There are a variety of reasons why people choose to move to North Carolina. The state offers a wide variety of landscapes for every taste, from the mountainous Appalachians to the coastal Atlantic region. There is an abundance of urban and rural areas in which to settle. And there are some top-level employers in the state, including Wells Fargo, Bank of America, IBM and Lowe's to name a few. But there's also another factor to consider: housing.

The housing market in North Carolina has continued to show increases with respect to home prices. The median home value in the state hit $173,500 as of August 2018, according to Zillow. A tightening market has caused price momentum to build in the last year, with inventories falling throughout the state as sales volumes continue to outpace new property listings. Values are expected to increase in the next year by another 1.5%. 

As prices in North Carolina have risen, so too have closing costs. While costs can vary widely depending on the property, the lender and other factors, many homebuyers in the state can expect to pay closing costs between 2 and 5% of home value.

Average Closing Costs in North Carolina

Average closing costs in North Carolina come in higher than the national average. Based on a theoretical transaction that includes a 20% down payment and a $200,000 home loan, the average closing costs in North Carolina amount to $2,242. Loan origination fees account for $915 of the total, while $1,327 goes to third-party fees for credit reports, appraisals, inspections and other standard services. Certain costs are not included in this average, such as local real estate transfer taxes, title insurance, homeowner's insurance and homeowner's association fees.

Breaking North Carolina fees down further, homebuyers pay an average of $718 in attorney fees associated with settlement, $545 for a property survey and $462 for a property appraisal. Other typical fee amounts include $53 for document preparation, $100 for postage and courier service, $76 for tax services, $25 for a credit report and $10 for flood certification. Actual costs vary depending on transaction details, local market prices and individual homebuyer decisions.

The nationwide average for closing costs is $2,084. New York is home to the most expensive closing costs in the nation, at $2,648, on average, followed by Hawaii at $2,490. At the low end of the scale, Oklahoma costs average $1,847, followed by Wisconsin at $1,817 and South Dakota at $1,814.

What Goes Into Closing Costs in North Carolina

When a homebuyer submits a home loan application to a lender, that lender must provide a good faith estimate (GFE) of all associated closing costs within three business days. The GFE enables homebuyers to compare costs and terms across different lenders during the loan shopping process. A GFE in North Carolina typically includes the following fees.

Borrowers pay a loan origination fee to the lender for services associated with processing and preparing a loan. This fee is generally quoted as a percentage of the loan amount. Origination fees may be negotiable depending on current market conditions, the size of the loan and the interest rate on the loan. Origination fees are also known as underwriting fees or processing fees.

An appraisal of home value is required, for a fee, to confirm that the sale price of a property is in line with its actual value and, therefore, in line with the size of the loan. In North Carolina, the lender is generally responsible for selecting the appraiser and overseeing the appraisal process.

In North Carolina, homebuyers require the services of a real estate attorney to handle the transaction settlement process. An attorney may charge a flat rate for settlement service or an hourly rate. Attorney duties typically include contract review, title search, document preparation and a host of other related services.

Lenders require the purchase of title insurance to protect against costs associated with title defects, such as liens or judgments, that went unidentified during the title search. A separate policy may be purchased to cover the homebuyer, but this is not required.

While a pest inspection is sometimes requested by North Carolina lenders, comprehensive home inspections are usually optional for the homebuyer. A thorough home inspection by a licensed North Carolina home inspector is generally a good idea, as it alerts the homebuyer to defects and safety issues that may otherwise escape notice prior to closing.

A survey is sometimes required by the lender to verify the official boundaries of a property.

The Bottom Line

Home values may be well below the national average in North Carolina, but closing costs are still some of the highest. At an average of $2,242, North Carolina is the eighth-highest in the nation. While less than half of that figure is paid to lenders, the remaining portion of closing costs is accrued to third-parties. Knowing which of these can be negotiated or rolled into the mortgage loan can help homebuyers save a little extra right from the onset of the purchase.

South Carolina (SC): Average Closing Costs

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