Average Closing Costs in Massachusetts

To create a comparison among all of the states, various lenders in each state were asked what they charge for closing costs on a $200,000 home purchase with a 20% down payment. In Massachusetts, the average fees charged by lenders are $905 and the average fees charged by third parties is $851, for a total of $1,756 in closing costs. That is below the national average of $1,847 and well below its neighboring state of Connecticut, which has one of the highest closing costs in the country at $2,033.

Breaking down the closing costs, Massachusetts homeowners pay an average of $935 for origination fees, $418 for a property appraisal, $804 for legal and settlement costs, $255 for a lot survey, $125 for inspections, $21 for a credit report and $10 for flood certification. These costs don’t add up to the total average costs because not all lenders charge for all costs. Title insurance fees are not included because they are calculated individually for each property. Prepaid items such as property taxes, homeowners' insurance and interest are also not included. 

The housing market in Massachusetts is as strong as it has been since 2006. With the median home value in 2016 approaching pre-housing bubble levels, more homes are entering the market, and demand is keeping pace. Home sales in January 2016 were up 10% over the last year, and inventories were shrinking, thus creating a challenging market for homebuyers in one of the most expensive housing markets in the country. In the mad dash to find a home, homebuyers need to be cognizant of the impact of closing costs on the cost of purchasing a home. Closing costs can range from 3 to 5% of a home's value, which can add thousands of dollars to the final cost. Closing costs differ widely between lenders, loan products and loan amounts, so it is wise to shop and compare. Understanding what goes into closing costs and what homebuyers can expect to pay for them is an important first step in the process.

What Goes Into Closing Costs in Massachusetts?

At the time of the loan application, homebuyers receive a good-faith estimate outlining all of the closing costs, which can include the following items.

Loan origination or lender fees: This fee typically amounts to about 1% of the home’s value and covers the cost of processing, underwriting and funding the loan. This fee is expressed in points, with each point representing 1% of the home’s value. Homebuyers can add additional points in exchange for a lower loan interest rate. They can also ask that the points be rolled into the loan to keep their out-of-pockets costs to a minimum.

Appraisal fee: Before approving a loan, lenders require a property appraisal to verify that the property is actually worth the amount of the sale price. It also needs to determine whether the sale price is reasonable in comparison to similar homes in the area.

Settlement/closing fee: In Massachusetts, the lender hires an attorney to handle the legal aspect of reviewing and settling the purchase. Homebuyers who want their own legal representation in the settlement can hire a private attorney at their own expense, paid outside of closing costs.

Survey: On some properties, lenders may order a lot survey or mortgage plot plan to verify the location of building structures and ensure the property conforms to local zoning laws.

Title Insurance: Homebuyers are required to purchase a title insurance policy on the lender to protect it against financial loss due to title challenges. Although it is not required, homebuyers are advised to purchase title insurance for themselves, in order to guarantee a clear title at the time of closing.

Inspections: Lenders may require a pest inspection should anything arise in the home appraisal that alerts them to a potential problem. Otherwise, homebuyers can request any number of inspections that they pay for out of closing costs, including a radon air or water inspection, mold inspection, lead paint inspection or a well water inspection.

New Hampshire (NH): Average Closing Costs

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