Since home values bottomed in 2012, the housing market in Tennessee has been one of the hottest housing markets in the country. As of 2018, prices had rebounded more than 20%, passing their pre-housing bubble peak of $121,000, and existing home sales have experienced five straight years of increasing activity. This is attributed to a strong job market and steady economic growth, which has led to a boost in consumer confidence. That confidence has poured into the housing market, unleashing a lot of pent-up demand. With a current, median home value of $146,000, Tennessee still has one of the more affordable housing markets in the country. Homebuyers also have the advantage of paying some of the lowest closing costs in the country. Closing costs do vary across the state, but homebuyers can get a good idea of what they can expect to pay by looking at the average closing costs in Tennessee.

Average Closing Costs in Tennessee

To arrive at the average closing costs, a survey was conducted among lenders in all states. The following average closing costs for Tennessee are based on a house selling for $200,000 with a 20% down payment. In Tennessee, homebuyers pay an average of $1,054 in origination fees and $976 in third-party fees, for a total average of $2,030 in closing costs. That is slightly below the national average of $2,084. New York, Hawaii, and Delaware have the highest closing costs, with more than $2,300 each.

On average, Tennessee homebuyers pay $1,276 for origination fees, $465 for an appraisal, $359 for settlement costs, $25 for a credit report, $10 for flood certification, $50 for courier services and $465 for a survey. These average closing costs exclude title insurance since lenders have difficulty estimating average title insurance costs.

Within three days of receiving a loan application, lenders must provide a good-faith estimate of the closing costs. Lender costs are usually fixed and cannot be changed. However, third-party costs may vary by as much as 10%. When the property is ready to close, the lender must provide a final statement of fees. If the fees seem unreasonable in comparison to the good-faith estimate, the buyer can simply walk away.

What Goes Into Closing Costs

Closing costs in Tennessee tend to vary from lender to lender and based on the amount of the loan and down payment. However, these are the more common closing costs that usually appear on the good faith estimate provided by the lender.

Loan origination fees are the largest closest cost because it is all-inclusive of the many functions the lender performs in processing the loan. Generally, the fee amounts to 1% of the home’s value and is stated as a “point,” with 1% equaling one point. The buyer can reduce the loan interest rate by adding points to the closing costs. Points can also be rolled into the loan, which increases the loan amount, but it can reduce the amount of money the buyer has to pay out of pocket.

All lenders require an independent home appraisal to verify that the property is worth at least the amount of the sale price and to ensure it is reasonable in comparison to other homes in the area.

In Tennessee, all of the legal aspects of settling the sale are handled by the title company. Homebuyers can hire their own attorneys to review the settlement at an additional cost.

Lenders require buyers to purchase a title insurance policy to protect it against title defects. In Tennessee, sellers are required to buy title insurance on the buyer to guarantee a clear title on the property.

Depending on the type of property and its location, lenders may require that a survey be performed to verify the property lines. This is done for the protection of both the lender and the buyer.

Should the buyer default on the loan, the mortgage becomes subordinate to property tax liens. Depending on the amount of the loan, the lender may require that a tax escrow account be established, which is monitored by the lender to ensure that payments are made on time.

Oklahoma (OK): Average Closing Costs

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