New research from Assurance IQ has found that homebuyers in New York, California and New Jersey have to deal with the highest average closing costs in the country, each in excess of $7,500.
That’s at least 76% more than the typical American’s closing cost of $4,243, per Assurance data. Closing costs, on average, comprise 1.87% of the median home value nationwide. In New York, average closing costs are $8,039 and comprise a much larger share of the median home value, equating to 2.47% of the median purchase price of $325,000. In California, the average closing costs of $8,023 represent 1.49% of the median home value, largely because the Golden State’s median home price ($538,500) is higher.
New York’s high average closing costs are driven by high homeowners insurance premiums, at an average of $3,245, and a median property tax payment of $5,590. California’s high overall costs are impacted by a sky-high average title insurance fee of $4,550, and a median property tax payment of $3,996.
New Jersey’s typical closing costs of $7,702 equate to 2.24% of the state’s median home value of $343,500. Pricey states in the West and Northeast made up the most expensive tiers of Assurance’s ranking, with Washington, Massachusetts, Oregon, Utah, Connecticut, Colorado and Hawaii rounding out the rest of the top 10.
On the other end of the spectrum are West Virginia, Alabama, South Carolina and Arkansas — all comparatively less pricey states in the South. These states have the lowest average closing costs in the nation at less than $2,600 each. West Virginia’s average closing costs of $2,124 is the lowest figure among the 50 states and represents 1.72% of the state’s median home value of $132,200.
To determine closing costs, Assurance assumed a 30-year fixed mortgage rate of 6.9%, taking into account common closing expenses such as appraisal fees, inspection fees, attorney fees, mortgage taxes, homeowners insurance, property taxes and title insurance. Mortgage taxes were based on average mortgage rates and payments for each state. Property tax estimates covered half of the total yearly tax amount, while homeowners insurance costs were calculated at 10% of the total yearly premium.