Bankrate.com recently completed their 8th annual survey of closing costs in all 50 states and the District of Columbia. The results are that the costs to close a mortgage have dropped about 7% in the past year to $3,754 on average.
Different states have different laws and the costs to refinance will vary in different localities. Bankrate chose 10 different lenders from each state and got good faith estimates on what it would cost to close a $200,000 loan on a single family residence. The estimates included all fees including appraisals, loan origination fees, and third party fees. The results show that New York remains the highest state for closing costs, at an average of $5,435; and Missouri comes in at the cheapest with an average of $3,006. All other states rank somewhere in between these. You can see where your state ranks by viewing this interactive chart.
There is no reason that you should not be able to get a lower rate than the national average. There are ways to negotiate lower closing costs. Just be aware that while most things need to be disclosed, there are lenders out there that have found ways to “hide” some fees. Whether they drop a closing cost but raise your interest rate, or they tack on third party fees, be aware of what you are getting, and make sure to get several different estimates so you can have bargaining power. Of course one of the best ways to get a great rate on a refinance is to use the same institution that now services your loan. They can often waive some fees since they are keeping the loan in house. If that does not work, check out local banks and credit unions. Many of them have great offers to new members.
Prices going down on the closing costs are great for individuals. More people can refinance their mortgages and not worry about having to pay as much out of pocket. The drop in average closing costs is also a plus for the economy, since more people will now be able to afford to refinance their homes. The housing market is the one area that is significantly lagging in the recovery, many other sectors are struggling because people see that the housing market has not quite picked back up. If more people start to refinance and obtain new home loans because it is cheaper to do so, the housing market will help boost the rest of the economy and lead to a quicker recovery. If you have yet to refinance, take advantage of the lower costs and get locked in at the extremely low mortgage rates we are seeing before they pass.