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Closing Costs Are Reaching New Highs

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Affordability

Closing Costs Are Reaching New Highs

The latest roadblock in an ongoing affordability crisis is the result of soaring closing costs on home purchases, making it difficult for first-time buyers to close on home sales in an already pricey market


April 25, 2022
Home closing costs money trail
Image: Stock.adobe.com

Not only are record-high home prices and surging mortgage rates putting financial pressure on prospective buyers, but rising closing costs are also making homeownership an increasingly unaffordable objective nationwide, according to Realtor.com. Average closing costs rose 13.4% in 2021, forcing buyers to pay an average $6,905 to complete home purchases, but some regions reported even higher numbers.

Buyers in Washington, DC paid an average $29,888 in closing fees throughout 2021, while Delaware buyers dished out the second most, at $17,859, followed closely by New York, at $16,849. Markets with more expensive homes tallied the highest closing costs, and as home prices surged across the nation in 2021, fees for home appraisals, land surveys, transfer taxes, and other closing essentials also soared to new highs.

Closing costs include fees for essential—but not so exciting—things such as home appraisals by lenders; land surveys; transfer taxes; and recording costs that provide official documentation of the change in ownership. These fees also typically include title policies (which ensure a seller has the right to transfer ownership of the property free of any liens, aka debts, which could be passed on to the new owners) and can include property and school taxes.

Closing costs were lowest in the Midwest and South. The states with the cheapest fees were Missouri, at $2,061; Indiana, at $2,200; North Dakota, at $2,501; Wyoming, at $2,589; and Mississippi, at $2,755.

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