Are you dreaming of buying a home in Colorado this year? If so, you may be wondering about the average homebuyer closing cost in Colorado.
You want to make sure you have enough cash left at closing after making your down payment, so understanding what you’ll owe is important.
Some costs are negotiable, depending on your credit score and interest rate, you may be able to qualify for certain loan programs that minimize the closing costs you can expect to pay.
Quick Definition: The term “closing costs” refers to the various fees, taxes, and charges that home buyers and sellers can incur during the sale of a home. You may be able to qualify for closing cost assistance depending on your loan type and terms.
Here’s what you need to know about Colorado closing costs in 2023.
Average Homebuyer Closing Cost in Colorado
Congratulations! You have your preapproval from your favorite online mortgage lender. Now it’s time to go shopping for your new home in beautiful Colorado. Saving for a down payment is no easy task, but you have increased your credit score and mastered budgeting skills. So, what are the closing costs for a homebuyer in Colorado?
Most lenders will tell you to estimate between 3% to 5% of the home’s value in closing costs for your purchase. Thus, the higher the price of the home, the higher the total dollar amount will be charged. But what do those percentages include? When are you required to pay them?
Let’s start at the beginning. According to Zillow, the median home value in the State of Colorado is $575,013. For the purposes of this article, we will calculate estimated fees based on that purchase price, and assume a conventional loan in the amount of $460,011 (80% loan to value).
Your favorite real estate agent helped you find the perfect home in your favorite neighborhood in the Denver suburbs! Now you want to write an offer to purchase. Your real estate agent will prepare the Colorado Real Estate Commission’s approved Contract to Buy and Sell Real Estate with all relevant information.
Once the contract is signed by the buyer and seller, the buyer will be required to make a good faith deposit or earnest money payment. Typically, buyers deposit 1% to 2% of the sales price into their broker’s escrow account (but this is always negotiable), so assume a $5,750 (1%) earnest money payment.
This money serves as protection for the seller in case you bail on the purchase. At closing, any balance will go towards title insurance (paid directly to the title company), loan origination fees (paid directly to your lender), any required prepaid mortgage insurance (paid to the insurer), outstanding property taxes, and so on, as detailed below.
Assuming the contract closes as planned, the buyer will receive credit for the earnest money deposit on the day of the closing. In other words, it will be subtracted from the total closing costs figure, but not actually, physically, returned to the buyer unless the earnest money provided was in excess of closing costs.
A diligent and thorough real estate agent will encourage her buyer to conduct several types of home inspections so that the buyer knows as much information as possible regarding the structure and quality of the construction of the home. Not all defects are readily visible.
Shana Lurie Cerise, a lawyer and experienced broker for LIV Sotheby’s International Realty in Denver, recommends that her clients perform a thorough whole-home inspection using a licensed contractor ($400.00), as well as a sewer scope ($150.00), and a radon inspection ($150.00) on a single-family home. Ms. Lurie Cerise advised that mold and termite inspections are common in more humid climates, but not generally necessary in Colorado.
These inspection fees are typically paid by the buyer before the work is completed, and are non-refundable should the buyer decide not to continue with the purchase.
Should the inspections uncover material defects with the home, the buyer can then negotiate the cost of appropriate repairs or remedies with the seller. The real estate contract will specify a strict time frame in which all inspections, and objections to inspections, must be completed and disclosed to the seller.
Lender Fees and Loan Costs
These fees will be paid at the closing table and calculated into the buyer’s “bottom line” or cash to close. As soon as the contract is signed, and simultaneous to the exercise of inspection rights, the executed contract is sent to the lender, along with a request for an estimated mortgage closing statement (closing disclosure).
Sammamish Mortgage does not charge loan origination fees. Third-party fees, such as the credit report ordered by your lender ($42.00) and appraisal fees from a local licensed appraisal company ($650-$675), are commonly lumped into this category. Get an estimate of your closing costs.
Though not a required homebuyer closing cost in Colorado, many lenders offer programs to reduce the final approved interest rate in exchange for an upfront payment. These fees are paid at the final closing and vary based on the amount of the loan. A point is equal to one percent of the loan amount and can drop your mortgage interest rate by as much as a quarter of a percent.
Private Mortgage Insurance
Depending on the type of loan you have, you might put down less than 20% of the purchase price. If your loan is for more than 80%, you’ll have to purchase private mortgage insurance or PMI. You can usually get rid of this requirement after your equity reaches 20%, either by dropping PMI or refinancing into a loan product that doesn’t require mortgage insurance.
Title Insurance Fees
A title company runs a title search to track the history of mortgages and other encumbrances on the property, and ensures that the buyer receives a clear title commitment on their new home. The seller is responsible for completely paying off existing mortgages and liens prior to transferring ownership of the home to the buyer.
While the payment of title insurance fees can be negotiated in Colorado, typically the buyer pays for the loan title insurance policy premium and half of the title company closing fee, as well as other miscellaneous fees including the title search itself, recording of deed and mortgage with the relevant County office. Estimated title fees and escrow costs combined on a home with a $500,000 purchase price and a conventional 80% loan to value mortgage are $995.00.
Although this is not an exhaustive review of all possible closing costs, it is helpful to know the average closing costs for Colorado home buyers before signing the real estate contract. Sammamish Mortgage can give you a detailed estimate of the closing costs you can expect to pay when you finalize your home loan. Contact us today to get started!
Why Choose Sammamish Mortgage?
At Sammamish Mortgage, our loan officers are committed to transparency during the loan application and approval process, meaning you’ll have a good idea of your closing costs from start to finish.
Sammamish Mortgage has been in business since 1992, and has assisted many homebuyers in the Pacific Northwest. If you are looking for mortgage financing in Washington State, we can help you get preapproved. Sammamish Mortgage offers mortgage programs in Colorado, Idaho, Oregon, and Washington.
Contact a loan officer if you have any mortgage-related questions or concerns. If you are ready to move forward, you can view rates, obtain a customized instant rate quote, or apply instantly directly from our website.