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August 24, 2010

MORTGAGE BROKERS & LENDERS TO GIVE REALISTIC ESTIMATE OF CLOSING COSTS
Prior to this past January 1, mortgage brokers and lenders were not penalized for giving prospective borrowers low-ball estimates of the amount they would pay in closing costs. As a result, lenders and brokers who were in competition for the borrowers' business often underestimated the amount of money needed to close escrow. Borrowers who were inaccurately informed as to the amount of their closing costs would often have an extremely unpleasant surprise on closing day.

Now, with new penalties in place should they give an unrealistically low estimate, they will have to pay the difference between their estimate and the actual closing costs. Good Faith Estimates show that closing cost estimates are up by 36% so far this year as a result of more accurate estimates being given. Actual closing costs are moderately higher this year.

Closing costs in California are among the highest; however, New York, Texas and Utah were higher than those in California. Closing costs in New York averaged $5,620 while Arkansas had the least amount of costs at an average of just over $3,000.

The most costly portion of closing costs is the title search and title insurance. This insurance protects the lender in case the title is not free & clear for any reason, such as having a lien placed on it.

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