Buying a home is a big financial decision, and there are many factors to consider besides the price of the home. Another important cost to consider when buying a home is closing costs.
Closing costs are the final fees paid to complete a real estate transaction, such as taxes, lender fees, and title insurance. Let’s break down what closing costs are in Colorado, who pays them, and what you can expect to pay as a buyer and seller.
What are the average closing costs in Colorado?
In addition to a down payment, homebuyers also need to pay closing costs to get the keys to their new home. Generally speaking, closing costs in Colorado can range from 2%-5% of the home’s purchase price. But it’s important to remember that this is just a range and the total amount will depend on many factors, such as the buyer’s loan program or negotiations with the seller.
For example, if you’re buying a home in Denver, where the average sales price is $619,750, closing costs could range from $12,395 to $30,988. Or, let’s say you’re buying a home in Colorado Springs, where the median sales price is $455,000. Closing costs on a home here can cost you between $9,100 and $22,750.
Who Pays Closing Costs in Colorado?
Generally speaking, both the buyer and the seller are required to pay closing costs. However, the amount of closing costs for each party will vary based on how much they need to pay. Keep in mind that it’s common for the buyer to pay closing costs out of pocket, while the seller’s closing costs are deducted from the home sale proceeds.
Colorado buyer closing costs
Closing costs for Colorado home buyers typically range from 2% to 5%. If you pay a deposit, this amount will be deducted from your closing costs, which will reduce the total amount you owe at closing. The deposit is usually 1%-3% of the house price. Here are some common closing costs that buyers typically bear:
- Assessment fee: Home appraisals typically range from $300 to $500 and are usually paid separately at the time of service. However, if not, you will need to pay a fee at closing.
- Inspection fees: Although not required, a home inspection is highly recommended. The cost of a home inspection generally ranges from $300 to $500 and is usually paid at the time of service. However, if not, payment will be required at closing.
- Loan origination fee: Your lender may charge a fee to create your loan. It’s important to understand what this fee covers and whether it can be negotiated to avoid high fees.
- Loan processing fee: Lenders may also charge fees for loan processing, including underwriting and related services. Similar to the origination fee, check with your lender to understand its purpose and possible exemptions.
- Loan discount points: If you purchase discount points to lower your interest rate, you’ll pay a one-time fee at closing. These points can lower your rates by 0.25% to 0.5%, but consider your long-term homeownership plans before paying the reduced rate.
- Private Mortgage Insurance (PMI): When your down payment is less than 20%, you usually have to pay PMI. Some loans allow PMI to be paid upfront at closing, giving you the option of a higher upfront cost or increased monthly payments.
- Title Insurance: Title insurance is a one-time closing cost, and the buyer usually pays for both the lender and the owner’s policy.
- Home Insurance: In Colorado, your annual homeowners insurance premium may be part of your closing costs.
- Homeowners Association Dues: For homes in HOA-managed communities, you may be required to pay one month’s dues upon closing, which may vary by property and cover maintenance and operating expenses.
- property tax: As part of your Colorado closing costs, you may be required to prepay a portion of your property taxes at closing.
Colorado Seller Closing Costs
Closing costs paid by Colorado sellers can vary, but here are some common fees and costs sellers incur:
- Real estate agent commission fees: These fees can be a significant cost for sellers. Commission fees may vary and are subject to negotiation. Sellers should discuss their options with an agent.
- Homeowners Association Fees: The seller is generally responsible for any unpaid HOA fees or assessments prior to the settlement closing date, and they may be required to provide HOA documents to the buyer as part of the sale.
- property tax: The seller is responsible for any property taxes accrued but not yet paid prior to the closing date. These unpaid property taxes are usually prorated based on the months you owned the property.
- Title Insurance: Owner’s title insurance is another common closing cost paid by the seller in Colorado.
- Transfer tax: In Colorado, the seller is responsible for paying state taxes and possible local transfer taxes. These taxes are usually a percentage of the property’s sales price and vary widely by jurisdiction.
Median home sales price data from the Redfin Data Center for July 2024.
