Why closing costs fell in 28 states, rose in 23

Closing costs fell year-over-year in 2025 by nearly 3% as lower home prices reduced a portion of the calculation, according to LodeStar Software Solutions.

Of the 50 states and the District of Columbia, closing costs fell year-over-year in 28 and rose in the remaining 23, according to the Mortgage Closing Cost Report.

"The connection between closing costs and housing affordability is often overshadowed by other components to the equation, like interest rates and down payments," said Ron Carvalho, director of data operations at LodeStar in a press release. "However, our data shows that decisions made at the state level on recording taxes and document fees have a direct impact on borrowers' total financial ability to purchase or refinance their home."

Yet some elements of closing costs, like title insurance premiums, have been cited by a number of sources, including both the Biden and Trump Administrations, as being a barrier to home purchases and refinance activity.

Nationally, average purchase closing costs edged down to $4,528 from $4,661. Home prices fell by 1.1% to $433,632 from $438,236 for 2024. Thus, the drop in closing costs was related to price-driven items and not any cuts in the tax rate or fees. 

Where closing costs for refis are the highest

The average for a refinance last year was $2,207, this is the first time LodeStar has broken out this category. Refis made up just under one quarter of 2025 closed loan activity, at 24.5%, up from 16.7%.

New York, which taxes refinances at the same rate as home purchases, nominally has the highest average at $10,553. However, many borrowers are able to keep refi costs down through the use of consolidation, extension and modification agreements, or CEMA for short. CEMAs are a refinance mechanism which is unique to New York. LodeStar did not carve out CEMAs from its calculations.

Florida is also cited as being a state with high average closing costs for refinancings. While it does not have a transfer tax like New York, its document stamp tax applies to the new note amount on a refi. As a result, the average closing costs for a Florida refi in 2025 was $5,250.

Average closing costs for purchase transactions in New York was $12,418, trailing only DC at $13,836 and Delaware at $12,418. Delaware was also the state with the highest share of closing cost as a percentage of the home price at 3.02%.

What are closing fees being used for

LodeStar is now tracking the degree to which state and municipal recording fees are used to fund spending that is not real estate transaction related.

Included in its definition of non-real estate initiatives which a portion (or in some cases a majority) of these fees are directed toward include affordable housing programs, homelessness services, and municipal general funds.

The report provided the example of Washington State, which has a recording fee of approximately $300.

"Of that amount, roughly $270 is allocated to non-recording purposes — including homelessness assistance funds and other state programs," the report said. "Borrowers pay this fee as part of closing costs with little visibility into its ultimate destination."