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Information for Home Buyers

Costs While Purchasing a Home

Once your offer on a home is accepted, there are costs you’ll incur on the way to and at the closing. It’s essential to understand and be ready for those costs.

Early Costs:

  • Earnest money deposit: A good faith deposit that shows the seller you’re serious. In the Denver area, this typically amounts to about 1% of the purchase price, held in escrow by the title company. Sometimes, sellers request more than 1%, but the amount is negotiable. The earnest money payment is usually due within three days after your offer is accepted.
  • Home inspection: A thorough home inspection helps you uncover issues and negotiate repairs or credits. We recommend a home inspection, a radon test, and a sewer scope. Some buyers may require a mold test, pest inspection, a well test a septic system test, or a structural engineer inspection. The cost of a home inspection, sewer scope, and radon test is typically around $800 to $1,000, depending on the home’s size, age, and location.

Costs Typically Paid at Closing:

Your lender is legally required to provide you with a Loan Estimate within three business days of your mortgage application, outlining estimated closing costs. At least three business days before closing, you’ll receive a Closing Disclosure, which provides the final, detailed breakdown of all costs. Review both documents carefully.

  • Appraisal fee: If you’re getting a mortgage loan, your lender will likely require an appraisal. Although the appraisal will occur before closing, you’ll usually pay for it when you close on your purchase. It typically costs around $600 to $900.
  • Title Insurance: The state of Colorado describes title insurance as “an agreement that should a problem arise in the ownership records of your property, your insurer will fix the problem, defend you against it, or compensate you for any losses.” Buyers typically purchase it to insure their lender, while sellers purchase it to protect buyers. The cost typically ranges from $500 to $1,000, depending on the property’s value and the loan amount.
  • Loan origination fees: These typically range from 0.5% to 1% of the loan amount.
  • Credit report and loan processing fees: These are typically between $300 and $500.
  • Homeowner’s insurance premium: You’ll pay your first year’s premium upfront at closing.
  • Loan Closing Fees/Closing Fees: In Colorado, we’ll typically close at the title company. They’ll charge a fee to close your loan and to close the sale of the property. Loan closing fees are about $480. The buyer and seller often split the closing fee, with each party paying about $240.
  • Prepaid expenses: Typically, your lender will create an escrow account and pay your property taxes and homeowner’s insurance for you. You will then pay for taxes and insurance monthly as part of your mortgage payment. The title company will collect three moths of  each to fund your escrow account.
  • HOA fees: If you’re moving into a community with an HOA, you may prepay some dues or pay a one-time “working capital” fee that goes into the community’s reserves to help pay for long-term maintenance, repairs, or projects. The costs of these are variable.
  • Government charges: The title company records documents with the county. The cost for this is approximately $150.

There may be additional costs associated with your purchase. Total costs can range from 2% to 5% of your home’s purchase price, although this varies significantly by location, loan type, and property specifics. While some closing costs are fixed, others can be negotiated. You can shop around for particular services or negotiate with the seller to cover some of your closing costs, especially in a buyer’s market.

The Good News? You’ll Also Receive Some Credits at Closing

  • Taxes: You’ll pay this year’s homeowner’s taxes next year, but you didn’t own your new home the entire year, so the title company will give you money from the seller to pay taxes for the portion of the year when they owned the home.
  • Negotiated Concessions: If the seller agrees to give you money at closing – perhaps after negotiations following the inspection or because you requested concessions in your offer – those concessions will show up as a credit to you at closing and will lower the amount of money you’ll need to bring to the closing.
  • Lender Credits: Your lender may offer you credits that can help lower your closing costs or your interest rate.
  • Special Rebates – Special programs, such as our Heroes Rebate Program, offer special rebates that can help you pay less out of pocket at closing.

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Understand and be ready for the costs involved in purchasing a home.

Costs can range from 2% to 5% of your purchase price.