Colorado First-Time Home Buyer Programs

Colorado First-Time Home Buyer Programs

One of the first steps to buying a house is obtaining financing and this can be a challenge for many. Good news, if you are a first-time home buyer there are many programs available to you as an alternative to a conventional mortgage. With so many options, it can be overwhelming to discern the differences between the programs and determine if you meet the eligibility requirements. Here is a summary of both the national first-time home buyer programs, as well as the first-time home buyer programs specific to the state of Colorado.

National first-time home buyer programs

Colorado First-Time Home Buyer Programs

✳️ FHA loans

This is one of the most popular first-time home buyer programs for people with lower credit scores and one of the easiest mortgages to qualify for. If you have a credit score of 580 or higher, the FHA will allow down payments as low as 3.5%. If your credit score falls between 500 and 580, you will need to make a 10% down payment. Mortgage insurance is required for the life of an FHA loan and cannot be canceled.

Positives

  • Low Down Payment for credit scores over 580
  • Flexible Credit Score Approval

Negatives

  • Larger down payment required for credit scores between 580 – 500

Eligibility

  • 3.5% Down Payment minimum
  • Credit Score of 500 or higher

Works Well For

  • First time home buyers with low and moderate incomes
  • People with a low credit score or without a lot of money for a down payment

If you are looking at an FHA loan, Luke Skar at the Mortgage Real Estate Blog has a list of important FHA Underwriting Guidelines That Every Home Buyer Should Know. Eric Janette from Dream Home Financing has a great article entitled How Much Are FHA Closing Costs?


✳️ VA loans

Mortgages are available to military members, veterans and surviving spouses which are guaranteed by the U.S. Department of Veterans Affairs (VA). Benefits include no down payment or private mortgage insurance required and the closing costs are quite low when compared to conventional mortgages. A VA funding fee is required, and the application process is slightly more complicated, but this option is great for veterans without a lot of money for a down payment.

Positives

  • No down payment required
  • Very few closing costs
  • No PMI private mortgage insurance required

Negatives

  • The application process is more lengthy than some programs
  • VA Funding Fee of 1.25 – 2.4% required based on down payment amount

Eligibility

  • Current or former military member, spouse or other beneficiaries
  • Credit Score of 620 or higher

Works Well For

  • Veterans or Active Military without a lot of money for a down payment

✳️ USDA Loans

If you are shopping for a home in a rural or semi-rural community, you might consider a loan from the United States Department of Agriculture (USDA). Like the VA loans, there is no down payment required and approval can be made for those with lower credit scores. You will not be eligible for a USDA loan if your income level is higher than 115% of the current U.S. median income or if you qualify for a conventional loan.

Positives

  • No down payment required
  • Can be approved with a low credit score

Negatives

  • Only available to those who don’t qualify for a conventional mortgage
  • Not available to homes in cities or urban areas

Eligibility

  • Limited to those who do not make more than 115% of the US median income
  • Home cannot be in cities or urban areas. The home must be in an eligible rural area.

Works Well For

  • People looking to live in a rural area with low to middle income.

✳️ Fannie Mae/Freddie Mac

The federal government created Freddie Mac and Fannie Mae in order to maintain liquidity in the mortgage markets. Like FHA these entities guarantee loans made by mortgage lenders. This means they buy back those loans so that the lenders have more money to loan to Future home buyers. Both companies have a number of first-time homebuyer options for individuals with low down payment cash or low credit scores. Both companies offer options with adjustable-rate terms and cancelable private mortgage insurance (PMI).

Positives

  • Very low down payment required
  • Can be approved with a low credit score
  • Many different loans types available

Negatives

  • May have higher interest rates

Eligibility

  • Variable income requirements

Works Well For

  • People with limited money for a down payment, or a low credit score or those who do not qualify for other federal options like the VA loan.

In addition to these programs, Bill Gassett over at Maximum Real Estate Exposure has a list of additional “Mortgage programs For First Time Home Buyers“.

Colorado First-Time Home Buyer Programs

CHFA First-Time Home Buyer Loan Programs

The Colorado Housing and Finance Authority (CHFA) offers purchase and refinance loans, as well as down payment and closing cost assistance for first-time home buyers.

CHFA defines a first-time home buyer as anyone who hasn’t owned or co-owned a home in the past three years. Veterans or repeat home buyers in Colorado can get CHFA loans and assistance if they meet certain requirements.

CHFA General Requirements

  • All borrowers have a mid-credit score of 620 or higher (CHFA Advantage program requires a mid-credit score of 680)
  • Total borrower income must not exceed CHFA’s income limits
  • Attend a CHFA-approved homebuyer education class either in person or online prior to loan closing. Required for purchase loan only, not refinancing loans.
  • Make a minimum required investment of at least $1,000 toward the purchase of the home

In addition to meeting CHFA program requirements, borrowers must qualify according to the underwriting guidelines as determined by one of CHFA’s Participating Lenders.


✳️ CHFA FirstStep Loan

The CHFA FirstStep program CHFA provides access to 30-year, fixed-rate mortgages. Homebuyers don’t need to have a credit score to qualify, but if you do have a credit score, it must be at least 620. As with other CHFA programs, your income can’t be higher than the local median if you want to take advantage of this program.

Positives

  • Very low down payment required; as little as $1,000
  • Can be approved with a low or no credit score
  • Can combine with down payment and closing cost assistance.

Negatives

  • May have higher interest rates based on down payment amount
  • Some income limits depending on home location and household size

Eligibility

  • Standard CHFA requirements

Works Well For

  • People with limited money for a down payment, or a low credit score or those who do not qualify for other federal options.

✳️ CHFA SmartStep Loan

Designed for borrowers with a credit score of 620 or higher, the SmartStep mortgage program offers CHFA’s lowest mortgage interest rates. You can combine SmartStep with a Mortgage Credit Certificate and down payment assistance for added savings. The CHFA SmartStep program provides down payment assistance for FHA, FHA 203(k), VA and USDA Rural Development loans.

Positives

  • Very low down payment required; as little as $1,000
  • Can be approved with a low or no credit score
  • Not restricted to first-time home buyers
  • Can combine with a Mortgage Credit Certificate and down payment assistance for added savings.

Negatives

  • May have higher interest rates based on down payment amount
  • Some income limits depending on home location and household size

Eligibility

  • Have a credit score of 620 or higher
  • Not exceed the statewide median income limit regardless of household size
  • Have a maximum loan limit within the limit determined by the applicable FHA,VA or USDA-RD guidelines.
  • Contribute at least $1,000 toward the purchase of the home.

Works Well For

  • People with limited money for a down payment, or a low credit score or those who do not qualify for other federal options.

✳️ CHFA Preferred Loan

If you can make a 3% down payment and have a 620 credit score, the CHFA Preferred program provides lower mortgage insurance prices. There’s also an option to pay your entire mortgage insurance bill at closing for lower monthly payments. If you don’t have 3%, but have at least $1,000, you can use a CHFA down payment assistance program to make up the difference.

Positives

  • As little as $1,000 needed toward a down payment
  • Mid-tier credit score requirements
  • Cheaper mortgage insurance with the option to pay upfront
  • Once you reach an 80% loan-to-value ratio, you can also cancel monthly mortgage insurance payments.

Negatives

  • May have higher interest rates based on down payment
  • Income limits dependent on home location and household size

Eligibility

  • A credit score of at least 620 or more
  • Standard CHFA Requirements

Works Well For

  • People looking for a low down payment, or those who do not qualify for the CHFA Advantage Loan.

✳️ CHFA Advantage Loan

CHFA Advantage Loan is one of the most straightforward loan types. If you have at least a 680 credit score, this loan offers you fixed-rate mortgages without a private mortgage insurance requirement. A low 3% down payment makes this an attractive option.

Positives

  • No private mortgage insurance (PMI) requirements
  • Low down payment
  • Potential to combine with Mortgage Credit Certificate tax credit to save even more

Negatives

  • Higher credit score required compared to other CHFA loans
  • Income limits dependent on home location and household size

Eligibility

  • A credit score of at least 680 or more
  • Standard CHFA Requirements

Works Well For

  • People with a good credit score and limited funds who can’t afford a down payment.

✳️ CHFA HomeOpener Loan

The Home Opener Loan has the same eligibility requirements as the other CHFA loans, but there are no purchase price limits. Higher incomes may qualify for this loan. As little as $1,000 is required for a down payment.

Positives

  • Mid-tier credit score required
  • Low down payment
  • Higher incomes may qualify
  • Low down payment
  • No purchase price limits

Negatives

  • Higher interest rates may apply based on down payment amount
  • Income limits dependent on home location and household size

Eligibility

  • A credit score of at least 620 or more
  • Standard CHFA Requirements

Works Well For

  • People with a higher income, or shopping for a higher priced home with little money saved for a down payment.

✳️ CHFA HomeAccess Loan

The HomeAccess Loan is designed to assist lower the cost of home ownership for those buyers living with disabilities or a parent of a child with disabilities. As little as $500-$750 is required for the down payment and up to $25,000 is available in down payment assistance.

Positives

  • Mid-tier credit score required
  • Low down payment ($500-$750)

Negatives

  • Additional eligibility requirements

Eligibility

  • A credit score of at least 620 or more
  • Standard CHFA Requirements
  • Must be an adult with a permanent disability as defined by the Social Security Administration or the parent of a child with a permanent disability.
  • To qualify, your income must fall within 80-100% of the median for your area, including any benefits from federal Supplemental Security Income and Social Security Disability Insurance programs.

Works Well For

  • People meeting the disability requirement who can take advantage of the low down payment and down payment assistance.

✳️ CHFA Section Eight Homeownership Loan

If you have been using Section 8 rental vouchers for at least 1 year and meet the standard CHFA requirements, the CHFA SectionEight Home ownership loan might be for you. You must also meet the HUD income requirements to qualify for this loan type.

Positives

  • Low down payment required
  • Mid-tier credit score
  • Can combine with additional down payment and closing cost assistance via a CHFA grant

Negatives

  • Must meet income limits from both CHFA and HUD

Eligibility

  • A credit score of 620
  • Have used Section 8 rental vouchers for at least 1 year
  • Standard CHFA requirements
  • Meet HUD’s income requirements

Works Well For

  • People who have been using Section 8 rental vouchers for at least 1 year and are ready to move with a low down payment.

✳️ CHFA Down Payment Assistance Grant

The Down Payment Assistance (DPA) Grant is a grant that can be used to provide further assistance to first-time home buyers. These grants offer up to 4% of the mortgage loan amount to apply towards the down payment and closing costs. For example, if you have a $300,000 mortgage, that means $12,000 toward initial homeownership costs.

DPA grants can help home buyers not only save money upfront but also have leftover funds to improve their new home and start saving for the future. Best of all, you never have to pay the money back.

Positives

  • No repayment required
  • Receive up to 4% of your mortgage toward down payment and closing costs

Negatives

  • Does not count toward minimum down payment requirement

Eligibility

  • Standard CHFA requirements

Works Well For

  • Home buyers taking advantage of another type of loan that still needs more assistance with down payment and closing costs.

✳️ CHFA Second Mortgage Loan

If you are in the market for a Second Mortgage, CHFA offers first-time home buyers a second mortgage of up to 5% of their primary loan amount. For example, it means you’d get a $15,000 loan if you have a $300,000 mortgage. The main benefit is that the second loan doesn’t carry any interest, but it does require repayment.

Positives

  • 0% interest
  • Request up to 5% of your mortgage amount
  • Has deferred repayment

Negatives

  • Must be repaid

Eligibility

  • Standard CHFA requirements

Works Well For

  • People using CHFA programs that need additional help toward homeownership.

✳️ CHFA Mortgage Credit Certificate

A Mortgage Credit Certificate (MCC) is for first-time home buyers and allows them to claim 20% of their annual mortgage interest as a tax credit on their federal return. To qualify, you’ll need to meet CHFA and HUD income requirements, credit score, and profile requirements. Your remaining interest can be claimed as a home mortgage interest deduction which when coupled with a CHFA loan can be a big cost savings.

Positives

  • Reduces federal tax bill

Negatives

  • Must both CHFA and HUD income limits

Eligibility

  • Standard CHFA requirements

Works Well For

  • People already pursuing a CHFA loan that need additional help with reducing their federal tax bill.

How to Apply for a National Mortgage Loan Program

Colorado First-Time Home Buyer Programs

FHA, VA and other national mortgage loans programs are so popular because of their low down payment options and low credit score requirements. These programs make home ownership possible for people with less than perfect credit and limited savings for a down payment.

To apply for one of these programs, you can get started with the following tasks.

  • Get a copy of your credit report and check for errors
  • Check your credit score
  • Get pre-approved before starting the house hunting process
  • Hire an experienced REALTOR®
  • Become familiar with the Federal Loan requirements
  • Fully understand all of your homeownership and living costs and have a budget in mind
  • Find a reputable Lender and ask about national and state programs for first-time home buyers.

How to Apply for a CHFA Loan Program

If you are a resident of Colorado and believe that you are eligible for a CHFA loan, the best place to start is with a reputable lender. If you do not have a lender that you are working with, talk to your Realtor, or give us a call and we can give you some lenders that specialize in CHFA loans. Here are some steps to get you started.

  • You must complete a CHFA-sponsored homebuyer education class before closing on your home loan under a CHFA program. It is recommended to take the class early in your search so that you are prepared to find a lender and real estate agent who are the best fit for you.
  • Contact a CHFA Participating Lender:
    • CHFA loan programs are available through our statewide network of CHFA Participating Lenders. A CHFA Participating Lender will help you determine which CHFA loan programs will work for you. They will walk you through the entire loan process from application to closing.
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