Texas homebuyers have it rough these days. Not only are they faced with a highly competitive market (although inventory is increasing) they have to pay out the nose in closing costs.
In fact, closing costs in Texas — including lender's origination fees and third-party fees such as appraisal — are the highest in the country, according to the 2014 survey by Bankrate. For a $200,000 mortgage, they average at least $3,046 — and we say "at least" because, as Bankrate notes, these charges do not reflect the most highly variable costs such as title insurance, title search, taxes, other government fees and escrow fees.
To determine the rankings, Bankrate requested good faith estimates for a $200,000 mortgage loan from up to 10 lenders in each state, plus Washington, D.C. The hypothetical loan was for a purchase of a single-family house in the state's largest city using a 20 percent down payment, with excellent credit.
Nationwide, homebuyers shell out an average of $2,539 in closing costs, which is 5.7 percent more than they paid last year, Bankrate's survey shows. Origination fees, which are the fees paid directly to the lender, jumped 8.5 percent.
The lenders blame the hike on new mortgage regulations, which went into effect this year. Dan Stevens, sales operation manager and vice president of National Bank of Kansas City, told Bankrate, "The No. 1 at the moment is the qualified mortgage rule. That alone has really added additional man-hours to the mortgage approval process."
Bankrate explains thusly:
The qualified mortgage rule — also known as QM or the ability-to-repay rule — was implemented in January by the Consumer Financial Protection Bureau. The rule is simple in theory: It requires lenders to verify that a borrower can afford to repay the mortgage before a loan is approved.
But in practice, complying with the rule is costly to lenders, and those costs are passed to the consumers, lenders say.
Curiously, Texas ranked No. 13 last year and No. 3 in 2012. Why the huge jump? Bankrate spokesman Holden Lewis told the Dallas Observer's Unfair Park that there may be no good answer for that, because banks are tight-lipped about their fees. "They don't talk about pricing to outsiders," Lewis said.
It probably just boils down to this: Lenders want to make a profit, and their cost of doing business has increased. "People would say that you can't fault lenders for making a profit, and that would be the winning argument," Lewis said.
If you are in the market for a house, Forbes has a handy guide for lowering closing costs. Because it just can't hurt to ask.
As for the rest of the rankings, Alaska, New York, Hawaii and Wisconsin round out the top five. The state with the lowest average closing costs is Nevada.