The Colorado housing market has been on fire and has been expanding for several years. Fueled to a large degree by an entirely new industry — legalized marijuana — housing prices have been increasing from their 2012 low. This new industry continues to spur job growth and attract transplants, creating a butterfly effect throughout the rest of the economy.

This new economic boost comes on top of a burgeoning technology industry that is one of the most robust in the country. As the housing market continues to flourish, the inventory of active listings is shrinking, with the average home sitting on the market for about 40 days. That is a challenging market for homebuyers who find themselves chasing increasing values on disappearing homes. When a home does become available, homebuyers must contend with paying closing costs. These expenses can add thousands to the cost of a home, so Colorado homebuyers would be well-served to understand what goes into these costs. 

Average Closing Costs in Colorado

Colorado homebuyers can expect to pay 2 to 5% of their home’s value in closing costs, so the actual amount paid is based largely on the value of the home. The following average closing costs are based on the purchase of a home valued at $200,000 with a 20% down payment. The following figures are current as of May 2017. 

In Colorado, homebuyers pay an average of $967 for lender fees and $979 for third-party fees for a total average closing cost of $1,946. Even though the average cost of a single family home has increased, Colorado has one of the lowest rates of average closing costs, and falls just below the national average of $2,084. Wisconsin, South Dakota and Pennsylvania have the nation's lowest closing costs, with each falling under $1,850. New York, Hawaii, Delaware topped the nation's highest closing costs, with costs in each state hitting more than $2,300.

As for the average cost of individual items, Colorado homebuyers pay $1,334 for origination fees, $503 for a home appraisal, $372 for settlement costs, $375 for a survey, $76 for tax services, $63 for courier services, $25 for a credit report and $10 for flood certification. Title insurance fees are excluded from these averages because they are difficult to estimate. Prepaid items, such as property taxes and homeowners insurance, are also not included.

What Goes Into Closing Costs?

Closing costs in Colorado can vary among lenders and are based on the type and size of property. However, these are the more common closing costs homebuyers may find in a good faith estimate provided by lenders.

Loan origination or lender fees: Buyers pay their lender an all-inclusive fee for processing the loan, which amounts to around 1% of the home’s value. For these fees, percentages translate into points, with 1% equaling one point. In exchange for a lower loan interest rate, buyers may add points to their closing costs. They can also roll their points into the loan to reduce out-of-pocket costs.

Appraisal fee: To verify that the home’s value is worth at least the sale price, lenders order an independent appraisal of the property. Lenders also want to ensure that the sale price is reasonable compared to other, similar properties in the area.

Settlement/closing fee: All of the legal aspects of settling escrow and closing the sale are handled by a title company. In Colorado, buyers are not required to hire their own attorney for settlement review, but if they do, it is at their own expense and usually outside of closing costs.

Tax services: In Colorado, tax liens take precedence over first mortgages in the event of a default. Depending on the amount of the down payment and the value of the home, some lenders may set up a property tax escrow account.

Title Insurance: The homebuyer is required to buy a title insurance policy on the lender to protect it against any title defects that could threaten its position as the top lien holder. The seller is required to purchase title insurance on the buyer to guarantee a clear title on the property.

Survey: On some properties, lenders may require a survey to ensure the integrity of the property lines. This is done to avoid any property line issues that might arise.

Hawaii (HI): Average Closing Costs

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