Most Millennials Don’t Understand Closing Costs
More than 1/3 of all potential homeowners – across all age brackets – say they’re “not very” or “not at all” aware of closing costs, which often amount to 2-5% of the total purchase price of a home.
Washington – March 29, 2015 – Closing costs come as a surprise to many buyers, especially young adults. Two-thirds of millennials – those between the ages of 18-34 – who plan to buy a home said they're unaware of closing costs in a survey of more than 1,000 adults conducted by ClosingCorp, a provider of residential real estate closing cost data and technology for the mortgage and real estate industries.
More than one-third of all potential homeowners – across all age brackets – say they're "not very" or "not at all" aware of closing costs. Closing costs, which often amount to 2 to 5 percent of the total purchase price of a home, can come as a big surprise to buyers who don't expect it.
"This study emphasizes the need to better educate millennials – and really all consumers in general – on the real estate closing process," says Brian Benson, CEO of ClosingCorp. "While interest rates are often the driving force in initiating a real estate transaction, the [real estate agent], lender, title and other settlement fees also have a significant impact on the downpayment and cash outflow from the borrower perspective. Not understanding how everything is related can be a real impediment for first-time home buyers who want to get into the market."
Most of the adults surveyed said they end up learning about closing costs first from their real estate agent or by doing their own research. Millennial homeowners said they were more likely to learn about closing costs from a real estate agent rather than a lender by a ratio of nearly 2-to-1.
"We as an industry should be stepping up our proactive education efforts to ensure homebuyers are fully prepared to make the most significant financial transaction of their lives," Benson says.
The Consumer Financial Protection Bureau is implementing several changes to the disclosure process on Aug. 1. It will require lenders to provide buyers with new closing disclosures at least three business days prior to closing. The disclosures are intended to be easier for borrowers to understand and give them more time to ask questions and compare costs.
Source: Realtor Magazine Daily News
© 2015 Florida Realtors®. All rights reserved. Reprinted with permission.
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