Closing costs in Colorado are the fees and prepaid items a buyer and seller pay to finish a sale. Buyers get surprised by them more than anything else in the deal. Most of that surprise comes from one mix-up: they think closing costs and cash to close are the same number. They aren't. Here's how I break the costs into buckets, who customarily pays each one under the Colorado contract, and how to walk a buyer through the estimate line by line.
The short answer
A Colorado buyer's costs fall into three buckets: lender charges, title and government fees, and prepaids. Prepaids aren't fees. They're the buyer's own future bills, like homeowners insurance and the starting balance in the tax and insurance escrow account, collected early. Colorado has a few habits that differ from other states. By custom the seller pays for the owner's title policy. Property taxes are paid a year behind, so the seller credits the buyer at closing. There's no statewide transfer tax, only a small state documentary fee. And title companies run closings, not attorneys. Every line can be negotiated in the contract.
Step by step
- Separate the three buckets. Lender fees (origination, appraisal, credit report, any points). Title and government (lender's title policy, closing fee, recording, documentary fee). Prepaids (insurance, escrow deposit, daily interest to month end).
- Show who customarily pays. Use the table below. Then remind the buyer that the contract, not custom, decides.
- Add HOA items. Condos and many subdivisions charge a status letter fee, a transfer fee and sometimes a working capital contribution. The contract says who pays each.
- Check the tax picture. Because Colorado taxes are paid in arrears, the seller credits the buyer for the part of the year the seller owned the home. Newer areas may also have a metro district levy that raises the tax line and the escrow deposit.
- Read the Loan Estimate. The lender sends it within three business days of the application. Check that the price, down payment and loan amount match the contract. Look at the "Cash to Close" box.
- Compare lenders. Lender fees are the biggest line a buyer can shop. Get Loan Estimates from two or three lenders using the same assumptions.
- Plan credits. A seller credit or lender credit can cover costs. The loan type caps how much the seller can pay. See seller concessions explained.
- Read the Closing Disclosure. It arrives at least three business days before closing. Compare it to the last Loan Estimate and ask about every line that moved. The CFPB has a guide at consumerfinance.gov.
Who customarily pays what
| Item | Customary payer on the Colorado contract |
|---|---|
| Owner's title policy | Seller |
| Lender's title policy | Buyer (when there's a loan) |
| Title company closing fee | Often split |
| Lender fees, appraisal, credit report | Buyer |
| Recording the deed and deed of trust | Buyer |
| Recording the seller's loan release | Seller |
| State documentary fee | Set on the contract form |
| Property tax proration | Seller credits buyer for the current year |
| HOA status letter | Usually seller |
| HOA transfer or capital fees | Set by the contract and the HOA |
| Prepaids: insurance, escrow, interest | Buyer |
| Mountain-town transfer tax | Set by the town and the contract |
Custom is a starting point. Check the current contract form on the Colorado Division of Real Estate site.
A worked example (illustration only)
A buyer purchases a $500,000 home with a $25,000 down payment.
| Line | Amount |
|---|---|
| Down payment | $25,000 |
| Closing costs (lender, title, recording) | $10,000 |
| Prepaids (insurance, escrow, interest) | $6,000 |
| Minus earnest money already paid | -$5,000 |
| Minus seller credit | -$8,000 |
| Minus seller's tax proration credit | -$2,500 |
| Cash to close | $25,500 |
Illustration only. A lender sets the real terms. These are round numbers to show how the math works, not quotes. Real fees, taxes, insurance and prepaids depend on the lender, the title company, the property and the closing date. The annual percentage rate (APR) would differ from any note rate. This is not an offer of credit. Program rules change. Check current rules at consumerfinance.gov.
How to explain it to your client
"Closing costs come in three piles. The lender's fees, the title and county fees, and prepaids. Prepaids aren't really costs. They're your first year of insurance and a head start on your tax account, paid early. In Colorado the seller usually buys your owner's title policy and gives you a credit for this year's taxes. The number you'll actually wire is called cash to close. It's your down payment plus these costs, minus your earnest money and any credits. Your lender's Loan Estimate shows it now, and the Closing Disclosure shows the final number a few days before closing. We'll compare them together."
Watch-outs
- Cash to close isn't closing costs. Show both numbers so the buyer isn't shocked.
- Credits over the cap are lost. Ask the lender how much the loan allows before you write the number in the offer.
- Special assessments. An HOA assessment voted before closing can land on the buyer. Ask early.
- Metro districts. They raise taxes and the escrow deposit. Check the actual tax bill, not a county average.
- Insurance. Front Range premiums can be high because of hail. It's often the biggest prepaid surprise.
- Wire fraud. Verify wiring instructions by phone with the title company before sending money.
- Don't quote fees from memory. Use the lender's and title company's estimates.
Further reading
- Closing Costs in Colorado: What Buyers and Sellers Pay on kennarealestate.com
- Closing Costs for Colorado Home Buyers on kennarealestate.com
This is training for real estate agents. It isn't legal, tax or lending advice. A licensed loan officer sets loan terms. Check with your managing broker.
Questions
Do Colorado buyers need an attorney to close?
No. Title companies run closings, and the contract is a state-approved form. A buyer can hire an attorney if they want one.
Can closing costs be rolled into the loan?
Usually not. The loan amount comes from the price and down payment. Some program fees, like FHA's upfront mortgage insurance or the VA funding fee, can be financed. Ask the lender.
How can a buyer lower closing costs?
Ask for a seller credit, compare lenders, ask about a lender credit, close near month end to cut prepaid interest, and check down payment programs that also help with costs.
When does the buyer get the Closing Disclosure?
At least three business days before closing on most mortgage loans.
Are closing costs tax deductible?
Some items may be. That's a question for the buyer's tax preparer.
Brian Lee Burke is the founder of PadLeaders, a Colorado real estate broker licensed since 2003, team leader of The Kenna Group at Keller Williams DTC (formerly Kenna Real Estate Group) and the author of Mastering Real Estate and The Real Estate Playbook. More about Brian.