to $4,470 in 2021, an increase of 20.8%. This is largely due to increasing mortgage rates, which have risen as a result of increased demand for mortgages.
The article breaks down the different kinds of fees associated with closing a mortgage loan and highlights the various areas in which the cost has increased. Appraisal fees rose from an average of $390 in 2020 to $504 in 2021, a 29.2% increase. Title insurance fees were up from $610 in 2020 to $766 in 2021, a 25.9% increase. And lastly, origination fees increased from $1,236 in 2020 to $1,700 in 2021, a 37.3% jump. The report also notes that other fees also increased, such as prepaid interest, recording fees, and private mortgage insurance (PMI).
The article also examines the underlying causes of the price jump. The main factor is the current market conditions, with strong demand for housing causing a spike in mortgage rates. In addition, lenders are becoming increasingly risk-averse, suggesting that closing costs could go even higher in the near future. The report also notes that some states have tightened regulations on mortgage lenders, which can add additional costs to the process.
Overall, the National Mortgage News report shows that closing costs have risen dramatically over the past year. This is primarily due to the high demand for housing and rising mortgage rates, and is expected to continue in the short term. To minimize the costs associated with closing, it is recommended that potential buyers shop around for the best possible deal and consider whichever fees they are able to negotiate down. With careful planning and research, homebuyers should be able to find a mortgage loan that meets their needs at a reasonable cost.
This article was contributed on Oct 20, 2023
