Summary: Find an in-depth guide to homebuyer fees and current closing costs in the State of Colorado, updated for Spring 2019.
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.
Average Closing Costs for Colorado Home Buyers
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 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 about $375,000.00. 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 $300,000.00. (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 for $375,000.00. Your Realtor 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 $3,750.00 earnest money payment. While not technically a “closing cost,” payment of this deposit will be required immediately upon the seller’s acceptance and execution of the contract This deposit must come from the buyer’s bank account or other verifiable funds.
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 cash to close figure, but not actually, physically, returned to the buyer.
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 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 buyer will send the executed contract to their chosen lender, and request an estimated closing statement. Sammamish Mortgage does not charge loan origination fees, however they will charge a modest administrative fee of $795.00. Third party fees, such as the credit report ordered by your lender ($42.00) and appraisal fees from a local licensed appraisal company ($67.00), 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.
Title Insurance fees
Title insurance companies are used to track the history of mortgages and other encumbrances on the property, and to ensure 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 payment of title insurance fees can be negotiated in Colorado, typically the buyer pays for the loan policy premium and half of the title company closing fee, as well as other miscellaneous fees including recording of deed and mortgage with the relevant County office. Estimated title fees on a $375,000.00 with a conventional 80% loan to value mortgage are $995.00.
Although this is not an exhaustive review of all possible fees, 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 costs you will pay when buying a home. Contact us today to get started!