With mortgage lenders and title companies under the regulatory microscope, mortgage closing costs in Minnesota and across the country are on the rise. That's according to Bankrate.com, which surveyed lenders across the country to find out how much it costs to close a $200,000 mortgage on a single-family home with a 20 percent down payment.
In Minnesota this year, you'd pay on average $4,206, up 7 percent from 2010 and the 17th-highest in the nation. Minnesota was the most expensive state in the Midwest. The state-by-state survey says that if you're looking for a cheap loan, head to Arkansas, where closing costs are the lowest, but avoid New York City, which posted the highest closing costs in the nation.
The increase in fees nationwide was slightly higher than it was in Minnesota, with fees increasing on average 9 percent from 2010 to $4,070.
Greg McBride, chief economist for Bankrate.com, said that most of those increases are tied to higher lender fees, with origination fees up 10.3 percent from last year to $1,614.
Bankrate asked up to 10 lenders in each state in June 2011 to report fees charged by lenders, as well as third-party fees for services such as appraisals and title insurance. The survey excludes taxes, property insurance, association fees, interest and other prepaid items.
The survey doesn't note the mortgage interest rate, which is a critical piece of information when weighing the cost of a mortgage. Lenders sometimes compete by offering a discount on the rate for a higher origination fee.
Because the mortgage industry works under more stringent regulations and the cost of compliance has increased, many lenders have passed along those costs to consumers.
"It should surprise nobody that costs have gone up," said Alex Stenback, a mortgage broker and blogger in the Twin Cities. He said that compensation reform has had a big impact on closing costs because changes in the way mortgage lenders get paid has caused more of them to wrap in a fixed amount of revenue on each loan, resulting in an increase in overall average costs for everyone. "Highly regulated and 'risk free' lending is expensive," he said. "Nobody wants to pay the costs for this, but they will."
