I received several responses from people in the industry to my recent post about the closing cost survey by Bankrate.com, which said that closing costs are rising and that Minnesota has the 17th-highest closing costs in the nation.
I’m not going to publish the complete responses, or the names of people who called or wrote, but their comments are worth summarizing.
Someone from the mortgage industry called the study “linkbait” because it omitted the interest rate — a key piece of information when it comes to determine the true cost of a mortgage.
Another reader said that Minnesota’s closing costs are understated because the Minnesota Association of Realtors introduced a new purchase agreement that shifted abstracting fees from the seller to the buyer and eliminated reissue credits worth several hundred dollars.
The story and blog post didn’t explain why closings costs are so much higher in Minnesota than in surrounding states. In Iowa, for example, the survey showed that costs were about half of what you’d pay in Minnesota. Here’s one explanation: “Local and municipal costs may have something to do with how title actually changes hands in Iowa. Titles are more expensive to insure in some states than others. Could also be local custom. In some states or regions, the custom is to pay points (one percent of the mortgage amount), in others, “no-points” mortgages are the common practice. Again, tough to asses where the difference is without seeing whether Iowans pay generally higher or lower rates for those lower costs. I suspect the former.”