Aug. 09--A recent release from Bankrate had some not-so-good news for potential homebuyers in Texas, as the study ranked the state as the most expensive in the country to get a home loan.
Bankrate's annual survey uses two categories -- lenders' origination fees and third-party fees-- to analyze the average closing costs for a loan.
The survey was based on single-family homes, using a 20 percent down payment with good credit. But, and it's important to note, the survey only compared each state's largest city, which in Texas was Houston.
Texas, which was ranked 13th on the list in 2013, had a $2,280 average cost for a lender's origination fee and an average cost of $766 in third-party fees, totaling a little more than $3,000.
After Texas, Alaska was second with a $2,897 average fee total. New York was third with $2,892.
The lowest costs were in Nevada, averaging $2,265.
Nationwide, the average cost of closing on a $200,000 loan with a 20 percent down payment in June increased 6 percent from a year earlier, hitting $2,539, according to Bankrate's report.
But people in Lubbock are buying homes at an increasingly fast pace, and local lenders say Lubbock's mortgage rates have stayed steady, and are relatively low compared to the state's major cities.
Jay Herrin, mortgage team manager at the Texas Tech Federal Credit Union, said by working with alumni, he handles mortgage loans across the country and always seems to have the better offer.
"We do a ton of loans in Houston, Austin, Dallas and, of course, Lubbock, and I'm always the best rate," he said. "I don't know if it's just because of our credit union status or what, but I seem to always be an eighth or a quarter of a percent under most of the larger metro areas."
Many of the fees, such as the closing costs, appraisal and the fees to pull a credit report are the same from bank to bank.
What separates the banks in Lubbock, Herrin said, is the administrative fee. This can range all over, he added. The Texas Tech Credit Union's administrative fee is $650 no matter how big the loan.
Herrin said he just recently closed a loan for someone in Austin with a rate on a 30-year loan at 4.125 percent, and he was competing against a larger bank that was offering 4.375 percent.
"I think it's because we're coming from a smaller area, smaller town," he said. "When you get to the larger metro areas, I don't know, the rates seem to go up a little bit."
Although Lubbock has a smaller rate compared to other cities, the general trend is still inching higher.
Renessa Knowles, senior vice president and mortgage department manager at Peoples Bank, said Lubbock hasn't seen a big change in mortgage fees, but they have risen a little since the recession.
The reasons, she said, are because of new regulations, such as new requirements of the Consumer Finance Protection Bureau that have been placed on the lenders.
The qualified mortgage rule was implemented earlier this year, and it requires lenders to verify that a borrower can afford to repay the mortgage before a loan is approved.
Complying with the rule adds extra cost, which in turn is passed to the consumer.
"The mortgage fees are regulated so that lenders can't take advantage of the consumer (the buyer)," Knowles wrote in an email. "However, each lender charges fees to help them be profitable as well. The market is strong, interest rates are great and the qualified buyer is still buying, and home financing is still being used."
So how do buyers know how to choose the best lender?
Norma Edwards, mortgage president at City Bank Mortgage, said there are reasons to decide on a lender other than a lower rate.
Whether everything was explained, if lenders are returning phone calls, if the loan is being processed or closed locally and if the loan is able to be closed on time are a few service qualities that should be considered, she said.
She went on to say loan costs have not changed significantly in the past few years.
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