Confusion Leads to Higher Closing Costs, HUD Reports

Pure confusion with the complex process causes far too many American homebuyers to overpay by thousands of dollars in closing costs when they purchase their homes, according to a new report from the Department of Housing and Urban Development (HUD). The study, prepared by HUD's Urban Institute, reported a mind-boggling number of significant and unsupported variations in loan charges, title fees and other closing costs charged to homebuyers, and that minority borrowers pay hundreds of dollars more in total loan origination fees than do non-minority homebuyers.

The report, A Study of Closing Costs for FHA Mortgages, found significant variations in closing costs even among borrowers with identical credit scores, loan terms and mortgage amounts. In addition, variations appeared to be based on education level, geography, race and ethnicity.

According to the report, African-American and Hispanic borrowers pay an average of $415 and $365 respectively in total home loan origination fees.

"This report demonstrates once and for all that the process consumers endure when they buy their homes is entirely too confusing," said HUD Deputy Secretary Roy A. Bernardi in a press release. "Clearly, we need to open the window and allow consumers to understand the fine print and shop more effectively for the largest purchase of their lives."

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