2010-09-02 / Local & State

Pennsylvania’s Closing Costs Among The Nation’s Highest

By Patricia Sabatini

PITTSBURGH (AP) – While mortgage rates have plunged to record lows, the cost of buying a home in Pennsylvania is being driven up by a related expense: sky-high closing costs.

Pennsylvanians are paying among the steepest mortgage-related fees in the country, according to a new study by Bankrate.com. Closing costs in the state were the eighth-highest overall, averaging $4,236 on a $200,000 loan, 13 percent higher than the national average of $3,741, the survey said. Costs excluded property taxes, homeowner’s insurance and escrow fees.

New York had the highest closing costs at $5,623, followed by Texas at $4,708 and Utah at $4,605. The cheapest states were Arkansas at $3,007; North Carolina, $3,255; and Iowa, $3,261. (For the full list, visit www.bankrate.com and search for “closing costs.’’ For a breakdown of closing cost fees in Pennsylvania, click “Breakdown of costs in your state.’’)

The survey laid most of the blame for relatively high closing costs in Pennsylvania on title insurance. Together, fees for title search and insurance averaged $2,334 in the state for a $250,000 home, 38 percent more than the national average of $1,687, the survey found.

Bankrate.com’s figures were based on good faith estimates obtained from lenders online for a sample loan. For the first time this year, lenders face government penalties for lowballing fees.

Title search and insurance estimates obtained for Pennsylvania varied widely from a low of $1,138 to a high of $3,680.

A spokeswoman for the Pennsylvania Land Title Association disputed Bank-rate.com’s findings, saying the study overinflated the costs.

In Pennsylvania, title insurance rates, which include the title search, are set uniformly by a rating bureau composed of member companies and approved by the Pennsylvania Insurance Department. Rates are tiered, based on the purchase price, or based on the loan amount if refinancing.

The actual cost for title search and insurance on a $250,000 home would be a maximum of around $1,600 to $1,750, said Diana Sabol, president of the title association. “I don’t know where Bankrate got $2,334’’ as the average cost, she said.

But a local professor who has been studying the title insurance industry for a number of years and wrote a 2008 book on the subject said title insurance often ends up being more costly for Pennsylvania consumers than the set rates.

“In addition to the authorized rate, title agents can add additional fees, which are not regulated,’’ said Joseph Eaton, professor emeritus at the University of Pittsburgh’s Graduate School of Public and International Affairs.

A 2008 study by the Department of Housing and Urban Development found that actual title fees charged in Pennsylvania were an average of 60 percent higher than the official rate, Eaton said.

Sabol was unfamiliar with the HUD study.

Eaton, who has a grant to study reforms in the title insurance industry, said research for his book found that Texas and Pennsylvania had the highest regulated rates in the country, even without any added fees.

Sabol said she and others in the industry dispute Dr. Eaton’s contention.

Eaton said consumers might want to consider getting title insurance through a new online company called Entitle Direct, which advertises discounts of 35 percent.

“They can do it cheaper because they don’t use title agents,’’ he said.

Overall, the Bank-rate.com study found that closing costs nationwide surged 37 percent to an average of $3,741, up from last year’s $2,739.

Actual closing costs likely did not rise nearly that much, however, Bankrate.com said. It attributed most of the increase to the new regulations requiring that estimates be more accurate.

“The main message to take away from the survey is that good faith estimates are more accurate and more trustworthy,’’ said Holden Lewis, senior reporter at Bankrate.com

“That’s a winning hand for consumers.’’

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