Consumers looking at purchasing or refinancing their homes usually think about the home value, the loan size and downpayments. They don’t always think about closing costs, or how the fees can vary by state.
Those costs are the focus of two new reports released by LodeStar, which look at state-by-state rankings of the fees that are tacked onto both purchase and refinance transactions.
Specific closing costs, which are paid by either buyers or sellers at the closing of a real estate transaction, can include title costs, lender fees, home appraisal costs, inspection fees and real estate agent commissions.
A national look at the state numbers show purchase closing costs average 1.04% of the sales price, with a median of 0.85%. Refinancing a mortgage averages 0.67% of the refinance loan amount, with a median of 0.65%.
According to the LodeStar report, when evaluated as a percentage of the sales price, “closing costs are lowest in states without transfer taxes, or with minimal transfer taxes,” referring to taxes imposed by state or local governments when a property’s ownership transfers from one individual or entity to another.
Conversely, the highest closing costs as a percentage of the purchase “tend to occur in states where the transfer taxes make up a bulk of the overhead.” The report pointed out Delaware, New York, Vermont, Pennsylvania and Washington, D.C., as examples where high transfer taxes are increasing purchase closing costs.
With its closing costs averaging 2.06% of the loan amount per refinance, New York has the dubious distinction of the highest closing costs nationally. Its average closing costs with recording and taxes totaled $10,553.
This was more than double the average costs of Florida, which had the second most by state with $5,250 — amounting to 1.36% of the refinance loan amount. Florida was the only other state with its percentage of the refinance amount above 1%.
“New York, Florida, and Maryland appearing at the top is not surprising, as refinance closing costs are heavily influenced by each state’s mortgage taxes, recording and related fee structure,” stated Ron Carvalho, LodeStar’s director of data, in a press release.
