Average Closing Costs Dip Nationwide

Home buyers are getting a break at the closing table thanks to recent regulations.

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A home under contract in Rockville, Md.

Although home prices and sales figures are now on the rise, there's one thing that's sinking in the housing market, and it's actually a good thing.

Closing costs—fees typically paid by the buyer to cover the transfer of ownership including loan fees, commissions, and appraisals—dropped 7 percent over the past year to an average of $3,754, according to Bankrate.com.

Title insurance and other third-party fees fell 12 percent from 2011, while mortgage origination fees declined about 1 percent.

"This is the third year lenders are required to estimate closing costs within 10 percent of the final costs," says Holden Lewis, financial analyst at Bankrate.com. Regulations went into effect in 2010 to protect consumers from nasty surprises at the closing table, he says.

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"They're becoming more accurate," he adds.

But there's a lot of variation in what homebuyers pay in closing costs state-by-state, the report found. For the third straight year, the Empire State posted the most expensive closing costs at around $5,435 on average. The runners-up were Texas, Pennsylvania, Florida, and Oklahoma.

The Midwest dominated states with the cheapest closing costs. Missouri was the least expensive, with fees adding up to about $3,006 on average. Kansas, Colorado, Iowa, and Arkansas were also among the states with the least expensive closing costs.

"There are a multitude of reasons why fees vary state to state," Lewis says. "In some states such as New York, everything is just more expensive, so it's [a reflection of] the higher cost of doing business."

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But consumers aren't completely at the mercy of their loan officers when it comes to closing costs. While lenders and mortgage servicers have preferred title insurance, appraisal, and legal firms, consumers can shop around to get the best price.

Just don't get caught up in the line-by-line expenses, Lewis warns.

"The bottom line is, don't get distracted by each individual fee," Lewis says. "What's important is how much the lender is charging, total."

Meg Handley is a business reporter for U.S. News & World Report. You can reach her at mhandley@usnews.cm and follow her on Twitter.