More than half of lenders last year gave loan estimates to home buyers that later had to be revised before closing, according to a new survey released by ClosingCorp, a provider of data on closing costs and technology related to residential real estate. Fifty-eight percent of recent home buyers say their initial loan estimates changed, citing closing costs, insurance costs, and taxes as the most common fees that needed to be adjusted.
The survey, which questioned 1,000 first-time and repeat buyers who purchased a home between Jan. 1, 2016, and Jan. 1, 2017, comes at a time when the year-old TILA-RESPA Integrated Disclosure (TRID) rule aims to help consumers better understand closing costs. The main reasons for adjustments in closing costs, according to the survey, were changes in the loan amount buyers could qualify for as well as inaccurate lender estimates. Twenty-three percent of survey respondents say closing costs changed because of a request on their part.
“As more and more millennials become first-time home buyers, TRID or ‘Know Before You Owe’ has made it easier for them to understand the costs and fees they’ll face at closing,” says ClosingCorp CEO Bob Jennings. “Yet there are still surprises during the closing process. Lenders and REALTORS® need to keep educating borrowers on the costs and fees associated with closing to alleviate surprises.”
Indeed, 35 percent of recent home buyers say their closing costs and fees were higher than they originally expected, according to the ClosingCorp survey. The top five closing costs that most surprised home buyers were mortgage insurance (24 percent), bank fee/points (23 percent), taxes (22 percent), title insurance (21 percent), appraisal fees (20 percent), and fees paid by the buyer versus seller (20 percent).
Nevertheless, the TRID rule, which took effect in October 2015, has helped buyers understand more of their costs prior to closing. Thirty-one percent of buyers say they were not surprised about their closing costs because their loan estimates and closing fees matched, according to the survey.