Understanding Average Home Loan Closing Costs: A State-by-State Breakdown

The fees mortgage lenders charge to settle home loans vary by state. Economic factors, such as a rise in foreclosures, can even affect how much home buyers pay in closing costs. Still, home buyers who pay close attention to a lender's estimate on closing costs may be able to negotiate lower fees.

Costs by State

New York and Texas have the most expensive closing costs, according to a 2010 Bankrate.com nationwide survey of such costs. The annual survey indicates that average fees on a $200,000 mortgage totaled $3,741, which is nearly a 37-percent increase over the 2009 survey average of $2,739. Bankrate.com notes that some of the increase in costs can be attributed to a change in regulations. In 2010, the federal government began requiring mortgage lenders to give borrowers more accurate estimates of closing costs or face penalties for underestimating such costs.

Third-Party Fees

The Bankrate.com survey also found that the cost of title insurance rose in 2010. The insurance is intended to provide compensation to a home buyer whose title to a property may be challenged in court by someone claiming ownership to it. Bankrate.com doesn't list an average amount paid for title insurance, but it's included among third-party fees, which rose by 47.2 percent. Third-party fees are closing costs that aren't paid directly to the lender. The fees include title insurance and home appraisal costs.

Negotiating Fees

It can be difficult for home buyers to get a lender to reduce closing costs that need to be paid to a third party. However, some fees that lenders charge are negotiable. SmartMoney notes that courier or express-mail fees lenders charge for sending mortgage documents to borrowers may be negotiable. Furthermore, SmartMoney asserts that some less reputable lenders charge excessive processing fees that are listed as settlement costs, underwriting fees and application fees. All of those charges may be alternative names for the same type of service and should be questioned by the borrower.

Considerations

A rise in foreclosures in the United States has subjected home buyers to more scrutiny by lenders to ensure they can afford to pay for the homes they want to purchase. CNNMoney.com notes that the additional scrutiny applied to each mortgage application costs lenders more in terms of administrative expenses. In response, lenders are raising fees to close home loans to cover their additional costs.