Most Millennials Unaware of Closing Costs

March 25, 2015

Closing costs might 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 say they were unaware of closing costs, finds a new 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.

What’s more, more than one-third of potential home owners – across all age brackets – say they’re “not very” or “not at all” aware of closing costs. Closing costs can come as a big surprise, which can often amount to 2 to 5 percent of the total purchase price of a home.

"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 down payment 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 say they end up learning about closing costs first from their real estate agent or by doing their own research. Indeed, millennial home owners said they were more likely to learn about closing costs from a real estate agent than a lender by a ratio of nearly 2-to-1, according to the survey.

"We as an industry should be stepping up our proactive education efforts to ensure home buyers 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 by August that are intended to make buyers more educated about closing costs. In August, the CFPB 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 by providing them more time to ask questions and compare costs.

— REALTOR® Magazine Daily News