Buying a home in Colorado is an exciting milestone, but it comes with a slew of hidden costs that can catch even seasoned buyers off guard. And no—I’m not just talking about swapping out the tacky pink tiling in the guest bathroom.
Beyond the purchase price and monthly mortgage payments, there are a bunch of other costs associated with homeownership that you’ll want to be aware of.
In this part of Buying in Denver 101, we’ll dive into the often-overlooked expenses of buying a home, ensuring you are well-prepared for the financial commitment ahead. Understanding these hidden costs can help you avoid any unexpected financial obstacles whenever you finally decide to buy a home.
1. Monthly Mortgage Payment
$1,342 on average1
When buying a home in Colorado, one of the most significant expenses you’ll encounter is the mortgage (duh). But what you may not know, is that mortgage payments typically include both the principal amount borrowed (ie. the balance of the loan) as well as interest payments. This is why after many months of paying a mortgage, the balance can look pretty similar—you’re never just paying down the principal amount borrowed.
And as you may have guessed, the interest rate (determined by your mortgage lender), will significantly impact your monthly mortgage payments and the overall cost of buying a home.
Even a small difference in the interest rate can lead to substantial variations in what you’ll pay over the life of the loan. For example, on a $400,000 loan, a 0.5% difference in interest rate could mean thousands of dollars more in interest payments over the life of a 30-year fixed mortgage. This is why it’s crucial to shop around for the best rates and understand how they might affect your ability to buy a home in Colorado.
2. Appraisal Fees
$400 – $600
Before finalizing a mortgage, your lender will require a home appraisal to ensure the property’s value matches the loan amount. In Colorado, appraisal fees typically range from $400 to $600, though this can vary based on the property’s size and location. This fee is a necessary part of the process and ensures that the lender isn’t loaning more money than the home is worth. While it may seem like a minor expense compared to the overall cost of buying a home, it’s still a good one to be aware of and might even save you money down the road—since a lender won’t actually approve a mortgage that far exceeds the value of a home.
3. Escrow Account
When you purchase a home in Colorado, you may be required to set up an escrow account. This account is used to pay property taxes and homeowners insurance on your behalf. Each month, a portion of your mortgage payment goes into the escrow account, ensuring that these expenses are covered.
While this can be convenient, it means that your monthly mortgage payments will be higher than just the principal and interest alone. The amount required for the escrow account will depend on the property taxes and insurance premiums for your home, adding another layer to the overall cost of buying a home.
4. Home Inspection Fees
$300 – $500
A home inspection is another vital step in the home-buying process and in Colorado, it typically costs between $300 and $500, depending on the size and age of your home. The inspection can uncover potential issues that might require expensive repairs, providing you with valuable information before making your final decision.
In some cases, discovering significant problems during the inspection can give you leverage to negotiate the purchase price or ask the seller to make necessary repairs before closing. Although the home inspection fee is an additional cost, it can save you from unexpected expenses down the road.
5. Title Search and Title Insurance
$200 – $400
A title search is conducted to ensure that the seller has the legal right to sell the property and that there are no outstanding claims or liens against it. In Colorado, this process typically costs between $200 and $400. Additionally, you will need to purchase title insurance to protect yourself and your mortgage lender against any future title disputes.
The cost of title insurance varies but usually ranges from $1,500 to $2,500. These costs are essential for protecting your investment and ensuring that the home you purchase is free of legal complications.
6. Lender and Owner Title Insurance
$1,000 – $2,000
There are two types of title insurance: lender’s title insurance and owner’s title insurance. Lender’s title insurance is often mandatory and protects the mortgage lender’s interest in the property, while owner’s title insurance is typically optional (but recommended) and protects your interest as the buyer. It typically costs around $1,000 to $2,000, depending on the property’s value and location. This insurance provides peace of mind, protecting you from potential title issues that could arise after the purchase.
7. Loan Origination Fees
0.5% – 1% of your loan amount
Loan origination fees are yet another part of traditional closing costs associated with buying a home in Colorado. They’re charged by the lender for processing your loan application. These fees typically cost between 0.5% and 1% of the loan amount. For a $400,000 mortgage, this could mean an additional $2,000 to $4,000 in fees.
These fees cover the lender’s administrative costs and can vary widely depending on the lender and the complexity of the loan. You’ll want to compare loan origination fees from different lenders to ensure you’re getting the best deal.
8. Private Mortgage Insurance (PMI)
20% of your home’s purchase price
If your down payment is less than 20% of the home’s purchase price, your lender will likely require you to carry private mortgage insurance (PMI). PMI protects the lender in case you default on your loan.
The cost of PMI can vary but typically costs between 0.3% and 1.5% of the original loan amount per year. This means that on a $400,000 loan, you could expect to pay between $1,200 and $6,000 annually for PMI. PMI can be rolled into your monthly mortgage payments or paid upfront at closing.
9. Prepaid Interest
When you close on your home, you will need to pay prepaid interest, which is the interest that accrues on your loan from the closing date to the first of the following month. This amount varies depending on the interest rate and the loan amount but can add up to several hundred dollars. Prepaid interest ensures that your mortgage starts accruing interest immediately, aligning your first mortgage payment with the start of a new month.
10. Property Taxes
As a homeowner in Colorado, you’ll need to pay property taxes annually. Property taxes vary widely based on the location and value of the home but typically cost between 0.5% and 1% of the home’s value each year. For a $400,000 home, this could mean paying $2,000 to $4,000 annually in property taxes.
These taxes are often included in your monthly mortgage payments through your escrow account, ensuring that they are paid on time. Be sure to factor property taxes into your budget, as they are often a significant ongoing expense.
11. Homeowners Insurance
$1,200 – $2,500
Homeowners insurance is another essential expense when buying a home. In Colorado, it typically costs between $1,200 and $2,500 annually, depending on the location, size, and value of the home.
Homeowners insurance protects your home and belongings against risks such as fire, theft, and natural disasters. Some mortgage lenders require specific coverage levels, so it’s important to shop around for a policy that meets both your needs and the lender’s requirements.
12. HOA Fees
$200 – $500+
If you purchase a home in a community with a homeowners association (HOA), you will be required to pay HOA fees. These fees cover the cost of maintaining common areas, amenities, and services provided by the HOA. HOA fees in Colorado can range from $200 to $500 per month or more, depending on the community and the amenities offered.
If your home is located in a flood-prone area, your lender may also require you to obtain a flood certification and carry flood insurance. The certification from $15 to $50 in Colorado, while flood insurance premiums vary based on the property’s location and flood risk.
13. Home Maintenance and Repairs
1-2% of your homes value, annually
One of the hidden costs of buying a home is ongoing maintenance and repairs. Homes require regular upkeep to maintain their value and functionality. This can include things like painting, lawn care, HVAC maintenance, and plumbing repairs. Experts recommend setting aside 1% to 2% of your home’s value annually for maintenance and repairs. For a $400,000 home, this means budgeting $4,000 to $8,000 each year. Having an emergency fund for unexpected repairs can also provide peace of mind.
14. Utility Costs
$200 – $400+
When you purchase a house, you’ll also need to account for utility costs, including electricity, gas, water, sewer, and trash services. These costs can vary widely depending on the size and location of the home, as well as your usage habits. In Colorado, homeowners can expect to pay between $200 and $400 per month for utilities.
15. Moving Costs
$1,000 – $5,000+
Don’t forget about the moving costs! Whether you hire professional movers or rent a truck and do it yourself, moving expenses can add up quickly. Professional moving services in Colorado can cost between $1,000 and $5,000, depending on the distance and amount of belongings. Additionally, you may need to purchase packing supplies and take time off work to facilitate the move. Planning and budgeting for these expenses can help ensure a smooth transition to your new home.
Let’s find your Denver dream home…
Whether you’re new to the area or just looking to relocate within the city of Denver, I can help you find the right place for your needs. And in our highly competitive market, it’s never too early to start the process…
Check out the other chapters of Buying in Denver 101 or book an intro call / send me an email to get the conversation started.
About Me:
Hi! I’m Sarah King, a licensed real estate agent helping buyers find their dream homes in Denver. Having grown up locally, and spent 24 years in real estate—I know the ins and outs of the Denver market. My business is 99% referral-based, but I’m always open to meeting new faces and families looking for guidance on buying or selling in Denver. You can drop me a line here or book an intro call on my calendar.
- https://www.moneygeek.com/mortgage/colorado/calculator/ ↩︎
