Not only are mortgage rates as low as they have ever been, but Colorado consumers have another incentive to buy a home – Colorado can boast having the third-lowest mortgage closing costs in the nation, according to a national study released on Monday.
The report by Bankrate showed that it cost $3,199 to close on a typical mortgage in Colorado, almost 15 percent lower than the national average of $3,754.
Only Kansas and Missouri, with average closings costs of $3,193 and $3,006, respectively, were lower.
“I think Colorado will remain more popular than Missouri and Kansas,” quipped Ryan McMaken, spokesman for the Colorado Division of Housing.
Seriously, he said the low closing costs in Colorado is somewhat good news for the housing market.
“It will feed the perception, the correct perception, that demand for housing is going up and prices are starting to rise slowly,” McMaken said. He said if more people decided low closings costs are a reason to buy a home now, rather than wait, it could hurt the owners of high-end apartment buildings.
“In the big scheme of things, employment is more important,” than closing costs. In recent months, Colorado has not enjoyed a lower unemployment rate than the national average, he said. Eventually, a higher unemployment rate could discourage people to move to Colorado from other states, he said.
To get an idea of what a typical consumer with excellent credit would pay in closing costs, Bankrate surveyed up to 10 lenders in all 50 states plus the District of Columbia in June.
Researchers obtained online good faith estimates for a $200,000 mortgage to buy a single-family home with a 20 percent down payment.
Costs include fees charged by lenders, as well as third-party fees for services such as appraisals and title insurance. The survey excludes taxes, property insurance, association fees, interest and other prepaid items.
Colorado has seen a dramatic drop in closing costs.
In 2011, Colorado the average closing cost in Colorado was $3,917, putting it in 23rd place. Closing costs declined 17 percent during the past years, more than twice the national decline of 7 percent, according to Bankrate.com’s research.
“This is the second year in which lenders are required to estimate third-party fees within 10 percent of the final cost,” said Greg McBride, Bankrate’s senior financial analyst.”It seems like they’re getting more accurate, which helps explain the sharp decrease in these fees over the past year.
“The main lesson of this survey for consumers is to shop around for at least three different estimates. While no one is going to move to a new state just because closing costs are lower, it’s important for people to realize that there is variation even within their neighborhood, and that they can save by being an educated consumer.”
For the third straight year, New York state has the nation’s most expensive closing costs at an average of $5,435. The next most expensive states are Texas, Pennsylvania, Florida and Oklahoma.