First-time homebuyers are often dismayed when they go to buy their first home, because they realize they’ve underestimated how much money it costs to buy a house.
Most homebuyers know about the down payment – though 20% is the standard advice, you only really need 3% down.
What some people don’t realize is that the down payment is only part of what they need to bring to the table. Closing costs are another big expense – and unlike the down payment, they can’t really be reduced or rolled into the cost of the loan.
Here’s what you need to know about closing costs in Colorado.
What are Closing Costs?
Closing costs are the various fees and payments you need to make, usually to third-party vendors, to close on the house.
“Closing costs are going to be paid at the closing table and they are separate from your mortgage payment,” explains Faith Longtin, a Colorado-based Trelora Realtor. “Your mortgage payment is going to have your taxes, insurance, and any sort of other escrow payments, such as HOA fee interest.”
Closing costs vary widely depending on where you buy a home. You can opt out of certain closing costs depending on your situation – if you’re paying in cash, you don’t need to pay a mortgage origination fee – and if you’re waiving the inspection contingency, then you don’t need to pay for that.
How much do closing costs vary? “It’s neighborhood by neighborhood,” Faith says. “If you’re in a special taxing district or if you’re in a district that has a transfer fee associated with it, those closing costs are going to look a little bit different. Likewise, with HOA fees.”
Note: although the inspection and appraisal fees are commonly referred to as “closing costs,” technically they’re just fees you have to pay out of pocket – because they come before the closing table. In fact, if the inspection goes badly, you might never make it to the closing table at all.
“Closing costs can get expensive – oftentimes it’s more than your down payment. So I think that’s probably one of the most shocking things for people – that the closing fees are usually double what your actual down payment for the loan itself is,” notes Faith.
Who Pays for Closing Costs in Colorado?
Both the buyer and the seller pay for closing costs in Colorado, though they pay different fees. Sellers typically pay more than buyers do, since sellers are responsible for the commission fees for both agents.
How Much are Closing Costs in Colorado?
In Colorado, closing costs for homebuyers range from 2 – 5% of the home’s selling price.
To give you a general idea of what this would look like:
- A $300,000 home will have $6,000 – $15,000 in closing costs
- A $400,000 home will have $8,000 – $20,000 in closing costs
- A $500,000 home will have $10,000 – $25,000 in closing costs
- A $600,000 home will have $12,000 – $30,000 in closing costs
The average Colorado home price is currently $530,400, which means you can expect to pay at least $10,000 in closing costs as a homebuyer.
Here’s a breakdown of the different services you’ll need to pay for, and their approximate price.
- Home appraisal ($350-$650)
- Home inspection ($250-$450)
- Lender fees (.5% of loan amount)
- Owner’s title insurance (.4% of home price)
- Recording/real estate transfer tax ($.02 per $100 of property value)
- Credit report ($25)
- Title service and closing fees (.3%)
- Loan origination fee (.5-1% of total loan amount)
- Escrow account/prepaid interest (variable)
- Recording fees ($10)
- HOA dues (variable)
How Can You Save on Closing Costs?
Most closing costs are fixed costs for buying a home. While you could skip a $500 inspection, it could cost you thousands of dollars later on something is wrong with the house.
“You don’t want to move into a home and then have something completely unexpected happen. That is going to be a hefty cost. So even though you may be saving anywhere between $350 to $800 on the front end with not doing the inspection, you could be saving yourself $10,000 on the back end for not needing to replace a furnace,” explains Faith.
Prorated taxes and HOA fees are also going to be amounts you can’t really fight.
One thing you will have control over is mortgage fees. Ask what the lender will charge upfront, because sometimes brokers will seem cheaper but will tack on hundreds of dollars worth of unexpected fees to close the transaction.
You can also bundle Trelora’s in-house mortgage and title services to receive the bundle rebate and save money.
“We have a $2,500 rebate that we can apply to your closing costs, which means you theoretically are bringing $2,500 less to the closing table – it doesn’t necessarily reduce what those closing costs are, but it does reduce what you would need to bring to cover them,” explains Faith.
Closing Costs While Paying Cash
If you buy your home in cash, you won’t have to pay the closing costs that relate to mortgage – the mortgage origination fee, for example, can be thousands of dollars. However, this is unlikely to be a cost-saving measure available to most home buyers.
How Can I Figure Out My Closing Costs?
Your best bet for figuring out closing costs is to meet with a Realtor and mortgage advisor. Although you can try to use a closing cost calculator, be aware that this will only provide you with a rough estimate. Costs can vary depending on the service provider, the house in question, and other factors, like time of year (since this impacts what’s put into escrow).
If you’re looking for a quick estimate, though, once you have the important information (like home price and taxes) you can use online tools, such as Nerdwallet‘s.
