Navigating Closing Costs: Insights into Closing Costs by State

As someone who has exclusively worked in the Iowa real estate market and holds a license to sell properties solely within the state, I haven't delved much into the nuances of buying and selling real estate in other parts of the country. However, recent feedback from clients who relocated out of state shed light on a significant disparity in closing costs between different regions.

Closing costs, often overshadowed by the focus on the down payment, play a crucial role in real estate transactions. These costs encompass various expenses associated with the purchase and mortgage, including loan fees, appraisals, title insurance, attorney fees, and inspections. According to a recent study conducted by Assurance IQ, a prominent insurance provider, the average closing costs across the United States amount to $4,243, representing a range of 1.2% to 2.47% of a home’s value.

Tyler Osby, a loan officer for Fairway Independent Mortgage Corporation in the Urbandale office at 2400 86th St., pointed out that closing costs are typically all your third-party fees, but discount points paid to reduce the interest rate would also be included. There are also escrows and pre-paid expenses that need to be considered. These would include things like property taxes, homeowners’ insurance, that are not really fees, but still need to be included in the amount of money that needs to brought to a closing. 

When analyzing closing costs relative to median home values, it becomes apparent that certain states bear a heavier financial burden on buyers. New York and California top the list, boasting average closing costs exceeding $8,000. Conversely, West Virginia and Alabama emerge as the states with the lowest average closing costs, standing at $2,124 and $2,400, respectively. Iowa falls within the lower spectrum, with an average closing cost of $2,760, a figure closely aligned with the experiences of my clients in the state.

Although Iowa sees lower closing costs than most states, it can still feel overwhelming to have those additional costs when buying a home. Derek Harjes, Senior Loan Officer with Land Home Financial Services in West Des Moines, provides some encouragement: “Navigating closing costs doesn't have to be a headache when you’re buying a new home. Think of them as the final hurdle in the home buying race, covering everything from legal fees to insurance. On average in the state of Iowa, they're around $2,760, but this can vary.  There are a few things you can do, however, to make this piece of the buying puzzle less stressful.

1) Budget Early: Know that closing costs are usually 1.5% to 2.5% of the home's value. If you're eyeing a $300,000 house, aim to save around $6,000 just for these costs (to be safe).

2) Talk to the Seller: Sometimes, you can negotiate for the seller to cover some or all of these costs, especially if they're really needing to sell.

3) Explore Lender Options: Some lenders might help with closing costs, through credits or various assistance programs. This can ease the immediate financial burden, and with a little planning and some negotiation, closing costs can be less of a burden. It's all about being prepared and knowing your options.”

In my last newsletter, I surveyed my readers to get their take on average closing costs in Iowa. Surprisingly, only about 25% guessed the right range of $2000 to $2999, while the remaining 75% thought the costs were $3000 or more. This blog brings good news for you, with Iowa having fairly low average closing costs in comparison to other states.

For those considering a mortgage in the foreseeable future, I maintain a network of trusted loan officers whom I can confidently recommend based on firsthand experience. These professionals excel in transparent communication throughout the process and demonstrate unwavering reliability in ensuring timely and seamless real estate transactions. Feel free to reach out to me whenever you require assistance.

Norwalk IA Real Estate – Jon Niemeyer, Broker/Owner/REALTOR® at EXIT Realty North Star. I list and sell real estate in Central Iowa including Norwalk, Des Moines, West Des Moines, Cumming, Indianola, Carlisle, Waukee, Urbandale, Grimes, Clive, Johnston, Ankeny, Altoona, and Pleasant Hill in the Counties of Warren, Polk, Dallas, and Madison. Call Jon Niemeyer at 515-490-4675.