One of the biggest surprises for first-time buyers: the down payment isn't the only cash you need at closing. Closing costs — the collection of lender fees, third-party service fees, prepaid items, and government charges — typically add another 2–5% of the loan amount to your out-of-pocket requirement. On a $400,000 purchase, that's $8,000–$20,000 on top of the down payment. Here's exactly what you're paying and why.
Total Cash to Close = Down Payment + Closing Costs - Credits
Before we break down individual fees, understand the structure:
Cash to close formula: Down payment + Lender fees + Third-party fees + Prepaids + Escrow setup – Seller credits – Lender credits = Cash to close
Lender Fees (Section A of Loan Estimate)
These are fees charged by your lender for originating the loan.
Origination fee: The lender's core profit charge — typically 0.5–1.5% of the loan amount, or a flat fee. On a $400,000 loan at 1%: $4,000. Some lenders charge no origination fee but make their margin in the rate.
Discount points: Prepaid interest to permanently lower your rate. Each point costs 1% of the loan amount and typically reduces rate by ~0.25%. Optional — you choose whether to pay points.
Application fee: Some lenders charge $300–$500. Many don't. Ask upfront.
Rate lock fee: Rarely charged separately — usually built into the rate or origination fee.
Third-Party Fees
Services You Cannot Shop For (Section B)
Appraisal: $500–$800 for a standard SFR appraisal. Ordered by the lender; you pay.
Credit report: $25–$75. Lender pulls your credit for underwriting.
Flood determination: $15–$30. Third-party company determines if property is in a FEMA flood zone.
Tax service/monitoring: $50–$100. Lender ensures property taxes are paid during the loan term.
Services You Can Shop For (Section C)
Title search: $200–$500. Research of public records to verify clear title.
Title insurance — lender's policy: $300–$700 typically. Required by lender; protects lender against title defects.
Title insurance — owner's policy: $400–$800+. Optional but strongly recommended; protects you against title defects after closing. In Florida, the seller traditionally pays for the owner's policy; in Colorado, it's negotiable.
Settlement/closing fee: $400–$1,000. The title company or closing attorney's fee for coordinating and conducting closing.
Survey: $300–$700 if required. Confirms property boundaries.
Attorney fees (Florida): Some Florida closings use real estate attorneys instead of title companies — attorney fees $500–$1,500.
Government Fees (Section E)
Recording fees: County recorder charges to record the deed and mortgage. Typically $50–$200 in Colorado; varies by county and document length in Florida.
Transfer taxes:
- Florida: Documentary stamp tax on the deed ($0.70 per $100 of purchase price) + intangible tax on the mortgage ($0.002 per dollar of loan amount). On a $400,000 purchase with $380,000 loan: ~$2,800 deed stamps + $760 intangible tax.
- Colorado: Transfer tax is minimal ($0.01 per $100 in some counties); documentary fee $0.05 per $100 state-wide.
Florida's doc stamp tax is a significant cost — plan for it.
Prepaid Items (Section F)
These aren't really "costs" — you're prepaying expenses that will be ongoing.
Homeowner's insurance: 12 months paid upfront at closing. On Colorado: $1,200–$2,500 (SFR). On Florida coastal: $3,000–$8,000+.
Mortgage interest prepaid: Interest from your close date to the end of the month. If you close on the 15th, you prepay 15–16 days of interest. On a $400,000 loan at 6.75%: ~$73/day × 15 days = $1,095.
Property taxes (prorated): Seller pays taxes from Jan 1 to close date; you may be reimbursed or charged depending on when taxes are due and whether the seller has paid.
Initial Escrow Setup (Section G)
Lenders collect 2–3 months of property taxes and homeowner's insurance upfront as a cushion for your escrow account:
- 2 months taxes: on $400,000 CO home (0.55% tax): ~$367
- 2 months insurance: on CO home: ~$200
- Total escrow setup (Colorado): approximately $567
- Total escrow setup (Florida coastal): significantly higher due to insurance premiums
Typical Total Closing Cost Ranges
| Location | Purchase Price | Closing Costs (excl. down payment) |
|---|---|---|
| Colorado (SFR, inland) | $450,000 | $8,000–$13,000 |
| Colorado (FHA) | $450,000 | $10,000–$15,000 (includes MIP) |
| Florida (inland, no doc stamps) | $380,000 | $9,000–$14,000 |
| Florida (coastal, doc stamps + insurance) | $450,000 | $14,000–$22,000+ |
| Florida (with coastal insurance + flood) | $500,000 | $18,000–$28,000+ |
Florida is more expensive to close primarily because of the documentary stamp tax and higher insurance prepaids.
How to Reduce Closing Costs
Seller concessions: Ask the seller to pay a portion of your closing costs. FHA allows up to 6%; conventional allows 3% (at LTV 90%+). On a $400,000 purchase, a 3% seller concession = $12,000 toward your costs.
Lender credits: Accept a slightly higher interest rate in exchange for lender credit toward closing costs. Good strategy if you plan to refinance within 5 years and want to minimize upfront cash.
Shop Section C services: Get competing title insurance and settlement fee quotes — can save $500–$1,500.
Close later in the month: Closing on the 28th vs. the 2nd means 2 days of prepaid interest instead of 28. Minor savings but real.
Use DPA programs: CHFA (CO) and SHIP (FL) can cover closing costs in addition to down payment — reducing total cash to close dramatically.
FAQ
Can I roll closing costs into the loan? Generally no on purchase transactions — the loan amount is based on purchase price, not purchase price + costs. Exception: FHA MIP is rolled in by default. VA funding fee is rolled in. Renovation loans (203k) can include improvement costs.
Can I negotiate lender fees? Yes — Section A (origination) is directly negotiable. Some lenders will reduce or waive origination fees in exchange for a slightly higher rate, or vice versa.
Are closing costs tax-deductible? Discount points on a primary residence purchase may be deductible in the year paid. Most other closing costs are not immediately deductible but add to your cost basis for capital gains purposes when you sell.
I'll Give You a Closing Cost Estimate Before You Shop
📞 970-708-9624 | tj@taytoncapitalllc.com
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