Closing costs for homebuyers in New York remain the highest in the nation and are still climbing, creating higher hurdles for prospective home buyers who are also facing higher down payments.
For the fourth consecutive year, New York topped Bankrate.com’s annual closing cost survey. The average closing cost for a $200,000 home earlier this summer would have been $4,016 in New York City and $3,975 in Buffalo.
The state’s closing costs were weighed down by state taxes levied on lenders and lawyer-intensive closing procedures. New York closings often involve three legal representatives — for the buyer, seller and lender — whereas western states leave those tasks to less expensive title agents and escrow officers.
In last year’s survey, which listed a single statewide average instead of separate averages for upstate and downstate, New York’s closing cost was $3,830.
With an average of $2,692, North Carolina had the nation’s lowest closing costs, replacing Indiana at the bottom.
“I’m not surprised by New York state’s high ranking. … It’s simply a reflection of doing business in New York,” said Robert Hayes, the senior vice president of Wilber National Bank and president of the Mortgage Bankers Association of Northeastern New York.
To conduct the survey, the North Palm Beach, Fla.-based financial research and analysis firm requested from online lenders information on closing costs for a $200,000 30-year, fixed rate mortgage. The loans were intended for borrowers who have good credit and would make a 20 percent down payment.
Hayes said the higher closing costs do not appear to be deterring prospective home buyers, though those expenses will likely rise further. To help counties struggling to fill budget gaps caused by the state’s economic downturn, Gov. David Paterson signed into law legislation that allows county officials to raise mortgage recording fees.
The new law could push some county clerk mortgage recording costs to $75 for a 10-page document. Officials in Albany, Saratoga and Fulton counties have eyed recording fee hikes.
“This is a problem in New York, and it creates barriers to homeownership for some New Yorkers,” said Salvatore Prividera, a spokesman for the New York State Association of Realtors, an Albany trade organization.
Alone, New York’s closing costs are usually not prohibitive to homeownership, but they can be when taking into account the tighter lending practices being applied to buyers. Buyers need to come up with that money up front, Prividera said.
Attempting to aid first-time home buyers with heftier down payments and closing costs, the Federal Home Loan Bank of New York in February sweetened the incentives of its First Home Club. The congressionally chartered wholesale bank raised its contribution under that program to $4 for every $1 deposited into a savings account, for a total contribution of $7,500. The savings match ratio for first-time home buyers used to be $3 for every $1 up to $5,000.
Federal Home Loan Bank members, such as M&T Bank in Buffalo, Pioneer Bank in Troy and SEFCU in Albany, have reported increased participation in the First Home Club. But the enhanced First Home Club barely dented the greater Capital Region’s housing market. During the first half, closed single-family home sales regionwide totaled 3,777, down 17 percent from the same period of 2007.
“Certainly, the high cost of entry keeps some buyers out of the market,” Prividera said.