A Guide For First-Time Home Buyer Programs In Colorado

It’s safe to say that buying your first home is both exciting and stressful. Exciting because, for many, buying a house is a lifelong dream fulfilled. Stressful because, at the same time, a home purchase is typically the culmination of years of planning and saving your hard-earned dollars.

But did you know there are many first-time home buyer programs available to lighten your upfront costs? If you’re a first-time home buyer in Colorado, keep reading to learn more about the loan options and programs that may be available to help pave your path to homeownership.

Colorado Home Buyers At A Glance

When you’re buying a house in Colorado – especially your first one – it’s crucial to understand local home buyer characteristics and housing market trends to ensure you’re prepared for such a significant financial investment. Here’s a snapshot at what you can expect:

SOURCE: Average home sale price collected from the Colorado Association of REALTORS, average credit score by state from CNBC and household income data from U.S. Census.

First-Time Home Buyer Loan Options In Colorado

To buy a house, you need to understand the types of mortgage loans available and the potential benefits and drawbacks associated with each loan option. There are several mortgage types to consider, including:

• Conventional loans: A conventional loan is a mortgage provided by a private lender. Because these mortgages are offered without government backing, conventional loans often come with stricter qualification requirements.
• FHA loans: An FHA loan is a mortgage backed by the Federal Housing Administration (FHA). Because they’re insured by a government agency, FHA loans pose a lower risk to lenders and therefore may offer lower credit score and down payment requirements.
• VA loans: A VA loan is a type of mortgage specifically available to active service members, veterans or eligible surviving spouses. These loans are backed by the U.S. Department of Veteran Affairs (VA) and, in addition to lower credit score requirements, down payments are not required.
• USDA loans: A USDA loan is mortgage targeted at helping low- to moderate-income families purchase a home in designated rural areas. Backed by the U.S. Department of Agriculture (USDA), these loans are typically offered with lower rates and no down payment requirement.

Colorado First-Time Home Buyer Grants And Down Payment Assistance

Even if prospective home buyers meet credit and DTI requirements to get a mortgage, there’s still the small matter of saving for a down payment and closing costs, which for some families can take years or longer. This is where down payment assistance comes into play, offering to lighten the upfront costs associated with homeownership.

CHFA

As we’ll talk about further down, the CHFA offers grants and down payment assistance options that can be combined with their loan options for additional home buying support. Home buyers using a CHFA first mortgage can also consider:

• Down payment assistance grant: This grant is available for up to 3% of the first mortgage loan amount and does not require repayment.
• Down payment second mortgage: This second mortgage is available for up to 4% of the first mortgage loan amount. Repayment of the loan is deferred until the first mortgage is refinanced, paid off or sold.

CHAC

The Colorado Housing Assistance Corporation (CHAC) offers home buying education courses and counseling for first-time home buyers. Alongside these resources, it also offers low-interest loans to help low- and moderate-income borrowers pay for expensive down payment and closing costs.

• Down payment assistance loan: This down payment assistance option comes in the form of a second mortgage. To be considered a first-time home buyer, borrowers must not have had ownership in a primary residence for at least 3 years prior to the loan closing date. Completion of a home buying education course is also required.

CRHDC

The Community Resources And Housing Development Corporation (CRHDC) is a nonprofit organization with a mission to create a state where every community has safe, affordable and attainable housing.

• NeighborhoodLIFT down payment assistance: The NeighborhoodLIFT program provides Colorado home buyers with up to $15,000 in down payment assistance. Unlike some of the other programs on this list, it isn’t limited to first-time home buyers. To qualify, home buyers must complete a home buying education course and meet local income limits. The program is only eligible for use in Adams, Arapahoe, Denver, Douglas and Jefferson counties.

Colorado First-Time Home Buyer Programs

The state of Colorado offers more to its residents than beautiful mountain views and ample opportunities for outdoor exploration. The Centennial State also has a handful of statewide homeownership assistance programs that can be used to turn the dream of homeownership into a reality.

CHFA

The Colorado Housing And Finance Authority (CHFA) offers several programs focused on creating opportunities for affordable housing and community development, including:

• CHFA FirstStep: The CHFA FirstStep program offers a 30-year, fixed-rate FHA loan with the option to add a second, no-interest mortgage called FirstStep Plus. The maximum loan amount is 4% of the first mortgage loan amount, which can be used toward down payment and closing costs. To qualify, borrowers need a minimum credit score of 620 and a debt-to-income (DTI) ratio no higher than 50% – 55%, depending on credit score. This program is available to veterans and first-time home buyers who have not owned a principal residence in the last 3 years.
• CHFA HomeAccess: The CHFA HomeAccess program offers a 30-year, fixed-rate FHA, USDA or VA loan with the option to add a second, no-interest mortgage called HomeAccess Plus. The maximum loan amount is $25,000 to be used as down payment and closing cost assistance. Borrowers can even defer payments until the first loan is paid. To qualify, borrowers must have a credit score of 620 and a DTI ratio no higher than 50% – 55%, depending on credit score. This program is available to first-time home buyers and qualified veterans with a permanent disability, or buyers with sole or joint custody or legal guardianship of a child or individual with a permanent disability.
• CHFA SectionEight: The CHFA SectionEight program offers a 30-year, fixed-rate FHA or USDA loan. There’s also optional, non-repayable grant or second mortgage programs available for up to 3% or 4% of the first mortgage loan amount. Proceeds can be used for down payment and closing costs. To qualify, borrowers need a credit score greater than 620 and a DTI ratio lower than 50% – 55%, depending on credit score. A statewide income limit of $148,120 also applies.
• CHFA SmartStep: The CHFA SmartStep program offers a 30-year, fixed rate FHA, FHA 203(k), VA or USDA loan. This loan has the option to be paired with the CHFA DPA Grant or Second Mortgage options mentioned above. To qualify, borrowers need a credit score greater than 620 and a DTI ratio lower than 50% – 55%, depending on credit score. This program is not limited to first-time home buyers.

The Bottom Line

Coloradoans, listen up! If saving to buy your first house has you feeling frustrated or overwhelmed, it might be comforting to know there are several loan options and down payment assistance programs available to help along the way.

With these first-time home buyer programs in your back pocket, homeownership may not be such a distant dream. If you’re ready to take the next step, get approved for a mortgage with Rocket Mortgage® today and begin browsing for your dream home.