Anyone who wants to become a homeowner should first take stock of where they stand financially. That’s important because buying a home is a pricey undertaking — one that comes with many hidden costs or at least ones that you may not have first been aware of at first.
Most people know that they’re going to spend a substantial amount of money on the down payment for the home. What tends to be less obvious is that closing a real estate transaction can be a costly affair.
The expenses that arise at this stage are collectively known as closing costs. These costs are incurred from the various services and fees that will come into play in the final stages of the sale of a home.
In order to know what kind of expenses to expect when closing the purchase of a home, start by hiring a real estate agent. An agent will be able to tell you all the various things you’ll have to spend money on based on the city you’re located in. Agents will also often recommend various vendors who you can hire at affordable prices so you can save money at this stage.
If you’re looking for a real estate agent to assist you, consider hiring a Clever Partner Agent. They come from some of the very best brokerages in the country and have multiple years of experience working on real estate deals. Fill out the form on this page and we’ll reach out to help you find a Partner Agent in your area.
Closing Costs for Colorado Homes: What to Expect
A BankRate study found that buyers in Colorado spend $1,946 in closing costs on average. That’s $967 in origination fees and $979 in third-party fees.
These numbers are based on a mortgage loan taken for the purchase of a single-family home by a buyer with excellent credit and 20% to put as down payment. Those may not be your circumstances going into the purchase of your home.
The BankRate study also didn’t take into account a number of variable costs that will be part of your closing costs. That includes things like taxes, title insurance, government fees, etc.
Everything put together, closings costs total about 2% to 5% of the price of a home.
Let’s assume you’re buying a home in Fort Collins, Colorado. The median price of a home in the city is $392,000. If you buy a home at that price, you can expect to pay between $7,840 and $19,600 on closing costs.
Common Closing Costs for Colorado Home Buyers
Now let’s see where all of that money you spend on closing costs actually goes. Below is a list of various taxes and fees that you will have to spend money on when you purchase a home.
Loan Origination Fees
This is money collected by your lender to process your loan. It generally comes up to about 1% of the value of your mortgage. That said, you can negotiate loan origination fees down if you have good credit history and are able to provide enough collateral to reduce the risk involved in giving the loan.
Discount points are purchased from mortgage lenders to reduce the interest rate on your loan. The cost of a discount point varies from lender to lender, but often you can get one discount point for remitting 1% of the value of a loan. Each discount point can be used to reduce your interest by between 0.125% and 0.25%.
When buying a home, you have to have its value appraised by a professional appraiser. This is primarily for lenders to ascertain how much the house is worth and the value of the loan you qualify for as a consequence. Home appraisals in Denver cost about $317 on average and depend on the size of the home under consideration.
This is a form of insurance that protects you against any defects that there may be with the title issued for your home. That can include things like the previous owner’s outstanding taxes, liens, and outstanding mortgages. Most mortgage companies will require borrowers to purchase title insurance. In Colorado, the party selling the home generally pays the owner’s policy. The buyer pays for the lender’s policy, which protects the interests of your mortgage company.
Other Costs to Consider
Apart from the ones mentioned in the previous section, there are also certain recurring costs that are associated with owning a home. Here are a few of them.
Property tax is an ad valorem tax, which means that its magnitude depends on the value of the property. As a result, the local government will assess the value of your property every few years in order to determine how much you owe in property taxes.
Fortunately for homeowners in Colorado, property taxes in the state are among the lowest in the country. For example, the property tax rate in Fort Collins is 0.655%. If you own a home worth $300,000 in the city, you would pay $1,965 per year in property taxes.
Fire insurance provides you with indemnity against any damage caused by a fire on your property. This is a fairly common form of insurance that homeowners get when they purchase a home. Since many places in Colorado are prone to fires, it has become increasingly hard for homeowners to insure their property. If your home is judged to be in a fire-prone area, you may have to take measures to protect the property in order to get insured.
How to Save on Closing Costs in Colorado When Buying a Home
The easiest way to save on closing costs is by negotiating them with the seller. A number of closing costs, even certain taxes, can be paid either by the seller or buyer. If you’re able to make a strong case at the negotiating table, you could get the seller to handle a share of your expenses during closing time.
Another way to cut down on your costs is by working with an experienced real estate agent. A local realtor will be able to help you find affordable neighborhoods with homes fitting your requirements. They will also be able to assist with negotiating with buyers to get a good price on the home.
In addition to all those services, Clever Partner Agents provide a $1,000 rebate to customers, if they’re eligible. You can use the rebate to pay for closing costs.
Working with a Partner Agent also gives you the ability to see houses you’re interested in on-demand. If you provide the address of the home and your availability, one of our agents will set up an on-demand showing for you. With this service, you don’t have to wait for an open house to see a home you’re interested in.
Visit our website to set up a no-obligation call with a Clever Partner Agent in your city.