Overview of Colorado Housing Market
Colorado has seen some of the highest housing price growth in the nation in the last few years. While home prices may be steep in some cities (like Denver), the state has some of the lowest effective property tax rates in the U.S. due to several local laws that bar increases.
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Factors in Your Colorado Mortgage Payment
The good news for homebuyers is that Colorado property taxes are among the lowest in the country, with an average effective rate of 0.63% of the home value. The money you pay for property taxes goes straight to your county to support local services, such as schools and infrastructure maintenance. None of your property tax money goes to the state.
Your property’s value is assessed in two-year cycles. While the market value, based on the price of homes sold in your area is part of the equation, your actual tax rate is based on a fraction of the market value. The number depends on how much revenue your county or town needs at that time. Tax exemptions are available for qualifying seniors and disabled veterans. To receive the exemption, check your eligibility and send an application by the deadline.
Along with property taxes, another cost that stays with you over the course of homeownership is insurance. In Colorado, homeowners insurance is 11th-highest in the country, at an average $1,388 per year, as determined by our Most Affordable Places to Live study.
While out of the path of most hurricanes, living in Colorado means contending with wildfires. According to the Insurance Information Institute, Colorado is the third-most prone state for wildfires, with 366,000 households at high or extreme risk as of 2017. Seventeen percent of all households are at high risk. In 2016 alone, over 129,000 of acres were burned. If you want to learn more about how you can help mitigate risk, Colorado’s Division of Insurance has a number of brochures with educational information.
Costs to Expect When Buying a Home in Colorado
You’ll need to pay for a number of services before you purchase a home. An essential step in the home-buying process is the home inspection. In Colorado, home inspections usually cost between $300 and $400, with higher prices for more square footage and lower costs for smaller homes and condos. A home inspection is your verification of the home’s condition before the contract is finalized. Most home inspections cover the structure, plumbing, electrical, roof and more. However, you’ll need to pay extra for specialized testing such as mold, termite and radon.
When you’re ready to finalize the home purchase, you’ll set a closing date with your loan officer. That’s when you’ll sign a number of documents, get the keys and pay the closing costs. You’ll pay fees to your lender, the county and/or state as well as a number of other entities involved in the property transaction. In Colorado, expect to pay between 1% and 4% of the home value in closing costs. You can find your county below to get a better idea.
Average Closing Costs by County
|County||Avg. Closing Costs||Median Home Value||Closing Costs as % of Home Value|
Our Closing Costs Study assumed a 30-year fixed-rate mortgage with a 20% down payment on each county’s median home value. We considered all applicable closing costs, including the mortgage tax, transfer tax and both fixed and variable fees. Once we calculated the typical closing costs in each county we divided that figure by the county’s median home value to find the closing costs as a percentage of home value figure. Sources: US Census Bureau 2015 5-Year American Community Survey, Bankrate and government websites.
You can break down closing costs by who receives the money. A significant amount usually goes to your mortgage lender, known as origination fees. Within that umbrella are underwriting fees, tax service, document preparation, broker fees, points and commitment fees. The total depends on what your particular lender charges you and isn’t the same across all lenders.
Another chunk of your closing costs goes toward third-party fees, such as for an attorney, appraisal, credit report and survey. Again, this amount varies on who provided the service as well as if you opted to use the service at all.
You also have to pay for title insurance. Most lenders require a policy, as it protects against past defects in the title. As the buyer, you have the option to purchase your own policy that insures you for the amount you paid to purchase the property. In Colorado, title insurance agencies are required to display current rates and fees, but generally expect to pay $1,000 to $2,000 according to Colorado’s Division of Insurance.
As the purchaser, you’re also required to pay a transfer tax. In some states, this is the responsibility of the seller, but in Colorado, most counties impose the tax on the home buyer. Most municipalities charge 0.01%, but you may find different percentages depending on the county.
If you’re a non-resident buying property in Colorado, you’re responsible for filing income tax withholding for any real estate in excess of $100,000. Usually, the title insurance company (or person you’re using for closing and settlement) will withhold the amount at closing. The form used for this is DR 1083, overseen by the Colorado Department of Revenue.
Details of Colorado Housing Market
Known for the Rocky Mountains, stunning outdoor scenery and a burgeoning tech scene, Colorado is home to 5.5 million people. This rectangular western state has seen a large influx of people in recent years, growing by over 91,000 people from 2015 to 2016 alone, according to the U.S. Census Bureau. Colorado was the seventh-highest state for population growth by percentage. It’s not terribly surprising. There’s a lot to attract newcomers to the Centennial State. For one, the state’s 103,600 square miles are packed with National Parks and Bureau of Land Management land open to hiking, camping and a variety of outdoor adventure. Plus, industry and tech are booming in Colorado.
The cities with the largest populations are Denver, Colorado Springs, Aurora, Fort Collins and Lakewood. Aurora, Fort Collins and Lakewood are suburbs of Denver and part of the same metropolitan statistical area. The greater Denver area along with Colorado Springs and Boulder, are known as the Front Range cities, located in the central and eastern half of the state, bordered by mountains to the west. Most of Colorado’s population resides along the Front Range, with a fraction of the population residing beyond in what’s known as the Western Slope.
Overall, Colorado has seen some of the highest price growth in the nation. In fact, Colorado home values have risen 8.8% in the last year, according to Zillow data. The median list price is $399,500, as of August 2017.
Looking for some area-specific stats? In August 2017, the median list price in Denver was $479,999 and median home value was $386,700. Looking north to Boulder, median home value was $687,400 and list price was $769,000 in August 2017. In SmartAsset’s Best Housing Markets for Growth and Stability, Boulder ranked highest for both factors for three years in a row. Fort Collins came in at number three, demonstrating Colorado’s strong housing market. In Fort Collins, the median home value was $359,000 and list price was $395,000, according to August 2017 data from Zillow. If you’re looking south of Denver, you’ll find Colorado Springs is less pricey, with a median home value of $256,300 and a median list price of $310,000 (in August 2017).
Local Economic Factors in Colorado
The Centennial State has the top spot on a number of lists for best economy, according to U.S. News 2017. Growth, employment and business environment were all factors in the study.
Colorado ranks number one for private aerospace employment concentration, and number four for high-tech performance, startup activity and STEM-based economy, according to the U.S. Chamber of Commerce and Choose Colorado. Key industries include bioscience, defense and homeland security, energy and natural resources and tourism. Ten Colorado-based companies made the 2017 Fortune 500 list, including Arrow Electronics, DaVita, DISH Network, Liberty Interactive and Ball.
Earnings in Colorado are also strong: In 2016, the per capita personal income (PCPI) was $52,059 which was 15th in the nation, according to the U.S. Bureau of Economic Analysis. The national average was $49,571. Looking at unemployment, in June 2017 Colorado’s unemployment rate was just 2.3% while the national rate was 4.4%.
Tax rates for Colorado residents aren’t bad, either. The state levies a 4.63% income tax, which is a decrease from 5%, the rate it was in years prior. Local and municipal governments can’t levy additional income taxes, either. However, local government can set sales tax rates on top of the 2.9% state tax, so actual sales tax will vary across the state. Colorado has one of the most decentralized revenue-raising structures in the country, with local governments setting property tax rates and sales tax. Residents are also protected from sharp increases by the 1992 “Tabor Act” which sets limits on state taxation power.
Set on moving to the mountainous state? You may find some savings, depending on where you move from. A single person with an income of $70,000 moving from San Jose, California to Boulder, Colorado would see a 10% decrease in average cost of living, mainly due to lower housing and food costs. If that same person moved instead from Chicago, Illinois to Denver, Colorado, it’d be an average of 4% lower due to lower housing costs. However a move from Austin, Texas to Colorado Springs, Colorado would only see a 3% lower cost of living. Try a cost of living calculator yourself by punching in your current town and where you’d like to live in the Centennial State.
Mortgage Legal Issues in Colorado
If you’re buying in Colorado, you’ll be relieved to know that sellers are required to fill out a property disclosure. While it’s no substitute for a home inspection, the seller’s disclosure will cover a number of issues such as zoning issues, water issues, electrical and structural problems. If the seller is aware of any issues, he or she is required to annotate it.
As for foreclosure, Colorado uses both judicial and non-judicial foreclosure proceedings, so it will depend on how the mortgage and deed were structured during the home-buying process. Again, power is pushed to Colorado counties and municipalities, so you may find widely varying local procedures depending on where the home is located. Colorado is also unique in that it uses Public Trustees for non-judicial foreclosures.
While both types of foreclosures (judicial and non-judicial) occur in Colorado, the most common seems to be non-judicial through a power-of-sale clause in the deed of trust (a mortgage document). At least 30 days after missing a mortgage payment, the borrower will be served information about foreclosure as well as the state hotline, and is given information on how to contact the lender’s loss-mitigation department. The lender files a Notice of Election and Demand for proceeds due, which is also served to the borrower. There’s a 110-day to 125-day window after that, where the borrower can pay what’s owed and begin regular payments again. The lender or foreclosing party must file a proof of debt ownership and the payment default with the public trustee, who oversees the process. The lender must also obtain a court order under Rule 120. The trustee will mail notice 45 to 60 days before the sale date. According to Colorado’s Weld County Public Trustee, the homeowner does not have the right of redemption after the house sells. Only a junior lien has that right, but must file the intent to redeem within 8 business days after the sale.
Colorado Mortgage Resources
|Resource||Problem or Issue||Who Qualifies||Website|
|Colorado Housing Finance Authority||Offers down payment assistance, closing cost assistance, low-income housing tax credits and special loan programs for the disabled and low-income individuals.||First-time homebuyers who meet income limits with a minimum credit score of 620 (for most loan programs).||https://www.chfainfo.com/|
|Home Affordable Refinance Program||Refinancing.||Single family homes and condos that fit within lending loan limits.||http://www.harp.gov/|
The Colorado Housing and Finance Authority (CHFA) helps Colorado homebuyers achieve homeownership by offering financial resources and affordable rental housing. Find homebuyer education both online and in-person, closing cost and down payment assistance programs, loan programs, foreclosure prevention and more.
An organization that works with CHFA is the Colorado Housing Assistance Corporation (CHAC), which also provides education and counseling as well as financial assistance.
Another loan program is the USDA. While there are restrictions on where you can use this type of loan, most of Colorado is deemed eligible by the rural and underdeveloped standards. To qualify you’ll have to see if you meet the income criteria.
Looking to prepare yourself for Colorado? Read our article on 15 things to know before moving to Colorado. While you’re at it, take a look at Colorado’s current mortgage rates to get an idea of what kind of mortgage you’d want to apply for.