With home prices down 20 percent or more from their peak and interest rates at historic lows, it may be a buyers’ market for real estate — but not when it comes to the cost of signing a mortgage, according to a 50-state survey by personal finance website bankrate.com.

Minnesota’s closing costs — the often confusing collection of fees charged by banks and third parties for setting up the loan — shot up a whopping 53.1 percent to $3,920 from $2,561in the 2009 survey on a $200,000 mortgage, ranking the Gopher state 17^th highest in the nation, up from 38^th a year ago and eighth highest in the rate of growth.

What’s going on?

Nationwide, closing costs, jumped 36.2 percent to $3,741 on average for  $200,000 mortgage. The fees charged directly by lenders — origination fees, including bank and mortgage broker fees and points — went up 22.8 percent. Fees charged by third parties for things such as appraisals, credit checks, property inspections and title insurance rose 47.2 percent. In Minnesota, lender fees went up 22.7 percent but third party fees jumped a whopping 77.5 percent.

Bankrate.com attributes part of the increase to increased costs as mortgage lenders more carefully scrutinize loan applications than in the past. But lenders reported that actual fees rose only modestly. Instead, government regulations that went into effect Jan. 1 began requiring lenders to provide accurate good-faith estimates of closing costs.

In the past, lenders could present a low estimate on fees to entice a borrower to take out a mortgage then increase the closing costs with no penalty. New rules by the U.S. Department of Housing and Urban Development (HUD) modified the Real Estate Settlement Procedures Act (RESPA) to increase transparency and clarity for borrowers in the hodge-podge of fees associated with closing a real estate deal.

So, in effect, the jump in closing costs in 2010 reflects in part how much fees were being low-balled in the past.

Rebecca Selby, spokesperson for the Minnesota Mortgage Brokers Association, said she had not seen the survey and, as a result, would not comment on it.

New regulations
Lenders must provide borrowers with a standard origination charge for the loan, which must include all points, appraisal, credit and application fees, as well as administrative, lender inspection, wire and document preparation fees. Origination fees, which include bank and mortgage broker fees, cannot change. Third party fees, which include inspections, appraisals, title search and credit checks, cannot change by more than 10 percent from the good-faith estimate provided by the lender.

In addition, lenders must provide potential borrowers with a list of third parties so they can shop around for the best deal on fees.

New York was most expensive in terms of closing costs and Texas was second. In four of the past five years, the two states have switched back and forth in the two top spots. Utah, California and Alaska round off the top five most-expensive states for 2010. Arkansas was the least expensive state in this year's closing costs survey, followed by North Carolina, Iowa, Montana and Wisconsin. In 2009, five completely different states occupied the least-expensive rungs.

How the study was done
Bankrate surveyed one area in 49 states, two areas in California (Los Angeles and San Francisco) and the District of Columbia. Researchers picked a ZIP code in some of the largest cities in each state and requested information on the closing costs for at $200,000 loan. They requested fees on a 30-year, fixed-rate mortgage for a borrower with a 20 percent down payment and good credit to buy a single-family house. Bankrate's survey includes lenders' origination fees and title and settlement fees, but did not include taxes or prepaid items.

Bankrate.com is a website that links consumers to a variety of personal finance products from mortgages to CDs.  It has been surveying closing costs for a decade.