Average Closing Costs in Alabama

As of 2017 (the last full year for which figures are available), the average total closing costs on a $200,000 home purchase in Alabama come to $2,112. This figure is slightly above the national average, which sits at $2,084, according to bankrate.com. Third-party fees of $1,140 and lender-charged origination fees of $971 make up an average closing-cost scenario in Alabama. In addition to closing costs, a homebuyer in Alabama may be required to purchase a title insurance policy and prepay property taxes and homeowners' insurance premiums into an escrow account. 

Regionally, Alabama's closing costs fall roughly in the middle of those of bordering states. Residents of Florida and Georgia pay, respectively, about $100 and $200 more in closing costs on average, while average closing costs are about $80 lower for buyers in Mississippi and Tennessee.

Life in Alabama

Alabama offers a surprisingly robust array of living options and a diversified economy and job market. The state's largest city, Birmingham, is a leading city in the Southeast for health care and financial jobs. Montgomery, the state capital, offers an abundance of government jobs and maintains a stable economy; throughout 2018, its unemployment rate has hovered around 4%. Huntsville, located in the northern reaches of the state, is the home of NASA's Marshall Space Flight Center and a magnet for highly trained engineers and technology professionals. Residents who prefer the water lifestyle gravitate to the city of Mobile on the Gulf Coast. In addition, Alabama features the football-rabid college towns of Tuscaloosa and Auburn, and a plethora of rural and small towns dotted throughout the state.

Although home values have been rising since 2016, Alabama remains one of the cheapest states in the U.S. to live in.

What Goes Into Closing Costs in Alabama

An Alabama buyer taking out a mortgage to finance some or all of his or her home purchase must pay lender closing costs, which compensate the lender for its services. In addition, all buyers pay a variety of non-lender closing costs, which accrue to different third-party entities involved in the transaction. Because the specific parties involved differ based on the unique structure and details of a real estate transaction, non-lender closing costs tend to vary more than lender closing costs.

Lender Closing Costs

Origination Fee: This fee, which pays the mortgage company and the loan officer involved in the transaction for their time and expertise, represents the largest lender closing cost in a typical Alabama real estate purchase. Origination fees used to be exorbitant for some buyers, reaching as high as 4% or 5% of the loan amount, but as of 2017, origination fees in Alabama averaged 1% or less.

Apart from origination fees, most lenders charge a document preparation fee and a tax services fee, neither of which tend to cost more than $100 in Alabama. The biggest single ticket items can be processing fees, which average $882, and underwriting fees, which average $350.

Non-Lender Closing Costs

Settlement Fee: The settlement fee compensates the closing attorney or title insurance company representative who executes the closing and transfers the home's title from the seller to the buyer. This fee, the largest non-lender closing cost for a typical Alabama real estate purchase, averages $506.

Appraisal Fee: The fee for a home appraisal represents the second largest non-lender closing cost for a typical Alabama real estate purchase. Required by nearly all lenders, a home appraisal ensures a home's market value is sufficient to justify the mortgage amount. An appraisal fee in Alabama averages $448.

Survey Fee: Also required by many lenders, a property survey is a physical inspection of the property by a licensed surveyor who determines where the exact property boundaries lie. The average fee for this service is $308 in Alabama.

Home Inspection Fee: Most lenders require a home inspection, but even cash buyers not required to have a home inspection should get one. Its average cost in Alabama is only $225, and a licensed home inspector can ensure that the home is free of termites and other pests.

Additional Fees: Various other small non-lender closing costs, such as a courier fee, a flood certification fee and a credit report fee, may be imposed. Each of these fees should be under $100.

Arkansas (AR): Average Closing Costs

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