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As Mortgage Closing Costs Drop, You’d Better Shop Around

As Mortgage Closing Costs Drop, You’d Better Shop Around

By Crissinda Ponder, Bankrate.com (TNS)

The average total cost a borrower pays to close on a home loan has dropped slightly, an exclusive Bankrate.com survey finds.

Bankrate’s 2015 survey of closing costs shows that closing costs fell 7.1 percent year over year — to $1,847 in 2015 from $1,989 in 2014.

About The Survey

Bankrate requested good faith estimates from up to 10 lenders in a populous city in each state and Washington, D.C., for a $200,000 mortgage. The hypothetical loan was to buy a single-family home for a borrower with excellent credit and a 20 percent down payment.

The averages comprise origination fees charged by lenders, plus third-party costs such as appraisal and inspection services.

Some highly variable costs were excluded — homeowners insurance and other prepaids, discount points, title insurance, and taxes — so your final charges on closing day likely will be higher than the averages found in the survey results.

It’s Gonna Cost More, Though

Variable costs could add up to another $2,500 or $3,000, depending on where you live, says Michael Becker, branch manager for Sierra Pacific Mortgage in White Marsh, Md.

In this year’s survey, average third-party fees rose nearly 22 percent, while average origination fees fell about 22 percent. What could explain why these average fees went in opposite directions?

“I can only speculate, but my best guess is that third-party fees went up because of inflation and an increase in the cost of providing those services,” Becker says. “Origination fees probably dropped because of a drop in mortgage rates.”

Borrowers today are paying less to get a better rate compared with 2014, he adds.

Industry Braces For New Documents

The mortgage lending process is getting a makeover soon, which is intended to change, in the borrower’s favor, the path to homeownership. The “Know Before You Owe” changes also will affect mortgage closings.

As part of the Dodd-Frank Act, the Consumer Financial Protection Bureau, or CFPB, has combined the four forms that borrowers get during the application and closing processes into two simpler documents.

New Documents For Homebuyers

Loan Estimate

– Replaces good faith estimate and Truth in Lending Act, or TILA, statements.
– Given to borrower within three business days of home loan application.
– Lists estimated costs associated with mortgage.
– Easier to compare multiple mortgage quotes.

Closing Disclosure

– Replaces the HUD-1 and final TILA statements.
– Sent to borrower three days before closing.
– Provides details about mortgage terms.
– Lists what is expected of the borrower at the closing table.

The new forms were slated to take effect Aug. 1, but the CFPB has delayed them until Oct. 3.

Compliance Costs Trickle Down To Borrowers

Regulations limit the amounts that lenders can charge above the numbers quoted in the estimates. “Lenders cannot impose new or higher fees on the final loan unless there is a legitimate reason,” reads a release on the CFPB website.

The costs of regulatory compliance are higher than ever, says Pava Leyrer, chief operating officer at Northern Mortgage Services in Grandville, Mich. Those costs are passed on to borrowers. The uptick isn’t likely to slow down anytime soon; industry leaders have warned that mortgage lending and its associated costs will continue to increase.

Title insurance costs are rising, too. “For the most part, our borrowers, on a purchase, are going to see a pretty hefty increase in title insurance,” Leyrer says. “A couple hundred bucks is a lot on a loan.”

You Still Have Options, So Shop

Many borrowers aren’t aware that they can shop around for competitive closing costs, says Marietta Rodriguez, vice president of national homeownership programs at NeighborWorks America in Washington, D.C.

“They sort of let their lender or their realtor drive how they purchase insurance or their home inspection or any other costs related [to the loan],” she says. “I think most borrowers don’t realize they have choices.”

Certain charges, such as taxes, are fixed: You can’t shop around for a better deal. Becker cautions that you should take a close look at the costs you can control.

“Make sure you’re comparing apples to apples,” he says. “Take into consideration the interest rate and the lender fees out there.”

Don’t be afraid to ask questions to fully understand what you’re paying, Leyrer advises. “Compare the service you get, the reputation, and the costs, along with the rate,” she says, “and then go with what you think will fit your needs the best after doing just a little bit of research.”

Photo: Homes are seen for sale in the northwest area of Portland, Oregon, in this file photo taken March 20, 2014. REUTERS/Steve Dipaola/Files  

Economy Was Hit Harder By Severe Winter Than Initially Feared

Economy Was Hit Harder By Severe Winter Than Initially Feared

By Jim Puzzanghera, Los Angeles Times

WASHINGTON — The economy stumbled badly during the severe winter, much more than first estimated, according to a government report, and stalled a recovery that appeared poised to take off this year.

Economists, however, see the quarterly drop more as a delay in the nation’s long revival from the Great Recession. Other recent data indicate economic growth has picked up significantly this spring, putting the recovery back on a slowly improving track.

Total economic output shrank at an annual rate of 1 percent from January through March, the first quarterly contraction in three years and just the second since the recession ended nearly five years ago, the Commerce Department said Thursday.

The department’s revised figure for what is known as gross domestic product was far worse than the 0.1 percent growth initially reported last month. And the revision was steeper than the 0.5 percent contraction economists had anticipated.

The new reading also makes it unlikely that the economy will expand this year at the 3 percent rate economists previously projected.

“We’ve got to climb out of that hole” in the first quarter, said Brian Bethune, chief economist at consulting firm Alpha Economic Foresights. “You can think of it as a temporary setback, but it is going to pull down growth projections for this year.”

Investors shrugged off the report. The Dow Jones industrial average rose 65.56 points, or 0.4 percent, to 16,698.74.

It typically takes two straight quarters of contraction to signal a recession, and projections are for growth to return in the second quarter.

The economy expanded at a 2.6 percent annual rate in the fourth quarter last year. And heading into this year, the recovery appeared ready to reach what economists call takeoff velocity, which has been an elusive pace in the recovery.

“If the economy can demonstrate it can grow better than 3 percent on a sustained basis, it will motivate many more companies to accelerate business capital spending and also increase the pace of hiring,” said Bernard Baumohl, chief global economist at the Economic Outlook Group.

This winter, bitter cold and heavier-than-normal snowfall swept across much of the nation, chilling economic activity.

The big factor in the contraction was a larger decline than originally estimated in how much businesses spent to restock their shelves.

Companies increased their stockpiles of goods by just $49 billion in the first quarter, down sharply from $111.7 billion in the fourth quarter. The falloff shaved first-quarter economic growth by 1.62 percentage points.

The weather didn’t slow down consumers much. Their spending was revised up slightly to 3.1 percent Thursday, though still down from 3.3 percent in the fourth quarter. Even so, spending was strong, which bodes well for the rest of the year.

But it wasn’t enough to boost first-quarter growth.

“Companies were not able to generate more inventory to offset that consumption because trucks were stuck on the road and employees couldn’t get back to the factories,” Baumohl said.

Still, what he called the “historically harsh winter” didn’t alter the improving fundamentals of the recovery.

Baumohl forecast growth of 3.5 percent to 4 percent in the second quarter as businesses rebuild inventories. And he projects 3 percent growth in the second half of the year.

Alan MacEachin, corporate economist at Navy Federal Credit Union, also is expecting a “decent snapback” in growth this quarter. He’s forecasting 3.7 percent annualized growth, with the economy then “back on track for 3 percent going forward.”

Economists point to improving economic data in recent weeks to bolster their view that the first quarter was a weather-related anomaly.

Orders for airplanes, motor vehicles, computers and other durable goods, a key indicator of future factory output, rose in April for the third straight month, the Commerce Department said this week.

And on Thursday, the Labor Department reported that initial jobless claims dropped last week by 27,000 to 300,000. The figure was near the lowest level in seven years.

In addition, the number of people receiving unemployment benefits for the week that ended May 17, the most recent data available, fell to 2.6 million, the lowest level since November 2007.

And the robust gain of 288,000 net new jobs in April indicated that the labor market was rebounding after a winter slowdown.

But caution flags are still out on the recovery.

As bad as the winter was, it wasn’t the only cause for the first-quarter contraction. Higher mortgage rates, for instance, contributed to the slowdown in the housing market. And a weaker global economy resulted in fewer exports.

AFP Photo/Davis Turner