Mortgage closing costs jumped by over 13% in 2021, in line with increases of other mortgage fees. But when measured as a percentage of the purchase price, costs actually registered a slight decline, a new report found.
The average cost to close a single-family home purchase in the U.S. last year totaled $6,905, inclusive of transfer taxes, and $3,860 without, according to the 2021 Purchase Mortgage Closing Cost Report issued by CoreLogic’s ClosingCorp subsidiary. The numbers amount to year-over-year jumps of $818, or 13.4% when taxes were included, and $390, or 11.2% without, trending even higher than
Closing costs by dollar value increased at nearly the exact same pace as
“As the market tightens in 2022, it will be interesting to see how lenders and borrowers respond and how these key metrics move,” he added. Lender’s and owner’s title policies,
But when calculated as a percentage of total home price, closing cost amounts actually decreased, reflecting the record surge in housing costs throughout 2021, said Frank Nothaft, CoreLogic chief economist. Average closing fees as a percentage relative to the mean sales price in 2021 was 1.81% inclusive of taxes, down from 1.85% a year earlier. If taxes are excluded, average closing costs came in at 1.01% compared to 1.06% in 2020.
The report noted the average U.S. home price was up by over $50,000 last year, while other research has found the cost of housing
Price increases managed to drive both the rise in absolute dollar value of closing costs, as well as their shrinking value compared to home price, because the fees are frequently correlated on a percentage basis to the home’s value, Nothaft said. Fee amounts will vary by jurisdiction.
The recordation fees, transfer tax, land surveys are the big-ticket items that generally are a certain percentage of the transaction price,” he said in an interview with National Mortgage News. The cost of land surveys can also be determined by the size of the property as well, he added.
“Some states have no tax or minimal taxes, and some states have a larger recordation tax, but generally, items like that are related to the value of the transaction,” he added.
The differences in regulations and tax rates across states can be vast. The highest average closing costs were concentrated on
On the other end of the spectrum, home buyers in Missouri had the lowest average closing costs last year at $2,061. Fees in Indiana averaged $2,200 and in North Dakota, $2,501. Wyoming and Mississippi, where average closing costs came in $2,589 and $2,756 rounded out the “bottom” five.
With taxes excluded, the nation’s capital still led the list with an average of $6,502, followed by New York at $6,168. Hawaii’s average was $5,879, California came in at $5,665 and Massachusetts rounded out highest-fee jurisdictions at $4,904.
States with the lowest average closing costs minus taxes were Missouri at $2,061, Indiana at $2,200 and Nebraska at $2,210. Arkansas and West Virginia followed with averages of $2,281 and $2,465.