New research from Assurance IQ has found that homebuyers in New York, California and New Jersey have to deal with the highest average closing costs in the country, all in excess of $7,500 each.
That’s at least 76% more than the typical American closing cost of $4,243, per Assurance’s data. Closing costs, on average, comprised 1.87% of the median home value nationwide. In New York, where average closing costs are $8.039, closing costs comprised a much larger share, equating to roughly 2.47% of median home values ($325,000). In California, the average closing costs of $8,023 actually represents just 1.49% of the median home value, although that’s largely because the Golden State’s median home price is so high ($538,500).
New York’s high average closing cost is driven up by high homeowners insurance premiums, at an average of $3,245, and a median property tax payment of $5,590. California’s high costs are impacted by a sky-high title insurance fee of $4,550 on average, and a median property tax payment of $3,996.
New Jersey’s closing costs of $7,702 equate to 2.24% of the state’s median home value ($343,500). Pricey states in the West and Northeast made up the most expensive tiers of Assurance’s ranking, with Washington, Massachusetts, Oregon, Utah, Connecticut, Colorado and Hawaii making up the rest of the top 10.
On the other end of the spectrum are West Virginia, Alabama, South Carolina and Arkansas —all comparatively less pricey states in the inexpensive South region. Those states have the lowest average closing costs in the nation, all under $2,500 each. West Virginia’s average closing costs of $2,124, lowest of all 50 states, represents 1.72% of the state’s median home value ($132,200).
To determine closing costs, Assurance assumed a 30-year fixed mortgage rate of 6.9%, taking into account common closing expenses like appraisal fees, inspection fees, attorney fees, mortgage taxes, homeowners insurance, property taxes and title insurance. Mortgage taxes were based on average mortgage rates and payments for each state, property tax estimates covered half a year’s total tax amount, and homeowners insurance costs were calculated at 10% of the total yearly premium.