SAN DIEGO – Feb. 15, 2017 – A national consumer survey of recent homebuyers explored whether the year-old TILA-RESPA Integrated Disclosure (TRID) rule has achieved its goal – to help consumers better understand the closing costs associated with purchasing a home.
The survey found that many homebuyers were surprised by some closing costs, even with the easier-to-understand closing disclosure (CD). Wilson Perkins Allen Opinion Research conducted the research, surveying 1,000 first-time and repeat homebuyers who purchased a home between Jan. 1, 2016, and Jan. 1, 2017.
Top five closing cost surprises reported by homebuyers
- 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 vs. seller (20 percent)
- When asked what surprised them about their closing costs, 17 percent of all homebuyers were surprised that costs/fees were even required; 35 percent were surprised that their costs/fees were higher than expected.
- 31 percent of homebuyers weren't surprised at all about their closing costs because their loan estimates and closing fees matched.
- 58 percent said that their initial loan estimates were changed or revised prior to closing.
- Most buyers (67 percent) who received a revised estimate were in the Northeast; 63 percent had home values between $500,000 and $1,000,000.
- When asked which fee estimates were changed, the top three answers were closing costs (12 percent), insurance costs (6 percent) and taxes (5 percent).
- Most common reasons for changes in the closing costs: A loan change based on what they qualified for (31 percent); an inaccurate lender estimate (27 percent); a change to the loan based on their request (23 percent).
- 72 percent of homeowners said their loan estimates and closing disclosures were delivered electronically. Of note: The majority of these homeowners (72 percent) fell into the millennial age range, 18-34 years old.
- 50 percent of all homebuyers selected their title company. Of those who did not select their own title company, 35 percent said their Realtor selected it for them.
"As more and more millennials become first-time homebuyers, TRID or Know Before You Owe has made it easier for them to understand the costs and fees they'll face at closing. Yet there are still surprises during the closing process," says Bob Jennings, chief executive officer of ClosingCorp.
"Lenders and Realtors need to keep educating borrowers on the costs and fees associated with closing to alleviate surprises," he adds. "In addition, our survey shows that 52 percent of lenders were 'off' on their initial loan estimates, so there's significant room for improvement."
© 2017 Florida Realtors