Rising home prices and lender costs helped drive up homebuyers’ closing costs by 13.4 percent in 2021, to an average of $6,905, according to an analysis released Thursday by CoreLogic’s ClosingCorp.
That figure includes transfer tax fees, which are often the biggest single component of closing costs and are based on a home’s sales price.
But even when transfer taxes are excluded, closing costs for homebuyers purchasing single-family properties averaged $3,860 in 2021, an 11.2 percent increase from the year before. Those closing costs include the lender’s title policy, owner’s title policy, appraisal, settlement, recording fees, land surveys and transfer tax.
The increase in closing costs, even when excluding transfer taxes, could in part reflect that purchase loans — which are more labor intensive and less profitable for lenders — made up a greater proportion of mortgage originations in 2021.
Lenders polled by the Mortgage Bankers Association made an average profit of $2,339 on each loan they originated in 2021, down from a record $4,202 per loan in 2020.
Loan production expenses — which include commissions, compensation, occupancy and equipment — hit an all-time high of $9,470 per loan during the fourth quarter of 2021, the MBA said in a separate report. During a period stretching back to the third quarter of 2008, loan production expenses averaged $6,758 per loan.
As a result, lenders may be less inclined to compete for homebuyers’ business by subsidizing their closing costs.
“As the mortgage industry comes off two years of record-low interest rates and red-hot consumer demand, lenders are now pivoting to address increasing headwinds from higher loan origination costs and lower origination volumes,” said CoreLogic executive Bob Jennings, in a statement. “The Mortgage Bankers Association recently reported lender origination costs show a 13.2 percent year-over-year increase, which corresponds closely to the 13.4 percent increase we are…