2015 was a major turning point for the housing market in Maine, with sales of existing houses jumping nearly 11% over the prior year. The momentum has continued into 2016, with a 13.5% increase in January over last year. Although rising home values have encouraged more sellers to list their homes, rising demand is keeping inventory low, which has pushed the median home value up past $190,000, just short of its pre-housing bubble peak. Despite the demand, the recent surge in home values is making housing in Maine unaffordable for many new homebuyers, whose incomes are not keeping pace. For homebuyers on the fringe of affordability, closing costs can become an issue. Fortunately for them, closing costs in Maine are among the lowest in the country, but they can still add several thousands of dollars to the cost of buying a home. Closing costs vary widely, based on the lender and the type of loan product, so homebuyers would be wise to shop and compare. Knowing what goes into closing costs and what homebuyers should expect to pay for them is an important early step in the home-buying process.

Average Closing Costs in Maine

A survey of lenders in Maine produced the following averages for the most typical closing costs on a $200,000 home with a 20% down payment. The average fee charged by lenders is $897, while third-party fees average $830, for a total of $1,727 in closing costs. That is well below the national average of $1,847 and the fifth lowest of all the states.

Breaking down some of the more common closing costs, homebuyers spend an average of $937 for origination fees, $588 for legal or settlement fees, $454 for a home appraisal, $320 for a lot survey, $125 for inspections, $100 for postage and courier services, $76 for tax services, $21 for credit reports and $10 for flood certification. Not all closing costs are included in these averages because lenders vary when it comes to which costs they include. Title insurance fees, which can add as much as $1,000 to closing costs, are not included because lenders calculate them separately for each home purchase.

What Goes Into Maine's Closing Costs

Homebuyers in Maine receive a good-faith estimate from the lender within three days of submitting their loan application. The estimate lists all of the closing costs they can expect to pay. These are among the more common closing costs found on most estimates.

Loan origination fees: This fee covers most of the lender’s costs for processing the loan, including origination, underwriting and funding the loan. For many lenders, the fee is charged as an origination point, which is equivalent to 1% of the loan value. Homebuyers can pay additional points if they want to reduce the loan interest rates. Some lenders allow homebuyers to include the points in the loan to minimize their out-of-pocket costs.

Appraisal fee: Lenders require a home appraisal on all properties to verify that the value of the property is worth at least the sale price, and that the price is reasonable when compared to other homes in the area.

Settlement/closing costs: In Maine, the lender hires a legal representative to perform the settlement review and handle the legal matters in closing the sale. Homebuyers may hire their own legal representation to review the settlement, but this is done at an additional expense.

Lot survey: In some cases, lenders may require a survey of the property to verify the official boundaries of the property and its compliance with local codes.

Title search and insurance: The lender pays a title company to conduct a search of the property’s historical records to ensure it is legally owned by the seller and that there are no outstanding liens or encumbrances. To protect itself against any hidden title defects, the lender requires the buyer to purchase title insurance on the lender.

Flood certification: Depending on the location of the property, lenders may require a flood certification to verify that the property is not located in a flood zone. If it is determined that the property is located within a flood zone, the buyer may be required to purchase a flood insurance policy.

Massachusetts (MA): Average Closing Costs

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