Federal regulations have significantly reduced the cost of closing a mortgage for new home buyers, noted a CNN report.
Based on the latest survey by Bankrate.com, the average cost of closing a mortgage fell by 7.4 percent over the past year. In June, a borrower looking to close a US$200,000 (S$248,280) loan with 20 percent down payment paid an average of US$3,754 (S$4,660) or US$300 (S$372) less than a year ago.
Closing costs include third-party fees for insurance and title searches as well as origination expenses like credit check costs and application fees.
Greg McBride, Senior Financial Analyst at Bankrate, said the large decline was due to new regulations requiring lenders to be more precise when estimating closing costs for borrowers.
Under the Real Estate Settlement Practices Act, lenders must provide a “good faith estimate” of third party fees that are within 10 percent of the actual amount that borrowers pay.
“The big drop in third-party fees indicates the lenders are doing a better job at estimating what the costs will be,” noted McBride, adding that “closing costs are a big line item and savings there can be quite significant”.
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