Buyers Are Paying Less in Closing Fees

Closing costs dropped 7.1 percent year-over-year, falling from $1,989 in 2014 to $1,847 in 2015, according to a newly released survey. For its analysis, Bankrate requested Good Faith Estimates from up to 10 lenders in the nation’s largest cities for a hypothetical $200,000 mortgage for a single-family home assuming a 20 percent down payment

While average origination fees were down about 22 percent in this year’s survey, average third-party fees rose nearly 22 percent.

“My best guess is that third-party fees went up because of inflation and an increase in the cost of providing those services,” says Michael Becker, branch manager for Sierra Pacific Mortgage in White Marsh, Md. “Origination fees probably dropped because of a drop in mortgage rates.” Becker adds that borrowers are paying less to secure a better rate nowadays than they were in 2014.

However, industry leaders are warning that mortgage lending and its costs will likely rise, notably on title insurance.

Overall, regulatory compliance is increasing for lenders and those costs are usually passed on to borrowers, says Pava Leyrer, chief operating officer at Northern Mortgage Services in Grandville, Mich.

“For the most part, our borrowers, on a purchase, are going to see a pretty hefty increase in title insurance,” Leyrer says. “A couple hundred bucks is a lot on a loan.”

Becker urges borrowers to shop around for a mortgage and take a close look at the costs that vary from lender to lender.

“Make sure you’re comparing apples to apples,” he says. “Take into consideration the interest rate and the lender fees out there.”

Source: “Even as Mortgage Closing Costs Drop, You’d Better Shop Around,” (Aug. 3, 2015)

About one-third of recent home buyers failed to shop around for a mortgage, saying they were satisfied with the first quote that a lender gave them, according to Fannie Mae’s National Housing Survey. But that could be a big mistake.

Researchers found that higher-income, younger-aged, and minority borrowers were the most likely to gather multiple quotes when shopping for a mortgage.

On the other hand, “first-time home buyers and lower-income borrowers are more likely to say that referrals from friends, family, or co-workers had a major influence on their choice of lender,” note Sarah Shahdad and Qiang Cai of Fannie Mae’s
 Economic & Strategic Research Group in commentary at Fannie Mae’s website. “Only first-time home buyers are more likely to say that a real estate agent’s or mortgage specialist’s referral influenced their choice of lender. … These findings suggest that there is an opportunity to help consumers be better informed and improve upon the mortgage shopping process.”

Shahdad and Cai urge that consumers be provided with more information about mortgage product choices and that buyers be encouraged to seek multiple sources of information.

“As large and infrequent as the mortgage transaction is in most people’s financial lives, borrowers may be leaving money on the table by not shopping around and negotiating for the best terms they can get,” Shahdad and Cai write. “Getting a better deal can help borrowers sustain their mortgage even in the case of unexpected increases in expenses or decreases in income. The level of influence of referrals on today’s first-time and lower-income home buyers suggests that finding a lender who delivers on other dimensions, such as efficiency and customer service, also is a key area of focus for many.”

Source: “What Is the Mortgage Shopping Experience of Today’s Homebuyer?” Fannie Mae (April 13, 2015)