NEW YORK (MainStreet)—Mortgage closing costs increased 6% over the past year to $2,402, according to a new study.

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Bankrate found origination fees accounted for the bulk of the increase, jumping 8% to $1,730 with third-party fees edging up 1% to $672.

"I don't see attorneys or title companies raising their fees," said Richard Martin, managing director of Quontic Bank, a privately held federally charted ban. "It's the banks, because the cost of doing business has increased due to added compliance and regulatory requirements compared to 5 to ten years ago. They are passing the cost on to customers vis-à-vis junk fees."

Unnecessary junk fees cost between $400 and $700 per fee and can include application fees, credit report fees and processing fees.

"We don't charge an application fee but to be competitive many banks do, which is extra profit for them," Martin said. "You can always ask a bank for a waiver of the fees but they are less apt to change underwriting fees."

Despite rising mortgage costs, consumer attitudes toward the housing market are positive, according to Fannie Mae's July 2013 National Housing Survey.

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About 45% think it would be easy for them to get a home mortgage today, up from 43% last month, with 74% saying it is a good time to buy a house compared to 40% saying it is a good time to sell a house.

"Expectations for continued improvement in housing persist and sentiment toward the current buying and selling environment is back on track from its dip last month," said Doug Duncan, senior vice president and chief economist with Fannie Mae.

Hawaii's average closing costs of $2,919 are the highest in the nation compared to $2,119 in Wisconsin. South Carolina, California and New Mexico are also among the top five most expensive with Missouri, Kansas, Michigan and Washington State comprising the five lowest, according to Bankrate.

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"It's unlikely that you will move to Wisconsin or Missouri solely to pay lower closing costs, but you should shop around and compare fees from different loan originators to make sure you get the best deal in your area," said Polyana da Costa, senior mortgage analyst with Bankrate.com.

Tips For Reducing Mortgage Closing Costs:

  • 1. Compare fees from various lenders at Bankrate.com and Lendingtree.com.
  • 2. Inquire with the bank loan officer about whether there is room for negotiation around processing and application fees. "Everyone in the industry has some form of underwriting," said Martin. "A zero fee structure is impossible but finding a lower cost fee structure is possible just by being a smart consumer."
  • 3. Community banks and the credit unions tend to have lower fee structures than large national banks.
  • 4. Expect closing costs, not including taxes and transfer fees, to be about 1% of the loan amount. "That includes bank attorney and appraisers fees," Martin said.
  • 5. Build savings to cover mortgage closing costs.

--Written by Juliette Fairley for MainStreet