Whenever you get approved for a mortgage, you have to pay closing costs. These are fees that lenders and various third parties charge when you purchase your home. Closing cost fees typically include attorney’s fees, loan origination fees, inspection fees, appraisal fees, title fees, and various other costs that can really add up. In most cases, it’s the home buyer that’s responsible for paying these fees, but in some situations, the seller may pay a portion of the costs. Closing costs are certainly a nuisance for buyers, but they are something that must be accounted for when shopping for a new home.
Recently, there is evidence that the average closing costs charged by mortgage lenders has increased in 2013. According to Bankrate’s annual closing cost survey, closing costs in 2013 are about 6% higher than they were in 2012. The bulk of this increase is related to fees charged directly by the loan originator rather than third parties. Excluding third-party fees, loan origination fees were over 8% higher than last year.
Experts point to a number of causes for high closing costs
Of course, these sharp increases in closing costs have left many buyers and sellers asking why. What has changed over the past year to lead to such a significant jump in closing costs? Experts point to a few different causes.
Perhaps the simplest explanation is that lenders are charging higher fees simply because they can. Right now, the market is seeing some of the lowest mortgage rates in history. As a result, buyer demand is sharply increasing. Since more people are interested in buying homes, lenders don’t have to fight as hard for business. Consumers are coming to them in droves, and because of this huge demand for home loans, lenders are able to hike up their fees and take advantage of buyers.
The other issue is that lenders realize these historically low interest rates aren’t going to last forever. That’s why they are increasing their fees now so they can generate as much money as they can before the rates start to climb in the coming months and years. In short, lenders are trying to get as much money as they can while the getting is still good.
Another possible reason for the increase in closing costs from lenders is that banks are facing increased expenses as they implement new mortgage regulations from the Consumer Financial Protection Bureau. The cost of compliance with these new rules is expensive for lenders, so they are increasing their fees to help absorb this cost.
Don’t expect high fees to last forever
The good news is that the increased closing costs we’re seeing right now aren’t expected to last forever. As interest rates start to rise in the coming months, you can expect to see lenders competing with one another for business by lowering their closing cost fees. They will have to do this in order to attract more business in the ever-changing marketplace.
Of course, you should always shop around and compare fees from lenders to make certain you get the very best deal when taking out a loan for a new home.
If you’re thinking about home in the Outer Banks, let the experienced, knowledgeable team at Coastal Outer Banks Realty guide you through today’s changing market. Visit www.coastalouterbanks.com today for more information!