What are closing costs when buying a home?
Closing costs are the fees and prepaid expenses due when you finalize a home purchase, separate from your down payment. According to Freddie Mac, they typically run 2% to 5% of the purchase price, and in Colorado some costs are customarily paid by the seller.
"What are closing costs when buying a home?" is a question that often comes up later than it should. Many buyers focus on saving for a down payment, then learn that they also need cash for loan fees, title charges, and prepaid expenses at closing.
The Bernardi Group wants Boulder buyers to plan for closing costs from day one. This guide explains what closing costs typically include, which costs Colorado buyers and sellers customarily pay, how the documents you receive help you track them, and ways buyers sometimes reduce them. For questions about your specific loan fees, contact a qualified mortgage lender, and for legal or tax questions, consult the appropriate professional.
How Much Are Closing Costs?
According to Freddie Mac, closing costs typically range from 2% to 5% of the purchase price. On a hypothetical $700,000 home, that would be about $14,000 to $35,000. Your actual amount depends on your loan type, lender fees, the property's taxes and HOA, and how costs are divided in your contract.
What Buyer Closing Costs Typically Include
Closing costs fall into a few main categories.
Lender and Loan Costs
- Origination or underwriting fees: Charged by the lender to process your loan.
- Discount points: Optional upfront payments to lower your interest rate.
- Appraisal fee: Pays for the independent valuation your lender requires.
- Credit report fee: Covers the cost of pulling your credit.
- Mortgage insurance: FHA loans include an upfront premium, and some conventional options involve upfront costs.
Title and Closing Costs
- Lender's title insurance policy: In Colorado, buyers who use a mortgage customarily pay for this policy, which protects the lender.
- Closing or settlement fee: Charged by the title company for handling the closing. In Colorado, how this fee is divided is set by the purchase contract.
- Recording fees: Paid to the county to record documents.
Prepaid Items and Escrow Deposits
- Homeowners insurance: Lenders typically require the first year's premium at or before closing.
- Prepaid interest: Covers interest from your closing date to the end of that month.
- Escrow deposits: Many lenders collect an initial deposit for future property taxes and insurance.
- Property tax prorations: Colorado property taxes are paid in arrears, so the buyer and seller typically settle each party's share at closing according to the contract.
HOA-Related Costs
If you are buying a Boulder condo, townhome, or home in an HOA community, there may be transfer fees, status letter fees, or prepaid dues. Your contract and the HOA documents spell out who pays what.
Who Pays What in Colorado?
Customs vary by state. In Colorado:
- The seller customarily pays for the owner's title insurance policy, which protects the buyer's ownership.
- The buyer customarily pays for the lender's title insurance policy when financing.
- Many other costs are divided according to the purchase contract.
These are customs, not laws. Everything can be negotiated, and The Bernardi Group will explain how each cost is handled in your specific contract.
Buyer Agent Compensation After the NAR Settlement
Since August 2024, buyers working with a REALTOR® sign a written agreement with their agent before touring homes. That agreement explains the services the agent will provide and how the agent will be paid.
Here is what buyers should know:
- Compensation is negotiable and is not set by law or by any industry group.
- It can be paid in different ways. Depending on the agreement and the negotiated purchase terms, it may be paid by the buyer, or a seller may agree to contribute toward it as part of the offer.
- Your agreement should be clear. Ask your agent to explain any term you do not understand before you sign.
The Bernardi Group will walk you through this agreement in plain language, so there are no surprises at closing.
Costs You Pay Before Closing
Some expenses come up during the contract period instead of at the closing table:
- Earnest money: Deposited after your offer is accepted and usually credited toward your purchase at closing, according to your contract.
- Home inspection: Paid directly to the inspector.
- Other inspections: Such as radon, sewer scope, or specialized inspections, depending on the property.
Track Your Costs With Your Loan Documents
Federal rules from the Consumer Financial Protection Bureau give you two key documents:
- Loan Estimate: Your lender must provide this within three business days of receiving your loan application. It shows your estimated rate, monthly payment, and closing costs.
- Closing Disclosure: You must receive this at least three business days before closing. It shows your final loan terms and costs.
Compare the two carefully and ask your lender about any differences.
Protect Yourself From Wire Fraud
Closing funds are a common target for scams. Before you wire any money:
- Confirm wiring instructions by calling your title company at a phone number you know is legitimate.
- Never rely on wiring instructions sent only by email.
- Be cautious of any last-minute change to payment instructions.
Ways Buyers May Reduce Closing Costs
- Negotiate seller concessions. A seller may agree to pay part of your closing costs. Loan programs set limits on how much a seller can contribute.
- Explore assistance programs. The Colorado Housing and Finance Authority (CHFA) offers down payment assistance options that can help with closing costs for eligible buyers using a CHFA first mortgage.
- Compare loan offers. Fees vary from lender to lender, so comparing Loan Estimates can help you understand your options.
- Ask about timing. Your closing date can affect prepaid interest.
How The Bernardi Group Helps You Prepare
As your Boulder Realtor team, we help you plan for closing costs from the start:
- We explain Colorado customs for who typically pays what.
- We negotiate for seller concessions when the market and the home allow.
- We coordinate with your lender and title company so deadlines stay on track.
- We review your timeline so you know when each payment is due.
Frequently Asked Questions
How much are closing costs for buyers in Boulder?
According to Freddie Mac, closing costs typically run 2% to 5% of the purchase price. Your exact amount depends on your loan, lender fees, property taxes, HOA costs, and how costs are divided in your contract.
Who pays for title insurance in Colorado?
In Colorado, the seller customarily pays for the owner's title insurance policy, and the buyer customarily pays for the lender's policy when financing. These customs can be changed by agreement in the purchase contract.
Can the seller pay my closing costs?
A seller may agree to contribute toward your closing costs as part of a negotiated offer. Loan programs limit how much a seller can contribute, so your lender can confirm what is allowed for your loan.
Plan Your Boulder Purchase With Confidence
Closing costs do not have to be a surprise. The Bernardi Group is here to help you understand every number, negotiate where it counts, and close on your Boulder home with confidence.
Call The Bernardi Group at 303.402.6000 or email [email protected] to talk with a Boulder real estate agent today.
The Bernardi Group | Coldwell Banker Realty
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