Higher mortgage rates aren’t the only things driving up the cost of buying a home. Mortgage closing costs are up, too.
Loan-origination and other fees rose 6% the past year to $2,402 nationwide on a $200,000 single-family mortgage loan to a customer with excellent credit and a 20% down payment, according to survey data from Bankrate.com.
Origination fees accounted for the bulk of the increase. They jumped 8%, while third-party fees edged up 1%, indicates the survey conducted in June.
Origination fees are rising, in part, because interest rates are higher, says Guy Cecala, publisher of Inside Mortgage Finance.
As rates rise, lenders make less profit on the money they lend, so look for more profit from fees, he says.
Lenders are also having to do more work underwriting loans, which increases their costs, says Doug Lebda, CEO of the Lending Tree online exchange.
Last year, origination fees were 1% lower than in 2011, Bankrate’s data show.
Higher interest rates have taken a toll on the refinance market in recent weeks. As that business declines, more lender competition for loans should help keep competitive pressure on origination fees, Cecala says.
The average interest rate for a 30-year fixed-rate loan was 4.39% for the week ended Thursday, up from 3.55% a year ago, Freddie Mac data show.
The higher closing costs are one more reason consumers should shop around and compare fees from different loan originators to get the best deal.
Some lenders offer loans with no origination fees. Of all the closing costs, lenders “have the most discretion,” with origination fees,” Cecala says.
Consumers should also watch out for underwriting or processing fees, which can add up, Cecala adds.
There’s so many different costs associated with closing on a loan that it can be confusing for consumers to do good comparison shopping, says Quicken Loans chief economist Bob Walters.
One way to get an apples-to-apples comparison is to ask for a no-cost rate, he says. That should result in quotes that lack fees but carry higher interest rates.
In general, interest rates matter more than fees if someone is going to be in the home for more than a few years, he says. Over time, the lower interest rate typically results in more savings.
“The rate is still the biggest driver of mortgage costs,” Lebda says.
Bankrate’s survey showed Hawaii’s average closing costs of $2,919 to be the highest in the nation. Alaska ($2,675), South Carolina ($2,658), California ($2,639) and New Mexico ($2,566) rounded out the top five.
The lowest costs were in Wisconsin ($2,119), Missouri ($2,188), Kansas ($2,193), Michigan ($2,203) and Washington ($2,208).
Bankrate’s survey excludes taxes, title fees, property insurance, association fees, interest and other prepaid items.
courtesy of: http://www.usatoday.com/