1. CLOSING COSTS HIT HOMEBUYERS HARD
OCOTBER 7, 2014
Graebel ReloTRENDS
SM
WHAT IS CAUSING THE INCREASE?
As reported by Graebel in “Tighter Lending
Standards Are Coming Soon,” one of the main
reasons for the rising fees is the implementation
of additional federal regulations. The qualified
mortgage rule, also known as QM, tops this
list. QM was implemented in January 2014
by the Consumer Financial Protection Bureau,
and requires lenders to verify that a borrower
can afford to repay the mortgage before a loan
is approved.5
While QM is beneficial from a compliance
perspective, it adds much more time to the
loan process, as underwriters must now
review information in more detail than before
to approve a loan. And according to lenders,
the rule is actually very costly, and those
costs are passed on to the consumers.6
CLOSINGCOSTSHITHOMEBUYERSHARD
Relocating homeowners
buying a home may
become increasingly more
expensive to employers,
as mortgage closing
costs have continued to
increase throughout this
year. The average fees that
consumers pay to close on
a mortgage have escalated
for the second year in a row.
Over the past year, closing
costs, which include lender
and fees such as appraisals,
rose six-percent. And as
of the first eight months
in 2014, closing costs
now average $2,539 on
a $200,000 loan (see
Figure 1).1
That’s 5.7-
percent more than the
closing costs recorded
in 2013.2
Additionally,
origination fees directly
paid to the lender jumped
8.5-percent.3
1
Keshia Clukey. “New York has third highest mortgage closing costs in the U.S.” Bizjournals.com,
August 6, 2014.
2
Polyana da Costa. “Closing costs survey: Mortgage fees rise.” Bankrate.com.
3
Ibid.
4
Ibid.
5
Ibid.
6
Ibid.
FIGURE 1: NATIONAL AVERAGE
CLOSING COSTS4
$1,877
$662
Third-party homebuyer fees
(appraisals, inspectors, etc.)
Lender’s
origination fee
OCTOBER 7, 2014
Graebel ReloTRENDS
SM
2. ECONOMY CAUSES BANKS
TO BOOST REVENUE
Fees charged by lenders continue to vary by state.
Texas, Alaska, and New York rank in the top
three for the highest origination fees (See Figure
2). A variety of factors continue to impact these
changing rates, including the improved economy
that is fueling demand for consumer borrowing.
As described in “U.S. Banks Boosted Lending
in Second Quarter, FDIC says,” U.S. banks are
taking advantage of the uptick in consumer
borrowing and have boosted lending in the
second quarter at a pace unseen since the
financial crisis. The Federal Deposit Insurance
Corporation said banks’ loan and lease balances
rose to $8.11 trillion, a 2.3-percent increase
over the first quarter of 2014 – and the largest
quarter-over-quarter jump since the end of 2007.
Mortgage lending was also up compared with
the first quarter, reflecting a retreat by some
banks amid new regulatory and legal risks.7
INCREASE HITS YOUNG
BUYERS HARD
While rising costs impact any prospective
homebuyer, they’re hitting the market of first-
time and young buyers much harder. According
FIGURE 2: 2014 AVERAGE CLOSING COSTS PER STATE8
STATE
ORIGINATION
AND APPRAISAL
FEES, ETC. STATE
ORIGINATION
AND APPRAISAL
FEES, ETC.
Texas $3,046 New Mexico $2,516
Alaska $2,897 Pennsylvania $2,511
New York $2,892 Oklahoma $2,498
Hawaii $2,808 Maine $2,497
Wisconsin $2,706 South Carolina $2,494
Nebraska $2,654 Montana $2,491
Vermont $1,976 Illinois $2,481
Florida $2,648 Virginia $2,479
New Hampshire $2,641 Iowa $2,448
New Jersey $2,625 Idaho $2,440
Alabama $2,613 Minnesota $2,436
North Carolina $2,602 Colorado $2,436
North Dakota $2,599 Washington $2,435
Kansas $2,582 Michigan $2,435
Louisiana $2,580 Georgia $2,433
Rhode Island $2,576 Kentucky $2,430
Massachusetts $2,564 Arizona $2,425
South Dakota $2,563 Arkansas $2,420
Mississippi $2,560 Maryland $2,404
Oregon $2,559 District of Columbia $2,402
Connecticut $2,555 Ohio $2,392
California $2,542 Missouri $2,387
Utah $2,537 Tennessee $2,366
Wyoming $2,518 Nevada $2,265
West Virginia $2,516
Delaware $2,516
CLOSING COSTS HIT HOMEBUYERS HARD
OCOTBER 7, 2014
Graebel ReloTRENDS
SM
7
Ryan Tracy. “U.S. Banks Boosted Lending in Second Quarter, FDIC Says.” The Wall Street Journal, August 28, 2014.
8
“Closing costs: States ranked.” Bankrate.com
