Georgians who are paying more for new homes and facing higher mortgage rates can add heftier loan closing costs to the list.
An annual review of closing costs in Georgia shows homebuyers with mortgages are paying on average 6 percent more to have their loans processed, according to Bankrate.com.
Bankrate says Georgia closing costs are 12th highest in the nation, averaging $2,490 on a $200,000 mortgage. The national average is $2,402, also up 6 percent from last year.
Lenders appear to be boosting fees before the continued rise in mortgage rates cuts loan volume, Anthony Sanders, a George Mason University real estate and finance expert, told Bankrate.
“They know when rates go up, loan applications plunge, so they are trying to generate more earnings on anticipation of lower application volume and lower profits,” Sanders said.
The higher fees also reflect the cost of more compliance and regulatory mandates for lenders, according to Christopher Marinac, who researches banking trends for FIG Partners LLC in Atlanta.
“Banks are subject to heavy regulatory scrutiny,” Marinac said.
Much of the scrutiny comes from the Consumer Financial Protection Bureau, created by the Dodd-Frank Act to enforce federal consumer financial laws, including those designed to prevent questionable lending practices that led to a flood of foreclosures during the housing bust.
Bankrate looked at origination and third-party fees to arrive at its averages. Origination fees include items such as points, a calculation used to compensate loan officers; and payments for the loan application, other loan processing documentation and broker fees. Third-party fees include payments for items such as the appraisal, closing attorney, inspections and surveys.
The average origination fee in Georgia is $1,816 and the average third-party fee total is $674, according to Bankrate, which tracks mortgage rates.
Bankrate said actual closing costs are probably higher because its analysis did not take into account the most variable costs, such as title insurance, title search, taxes and other government fees and escrow fees.
Bankrate asked up to 10 lenders in each state plus Washington D.C. to provide good faith estimates for a $200,000 mortgage loan on a single-family house in a state’s largest city, and for a borrower with excellent credit and a 20 percent down payment. Banks are required to disclose all fees on the good faith estimate.
Nationally, Hawaii had the highest average closing costs ($2,919), while costs were cheapest in Wisconsin ($2,119).
The rise in closing costs mirrors similar increases in home prices and mortgage rates. According to Zillow.com's latest research, the average metro Atlanta home values are up 6 percent year over year. Bankrate said its benchmark 30-year fixed-rate mortgage rose to 4.59 percent from 4.54 percent last week. A year ago the rate was at 3.77 percent.
Experts advise homebuyers to shop around for the best rates and closing fees, and get a good faith estimate, which will allow consumers to see all fees associated with the loan.
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