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Whether you’re looking for the downtown energy of Denver or hoping for the peace and tranquility of a remote mountain town, Colorado offers plenty of opportunities to spend more time outside. Buying a home here isn’t easy, though, especially for first-time homebuyers on a budget. If you’re looking for your first home, the state’s housing finance agency, the Colorado Housing and Finance Authority (CHFA), offers a number of programs that can make the dream of owning a home a more affordable reality.
Colorado first-time homebuyer loan programs
The Colorado Housing and Finance Authority (CHFA) provides access to fixed-rate mortgages and financial help for both your down payment and closing costs. In general, you could be eligible for a CHFA program if you:
- Have a credit score of at least 620 (there can be exceptions if you do not have a credit score at all)
- Don’t exceed the 50 percent debt-to-income (DTI) ratio limit with a mid-FICO of 620 to 659, or 55 percent DTI limit with a mid-FICO of 660 or higher)
- Complete a homebuyer education class
- Meet income requirements (based on the loan program, the size of your household and the location of the home)
- Can contribute at least $1,000 to the purchase
- Fulfill your mortgage lender’s loan requirements
CHFA has a number of programs for homebuyers, including:
CHFA’s FirstStep and FirstStep Plus programs provide a 30-year fixed-rate FHA loan to first-time homebuyers, veterans or any buyer purchasing in a targeted area, along with down payment assistance if needed. In addition to meeting CHFA general loan requirements, the home you’re buying and your income must be within the program’s purchase price and income limits, respectively.
CHFA’s HomeAccess and HomeAccess Plus programs can provide a 30-year fixed-rate FHA or USDA loan to a first-time homebuyer or veteran who is either living with a permanent disability or is the custodial parent of an individual living with a permanent disability. Like other CHFA programs, there are income and purchase price limits, but if you’re eligible, you can also obtain up to $25,000 in down payment assistance with your loan.
CHFA’s SectionEight and SectionEight Plus Homeownership programs can provide a 30-year fixed-rate FHA or USDA loan to a first-time homebuyer or veteran who’s also receiving Section 8 assistance from a Section 8 agency. You can only combine the SectionEight Plus program with CHFA down payment assistance (more on that below); the standard SectionEight program doesn’t include this benefit.
CHFA’s SmartStep and SmartStep Plus programs provide 30-year fixed-rate FHA, VA or USDA loans and CHFA down payment assistance.
HFA Advantage and Preferred loans
CHFA also offers Fannie Mae HFA Preferred and Freddie Mac HFA Advantage loans for up to 97 percent financing, including an Advantage loan for low-income borrowers (called the Very-Low Income Program, or VLIP). These loans can also be paired with CHFA down payment assistance.
Colorado down payment assistance
CHFA offers two types of down payment assistance: a grant and a second mortgage.
With the CHFA down payment assistance grant, you can receive funds up to $25,000 or 3 percent of your first mortgage (whichever is less). The grant doesn’t have to be repaid. It can only be combined with a SectionEight Plus or SmartStep Plus first mortgage, however.
CHFA’s second mortgage provides assistance funds up to $25,000 or 4 percent of your first mortgage (whichever is less). You don’t have to repay this assistance until you pay off or refinance the first mortgage or sell your home. This option can be paired with a FirstStep Plus, HFA Plus, SectionEight Plus or SmartStep Plus first mortgage.
If you’re obtaining a HomeAccess first mortgage, you might be eligible for assistance, too: up to $25,000 in a deferred second mortgage. You won’t have to repay this assistance if you stay in the home for the full 30-year term.
Other first-time homebuyer loan programs
The CHFA isn’t the only option for first-time homebuyers in Colorado. The Colorado Housing Assistance Corporation offers low-interest loans for low- and moderate-income borrowers to help cover the down payment and closing costs. These loans are second mortgages and typically require monthly payments.
If your annual income is less than $188,250 and you’re buying somewhere on the Front Range, you might be eligible for the metroDPA program, which offers assistance in a three-year, forgivable second mortgage. You’ll need a credit score of 640 to qualify.
As you shop around for a mortgage, consider also looking into nationally available first-time homebuyer loan programs, as well, such as:
- FHA loans – If you have a lower credit score or limited savings, consider an FHA loan. These loans are widely available, have a minimum credit score of 580 and require a down payment as little as 3.5 percent.
- VA loans – If you’re a member of the military or veteran, you could qualify for a VA loan, which doesn’t require a down payment.
- USDA loans – USDA loans don’t have a down payment requirement, but are only available to borrowers buying in a USDA-eligible rural area. You typically need a credit score of 640 or higher to qualify.
- Good Neighbor Next Door program – This HUD program has a very low down payment requirement on homes in certain areas, coupled with the ability to save 50 percent on the purchase price.
Now that you know some options available to first-time homebuyers in Colorado, you’re ready to get started with your home purchase. Here are some next steps:
- Do your homework. If you’re ready to buy your first home and are interested in a Colorado Housing and Finance Authority program, register for an online homebuyer education course. Once you have your certificate of completion, browse different lenders through the agency’s website.
- Work on your credit score. It’s the most important factor in determining your mortgage rate, so focus on boosting your number.
- Compare lenders. Regardless of which program you choose, it’s important to shop around for mortgage offers. Interest rates are always changing, so if you find a rate that’s especially competitive, be sure to lock it.