Mortgage closing costs drop 7% in last year, but you should still negotiate
CLEVELAND, Ohio -- Ohio has the lowest mortgage closing costs of any state nationwide, according to a new survey.
Ohio's total of $1,613 in closing costs on a typical $200,000 home is $500 less than the total in Hawaii, which has the most expensive closing costs, according to a Bankrate.com study released this week.
That total includes $933 in lender origination fees and $681 in third-party charges for items such as appraisals.
Nationwide, closing costs dropped by 7 percent in the past year, Bankrate said, averaging $1,847 on a $200,000 loan.
Bankrate in June surveyed up to 10 lenders in all 50 states and Washington, D.C. Researchers asked for online good-faith estimates on a $200,000 mortgage on a single-family home with 20 percent down and a good credit rating. Bankrate said the costs include fees charged by lenders and third-party fees for services such as appraisals.
The study doesn't count one huge cost when getting a mortgage, which is title work. Outside of escrow items, which aren't fees, title insurance is generally the second most expensive closing cost behind origination fees.
Bankrate's survey also doesn't include prepaid items such as taxes, property insurance, mortgage insurance, association fees or interest or discount points to buy down the interest rate. Most of these aren't really fees, though.
For this reason, that $1,613 figure is good for comparison to other states, but it isn't realistic. A borrower in Ohio could actually expect to pay nearly double that in closing costs when everything is tallied.
However, "homebuyers have more say over closing costs than they think," said Holden Lewis, Bankrate.com's senior mortgage analyst. He noted that costs vary among lenders, so everyone should compare at least three different options. "You don't have to go with the lender your agent suggests," he said.
Here's a list of closing costs a buyer in Ohio might expect to pay. (Thanks to Huntington Bank and Third Federal Savings for helping The Plain Dealer arrive at realistic averages.)
TYPICAL CLOSING COSTS FOR BUYERS IN OHIO:
Lender fees: $900 to $1,300 total (Lender fees can be called several things, including origination, underwriting, document preparation, commitment, processing, funding and administration.) Some banks, like Third Federal right now, occasionally run huge discounts on lender fees; Third Federal's is currently $295.
Discount points: 1 percent of the loan amount for each "point" you buy to get a lower interest rate.
Appraisal and credit report (sometimes called an application fee): $300 to $350 combined
Title insurance/owner's and lender's coverage: A complicated calculation. $2.88 per $1,000 of the purchase price up to $150,000, plus $100; $2.25 per $1,000 from $150,000 to $250,000; and $1.75 per $1,000 for sale prices of more than $250,000 to $500,000. (The seller will be paying the same fee.)
On a $200,000 loan, this would be $644.50 -- $432 plus $112.50 plus $100 flat fee.
On a refinance, the borrower would pay the entire fee but it's generally discounted by 30 percent on "re-issued" title insurance to the same borrower.
Title binder: $50 to $75
Settlement/escrow/closing fee: $200 to $300
Tax service: $75 (not always charged).
EPA endorsement: $75 (This is issued by the title company attesting that, based on a title search of past zoning, usage or ownership, the property is free of environmental violations.)
Flood certification: $20.
Survey: $125 to $150 (or more if a large property).
Recorder's fees: $70 to $200 (depends on number of pages filed with county). May be $28 for first two pages and $8 for each additional.
Special tax search: $25.
Conveyance/transfer fee: $2 per $1,000 of sale price (if split evenly with seller). For Cuyahoga County it is $4.
Closing protection coverage fee for lender: $40
Closing protection coverage fee for buyer: $40 if the lender doesn't get one and $20 if the lender does.
Pest inspection (not always required): $100
One year of property insurance if not already paid, plus prepaid interest and taxes.
Escrow/reserves: If the lender is paying taxes, property insurance and mortgage insurance and includes those in the monthly payment, the lender is likely to want reserves at closing. Two months up front is typical.
Escrow waiver fee: Customers with 20 percent equity generally can pay their own taxes and insurance to avoid the long-term loss of the use of money in escrow. But lenders often charge a fee equal to 0.25 percent of the loan amount to make up for the interest they won't be earning on your money.
Other charges: Some loans will require other small third-party fees such as a condominium endorsement, deed preparation, wire transfer or courier. A few incidental fees ($15 to $75 each) are expected. But don't be pushed into paying large fees you don't understand or that aren't necessary, such as credit life insurance or the lender's coverage.
TYPICAL CLOSING COSTS FOR SELLERS IN OHIO:
Real estate fee or commission if you used a broker: Commissions are generally 6 or 7 percent of the first $100,000, and 3 or 4 percent of the remainder. Discount agencies with flat fees charge from $600 to $1,000; a buyer's agent may have a commission too.
Credit to buyer for property taxes accrued (but not yet paid) to cover the time you owned the home.
Title exam: $150 to $300
Title insurance/owner's and lender's coverage: A complicated calculation. $2.88 per $1,000 of the purchase price up to $150,000, plus $100; $2.25 per $1,000 from $150,000 to $250,000; and $1.75 per $1,000 for sale prices of more than $250,000 to $500,000. (The buyer will be paying the same fee.)
Settlement/escrow/closing fee: $200 to $300
Conveyance/transfer fee: $2 per $1,000 of sale price (if split evenly with buyer) in Cuyahoga and most surrounding counties; $1.50 in Medina.
Courier fee: $25.
Recorder's fees: $28 if one mortgage; $56 if equity line or loan.
Closing protection coverage fee: $35 to 50
Home warranty (optional): $350 to $400
Buyer's FHA fees and costs: All FHA fees used to be the responsibility of the seller; they're now negotiable. However, if the buyer can't or won't pay, the loan may not go through.