Closing costs can be a considerable expense, and it’s better to know your options before signing any documents.
In a report by Closingcorp in 2019, It was stated that homeowners in the United States spend an average of $5,779 (including taxes) on closing costs. However, this amount can vary greatly depending on the home’s location.
Many factors are considered when determining the closing costs, including the city it is being purchased in, age of the home being sold or purchased, the number of rooms in the home, whether or not the house has a pool, and many other factors.
For example, homeowners in Northwest Denver can expect to pay significantly more than the national average. In this article, we will take a closer look at the average closing costs in Northwest Denver and explore some of the factors that influence them.
An Overview of the Closing Costs in Northwest Denver
When purchasing a home, you will be required to pay closing costs when you sign your loan documents. Closing costs can include appraisal fees, inspections, application fees, and title insurance.
Buying a house is never cheap, nor is it supposed to be. However, the closing costs in Northwest Denver are exceptionally high because of the age and size of the homes included in this particular city.
However, when establishing the average closing costs for house purchasers in Denver, a range of 3% to 5% is a reasonable range to work with as a starting point.
Approximately 18.8% has been added to the median home value in Denver, Colorado, during the last 12 months, according to Zillow, a real estate information business (as reported in February 2022).
Given that property prices and mortgage loan sizes impact closing costs, it follows that Denver home buyers are paying slightly more in closing expenses (on average) than those who acquired a home in the previous calendar year.
As reported by Zillow, the median list price for single-family homes and condominiums in February 2022 was $593,289.
Because median home prices are less biased by “outliers,” such as a costly home that recently sold, they are generally considered to be a better reflection of current market pricing than average home prices. As a result, we will utilise the median figure to obtain insight into closing costs for Denver homebuyers in 2022.
The following is what we get if we take the median selling price for February 2022 (the most recent data available at the time this article was created) as our starting point:
Closing expenses would be approximately $17,798 if 3% of the typical sales price ($593,289) were spent on them. Closing expenses of around $29,664 would be incurred if 5% of the median amount were used.
In the end, we have a rough estimate of the amount of money a house buyer could have to pay to close on a median-priced property in Denver in February 2022. The more expensive property will almost certainly result in higher overall costs.
Expenses Included in Northwest Denver Closing Cost
The following are typical closing costs that you can expect to see when buying Northwest Denver. The only fees that aren’t included on this list are the settlement agent fee, title insurance fee, and other miscellaneous items.
Application Fee
This fee helps cover the costs of gathering your credit report, criminal history record, and other information. It is typically between $75 to $200.
Appraisal Fee
Closing a home purchase doesn’t mean that you get free reign over your new property. Before handing over the cash to buy a house in Denver, you are required to have an appraisal performed.
This cannot be skipped over because the home’s value must be determined to ensure that it is worth what you are paying for it. Generally speaking, expect to pay around $350 to $400 for this service.
Lawyer Fees
This is another fee that cannot be skipped under most circumstances. The only way that you would not need to pay for legal fees is if you and the seller could complete a transaction without lawyers present.
This seldom happens, so it’s best to budget for your lawyer fees as they can range from $400 to $800 or more per person.
Escrow Fees
You pay a fee to the third-party responsible for keeping track of all money involved in transactions. You can choose from either an escrow company or a title company as your “middleman” and expect to pay around $500 as a starting point.
Home Inspection
This is a necessity for all home buyers as it helps you avoid buying a house that has significant problems. The cost of hiring an inspector usually ranges from $300 to $500, but be sure to include it in your budget as this is one fee that will not change once you have agreed on a sales price with the seller.
Homeowners Association Transfer Fees
If you are buying a condo, there may be homeowners association transfer fees. This fee covers the costs of processing and transferring your future HOA responsibilities. This is another one that can cost more or less depending on the individual property, so make sure to add it to your budget no matter what type of home you are purchasing.
Mortgagees Title Insurance
As the name suggests, this insurance is for the mortgage company. If there is a problem with the title of the property you just purchased, this insurance will help to cover those costs. The cost of this policy is usually around $100.
Discount Points
This fee is paid when you borrow money to purchase your home. When you pay discount points, it lowers your interest rate and reduces the amount you will owe in interest over time. It’s like an upfront fee because you are paying now to save more later.
If your loan amount is $500,000, expect to pay at least one discount point, which is 1% of the loan amount.
Origination Fees
This is a fee that your lender charges to process your loan. Usually, this is around $1,000 or more, and the amount will depend on how much you are borrowing and whether or not you can make a down payment.
Prepaid Interest
This is the interest you owe for the month you are closing on your home. It’s like paying rent because, technically, your loan balance will be slightly lower than what you paid for when you close. This means that the interest owed will be less in each future monthly bill.
Property Taxes
This is one of the largest fees you will pay when purchasing a home in Northwest Denver. Property tax will vary depending on which county you live in and your home assessed market value but expect to pay around 0.6% of your total home value. If your new home is valued at $400,000, budget for about $2,400 per year.
Surveying Fee
This is another fee that you will pay as part of the closing costs when buying a Northwest Denver home. This is to determine where property lines are and ensure that everything on your end is correct.
Expect to pay about $300 to $500 for this service if an individual does it, but be prepared to spend around $800 or more if you hire a surveying company.
Land Transfer Taxes
Expect to pay around 1/10 of 1% of your total home value for the land transfer fee. The state charges it, and it will be part of the closing costs when you buy a home in Northwest Denver.
Final Thoughts
As you can see, there are many fees associated with buying a home in Northwest Denver. It’s essential to budget for these costs beforehand so that you don’t find yourself scrambling at the last minute to pay for something unexpected.
Remember that these are just some of the fees involved with buying a home in Denver, so be sure to do your research.
Contact us if you’d like more information on purchasing homes in Northwest Denver! We’re happy to answer any questions that may arise, so don’t hesitate to reach out!