National survey finds closing costs exceed average of $3,000

NEW YORK (AP) -- Aug. 10, 2006 -- Closing costs - the money consumers pay to cover title searches, application fees and other expenses when buying a home -- average more than $3,000 nationwide, according to a survey being released today.



The study by Bankrate.com looked at the closing costs charged by lenders in major cities in all 50 states and the District of Columbia. The closing costs included origination fees charged by lenders such as application fees and document processing fees as well as title search and appraisal costs that are paid to third parties.



The average nationwide was $3,024, the study found.



"These fees are not insubstantial, so consumers should shop around when they're in the market for a mortgage," said Greg McBride, senior financial analyst with Bankrate.com.



The cities with the highest closing costs were Buffalo, N.Y., $3,887; Houston, $3,578; Honolulu, $3,407; Cleveland, $3,354; and Miami, $3,349, Bankrate.com said.

Those with the lowest were St. Louis, $2,713; Detroit, $2,714; Concord, N.H., $2,734; Billings, Mont., $2,737; and Cheyenne, Wyo., $2,772, it said.



Bankrate.com, an online financial service based in North Palm Beach, Fla., asked home buyers if the closing costs they paid when they actually signed for their home mortgages were close to the so-called good faith estimate of closing costs they got from their lenders in advance.



Some 60 percent said the estimate was right on the mark. But 13 percent said they paid a higher amount than the estimate, while 8 percent said they paid less. The rest said they didn't know or didn't respond to the question.



McBride said the survey of closing costs didn't cover government fees and other prepaid items that are essentially passed through by the lender for payment by the borrower.



These fees vary significantly by location, and McBride warned that "lenders do a notoriously poor job of estimating what those fees are."



As a result, consumers should probably expect that closing costs will be above rather than below the good faith estimate, he said.



McBride said one way to hold down closing costs for things like title insurance was to ask the lender to recommend companies that offer cheaper policies. And, he said, consumers should watch out for "junk fees" - inflated costs for things like document preparation - that can boost their overall closing costs.