Why are closing costs so high in Pennsylvania

Where you live can have a big impact on how much you pay in closing costs when you buy a house. And its not always the most expensive areas that have higher fees.Just look at Delaw

Why are closing costs so high in Pennsylvania

Where you live can have a big impact on how much you pay in closing costs when you buy a house. And its not always the most expensive areas that have higher fees.

Just look at Delaware and Pennsylvania homebuyers. These are two states with home prices well below the national average, but homebuyers pay more in closing costs (as a percentage of the total home price) at 5.9% and 4.2%, respectively, than states with heftier price tags.

Like everything else in the real estate market, closing costs have gotten more expensive. According to data analysis from ClosingCorp, the national average of closing costs for single-family homes in 2020 was $6,087 (5.9% higher than in 2019); and $3,470 if you dont include the taxes.

Faster, easier mortgage lending

Check your rates today with Better Mortgage.

Forbes Advisor looked at state-by-state closing costs in the fourth quarter of 2020 to see which states were the most economical for mortgage fees, and which ones are harder on your bank account.

Closing Costs by State  Q4 2020

We also looked at:

States With the Highest Total Fees as a Percentage of the Sales Price

Typically, closing costs are largely based on the purchase price of the home, but some states with lower average home prices can have higher closing costs as a percentage of the home price. For example, Delaware is one of the most affordable states regarding the average home price (at $300,604), but the Diamond States closing costs are the highest when it comes to the percentage of the total sale price. Heres where the other highest percentage states rank.

States With the Lowest Total Fees as a Percentage of the Sales Price

On the opposite end of the spectrum, states like Missouri not only have some of the lowest average home prices but also the lowest closing fees as a percentage of the sales price (at 0.71%).

Colorado also had some of the lowest closing cost percentage despite having double the average home prices to Missouris. And despite California having some of the most expensive real estate in the country, it still made it to the list of 10 states with the lowest percentage closing costs.

States With the Highest Appraisal Costs

Appraisals are a relatively inexpensive line item in the grand scheme of closing costs, but every little bit counts when youre plunking down your life savings to buy a home. If you live in the Pacific Northwest or just out west in general, youll probably pay more for your appraisal than your Southern counterparts. Here are the top 10 states with the highest average appraisal costs.

States With the Lowest Appraisal Costs

The East Coast and Midwest dominate the list of top 10 states for least expensive home appraisals. Most of these states are all within a $40 range of each other, and $485 or less for an appraisal.

10 States Where Closing Costs Increased

Delaware saw the greatest jump (25%) in year-over-year price increases, with the total feesas a percent of the sale pricerose 5.9% in 2020 from 4.7% a year earlier. New Hampshire was second place with a 12.3% increase, and Washington, D.C. made the top 10 list with a smaller price hike of just 3.2%.

10 States Where Closing Costs Decreased

On the flip side, Missouri had the largest drop in closing costs (as a percent of the total sales price), falling to 0.71% in 2020 from 1.02% in 2019. Washington was a distant second with a 17.1% drop in closing costs, followed by Vermont (-15.6) and South Carolina (-14.4%).

What First-time Homebuyers Should Know About Closing Costs

For buyers who are saving up for down payment and closing costs, be sure to look ahead at price appreciation because as home prices rise, so do closing costs.

Nationally, home prices are up 17.2.%, so the nest egg you have to save has to be 17% bigger to afford to buy, says Frank Nothaft, senior vice president and chief economist for CoreLogic. You need to save up [for] a bigger down payment, more for higher closing costs, and you still need money in reserves.

Closing costs often catch first-time homebuyers by surprise, especially if their lender decides not to disclose all of the cash they need to finalize the loan to make their offer appear more competitive, says Mike Tassone, co-founder at Own Up.

Tassone says if closing costs are not disclosed adequately, it can be a bombshell as the borrower gets closer to closing and receives their cash-to-close number. Borrowers should ask their lender what the total amount of the loan will be, including all of the closing costs, so there are no surprises as you near your close date.

Theres a slew of down payment assistance programs available for eligible buyers, including grants, matched savings accounts and low-interest loans. While these assistance programs are called down payment assistance programs, the funds typically can also be applied to the closing costs.

Whats valuable about many of these programs is that homebuyers can use them in place of their savings, which is a major financial boon when taking on homeownership. Most experts recommend keeping around six months of expenses in reserves so that you avoid paying for unexpected emergencies with credit cards or personal loans.

How (and When) to Negotiate Closing Costs

Closing costs include all of the fees associated with the mortgage transaction. These fees are generally between 2% and 6% of the purchase price. The charges captured in the closing costs usually include the appraisal, tax service fees, title insurance, government taxes and prepaid costs like homeowners insurance, mortgage interest and property taxes.

You can categorize the fees buyers are obligated to pay into three groups:

  • Homeowner fees and prepaid costs
  • Lender fees
  • Third-party fees

Sellers typically pay the real estate commission for both the buyers and sellers agents and the transfer tax, which transfers property rights to the buyer.

If a seller is motivated to offload their property, they might offer to pay the closing costs; sometimes thats in exchange for a higher sale price. This scenario gives buyers more breathing room when it comes to how much cash they need upfront. However, in a hot sellers market, fewer sellers are willing to cover closing costs.

Weve very quickly gone from a market where it was common to get sellers to pay closing costs to one where that is increasingly rare, says Kris Lindahl, CEO at Kris Lindahl Real Estate in Fort Collins, Colorado. The lack of inventory were seeing nationwide has given sellers a lot of control. In many cases, sellers will overlook an offer asking them to pay closing costs because theyll have other offers on the table that arent asking them to make those concessions.

But even when sellers have the advantage, buyers might have a bargaining chip if sellers need more time to find their next home. Lindahl says that if the buyer is willing to push the closing date back so the seller can lock in a home, the seller might thank them by paying some closing costs.

Tassone says the best chance buyers have to lower their closing costs is to ask for lender credits, which are not tied to whether its a buyers or sellers market. These fees directly impact the lenders bottom line, so it depends on how much the lender needs your business.

This is often the area that savvy borrowers will have the most ability to negotiate because a lender may choose to reduce their profit margins by providing a sizable lender credit to win a deal, Tassone says. In times when rates are low, and lenders have an abundance of volume, they are less likely to offer larger concessions. However, in higher rate environments and more competitive markets, it is common for lenders to reduce their profit margins and be willing to negotiate.

Video liên quan