If you are considering buying a home in Colorado, you have a lot of tough decisions ahead. Want to be in the middle of the action in Denver? In a city like Boulder or Colorado Springs? Or are you looking for smaller towns or mecha skis, like Durango, Crested Butte, and Telluride? No matter where you decide to plant your roots, the Centennial State will bring you closer to the beauty of the great outdoors. Read on to get a complete understanding of how to buy a home in Colorado.
How to buy a home in Colorado
Decide where to live in Colorado
First things first: This is a large state, so narrow your search for the right place to buy a home. If you’re looking to live near a larger city, Fort Collins ranks high on Bankrate’s list of the best places to live in Colorado. While the Front Range along I-25 is the most densely populated part of the state, don’t forget Grand Junction and the cities further west.
While it’s smart to look at the price list of homes in each of the cities you’re considering, be sure to consider the cost of other essentials as well. For example, Bankrate’s Cost of Living Calculator shows Denver to cost about 15 percent of Colorado Springs.
Tips for buying a home in Colorado
When you figure out how much you’ll need to spend to buy a home here, be aware that property values and levels of competition vary widely across the state. If you’re looking to buy in the Denver metro area, the median sale price is now over $635,000, according to the Colorado Association of Realtors—a 15.5 percent increase from last year. And the competition is rather intense: homes tend to stay on the market for only 14 days. Head west to Mesa County, though, and the average price will be just $401,000, with homes on the market longer: 63 days, on average.
In addition to the price of the house, you will also need to know how much money you plan to put in a down payment. This will help you find out how much financing you need, and whether the amount you need to borrow exceeds the matching loan limits. If so, you will likely be looking for a hefty loan, which tends to come with stricter credit requirements and higher rates.
Things to know about buying a home in Colorado
- Property Taxes: While buying a home in Colorado can be expensive, paying taxes once you become a homeowner is much more affordable here than in the rest of the country. According to data from the Tax Foundation, Colorado homeowners pay an average of just 0.54 percent of their home’s value in property taxes—one of the lowest rates in the country.
- Dual agency: When you work with a real estate agent to buy in Colorado, they will represent you on their own. Colorado law prohibits dual agency, which means agents cannot represent both buyer and seller in a transaction.
- Seller Disclosure: The State of Colorado requires sellers to complete a property disclosure form that shares all of their knowledge about potential issues that may affect the value of the home. Read this carefully to be aware of any major problems, such as previous flooding or roof damage.
- closing costs: Before you get the keys to your new home in Colorado, you’ll need to hand a check for all closing costs. According to data from ClosingCorp, closing costs in Colorado averaged $3,881 in 2021 — or about 0.7 percent of the purchase price. Unlike most other states, in Colorado, the buyer traditionally pays property transfer taxes unlike in most other states. Outside of state and local fees, closing costs will vary based on your lender. Be sure to compare mortgage lenders in Colorado to see if there are options that do not charge an origination fee.
- lawyers: You are not required to hire a real estate attorney to purchase a home in Colorado. However, it is always wise to consider enlisting professional legal assistance when you are making a huge investment, especially one that comes with complicated contracts and paperwork.
- Climate and weather: The natural beauty of Colorado, unfortunately, also implies the potential for natural disasters. When you think of buying a home here, be sure to consider the cost of protecting it from wildfires and harsh winters. A study from the Colorado Department of Insurance revealed that the vast majority of homeowners who lost their Marshall Fire property at the end of 2021 did not have adequate insurance coverage. Colorado also ranked second in insurance claims for hail between 2018 and 2020, according to the National Insurance Crime Bureau.
How much home can I afford in Colorado?
If you’re thinking of buying a home, you’re probably also thinking about how much you can actually spend on a home. The best guidance is to limit your monthly mortgage payment to no more than 28 percent of your monthly income. So, if you earn $6,000 a month, your mortgage payment should be $1,680 or less. The easiest way to lower this monthly obligation is to make a large down payment up front, thus reducing the amount you need to borrow.
Saving for down payment in Colorado
Getting a large down payment isn’t easy—especially if you’re a low-income home buyer. If you’re paying rent, covering car payments, and dealing with all your other bills, it’s hard to set aside money to buy a home, too.
Fortunately, you don’t have to do all of this yourself. The Colorado Housing and Finance Agency has a number of first-time homebuyer programs that are designed to help with that first step — the down payment — that feels less impossible. With grants and deferred loans, you may qualify for between 3 percent and 4 percent of the purchase price to cover a portion of it. In addition to state and local programs, be sure to consider advance payment national assistance options.
Get pre-approved for a mortgage
If you want to prove that you are a serious buyer, show the sellers that you can show them the money. A pre-approval letter is proof that you are a qualified buyer and have a lender who is most likely to give you the money you need. In a seller market like Colorado, getting pre-approved is essential to give your bid credibility.
Find the best lender
One of the most important steps in buying a home – in Colorado or anywhere – is shopping to compare offers from several lenders. Some lenders may offer low rates that look attractive, but their fee structures can make your closing costs a headache. Others may only offer online help, which is a downside if you prefer to visit a branch in person. Research several options to find a deal that best serves your needs.
If you are looking at a particularly competitive market, it may be worth exploring beyond traditional lenders. For example, companies like Ribbon and Orchard offer software that can help you make a cash offer, making your offer look better to the seller.
Find the best local real estate agent in Colorado
Once you have a company to help you buy a home, it’s time to find the one who can help you find it. If you have friends or colleagues who have recently been through the home buying process, ask them for recommendations for a real estate agent. Having a professional realtor by your side can make all the difference in eliminating some of the stress of trying to find a home on the seller’s market. Realtors have professional knowledge of their local area. Discuss your location preferences, budget, and amenities you should have, and he or she can direct you toward the areas where your money will stretch the most.
Now, time for the fun part: You can start visiting the properties. The search for a home can be frustrating if you end up in a bidding war with buyers who have deeper pockets. But don’t get discouraged. Your real estate agent is here to help you overcome challenges. Here’s a pro tip for looking at homes in Colorado, where there are plenty of ski towns full of resorts: Don’t forget the apartments. Although you may not get complete privacy, you will get an affordable price point. Median townhomes and condos in the state cost about $150,000 less than single-family homes, according to the Colorado Association of Realtors.
make an attempt
When you find a place you like, your agent can help guide you through how to make a successful bid. Agents know how fast you need to act: If the home has been on the market for a while, you may be able to take your time and bid below the asking price. However, if companies are selling for more than the list price, you may need to consider the offer much more. About 59 percent of Colorado homes sold above ask these days, according to Redfin data.
Get a home inspection and appraisal
An accepted offer does not necessarily mean that you are limited to buying the home. You should immediately get a professional home inspection to ensure that the property is in good condition. Additionally, if you are taking out a mortgage, your lender will require an appraisal. This confirms that the house is worth what you agreed to pay for it. Be prepared for the possibility of a low appraisal, which is fairly common in Colorado’s hot housing market.
Closes in your new home in Colorado
Three days before you are scheduled to close your home, you will receive a closing statement detailing all of your final costs. Double-check that all amounts look somewhat similar to your initial loan estimate, and get a certified or cashier’s check—personal checks likely will not be accepted—for the final amount. However, before you deliver that big of a change, set a deadline. This should ideally be done before you go into official closing, which is a last chance to check that the house is in good shape for your move into. If everything looks as it should, head to the conclusion, sign your name on a mountain of papers and then celebrate your new life in the actual mountains. You own a home in Colorado now.