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Colorado's median home sales price hit $606,800 in January 2025. This number might seem daunting if you're a first-time homebuyer in the state. The good news is that several programs and options can make your first home purchase more achievable than expected.
The typical down payment in Colorado is $70,000. You can start with just 3% down through conventional loans or 3.5% with FHA loans. The Colorado Housing and Finance Authority's support includes grants up to $25,000 or 3% of your home's purchase price to help with the down payment.
Let us walk you through the essentials of buying your first home in Colorado. You'll learn about credit score requirements, loan programs, and assistance options that can turn your dream of homeownership into reality.
Who Qualifies as a First-Time Homebuyer in Colorado
People often think they need zero property ownership history to be a first-time homebuyer. Colorado's definition turns out to be much more inclusive and opens doors for many buyers who might not see themselves as first-timers.
Official definition and requirements
Colorado follows the U.S. Department of Housing and Urban Development (HUD) definition for first-time homebuyers. A first-time homebuyer status applies to anyone who hasn't owned a principal residence in the last three years. Your three-year qualification period starts from your new home's purchase date.
Basic requirements for Colorado's first-time homebuyer programs include:
- The property must be your primary residence
- Your credit score should meet minimums (usually 620, though 660+ gives you better debt-to-income options)
- Your debt-to-income ratio can go up to 50% (or 55% with strong credit)
- You need to put at least $1,000 of your own money toward the purchase
- You can't own other residential property at closing
- Most assistance programs require completion of a homebuyer education course
Exceptions to the three-year rule
Some special situations let you qualify as a first-time homebuyer even with previous ownership.
You might be eligible if you're:
- A single parent who owned a home with an ex-spouse during marriage
- A displaced homemaker who shared property ownership with a spouse
- Someone who owned a manufactured home without permanent foundation attachment
- Someone whose property violated building codes and repairs would cost more than building new
These rules help people who faced foreclosure, single parents, stay-at-home partners with previous joint ownership, and those whose earlier property wasn't considered livable.
Income limits by county
Colorado doesn't set one standard income limit for first-time homebuyers. Limits change based on your county and the specific assistance program you choose.
Colorado Housing and Finance Authority (CHFA) programs have income limits that vary by county and household size, going up to $162,000 in some areas. The 2024 income limits get yearly updates based on median area incomes. Boulder County's limits run higher than places like Pueblo County.
Income categories split into:
- 30% of Area Median Income (AMI)
- Very Low Income (50% AMI)
- Low Income (80% AMI)
Each county sets its own limits for these groups. A family of four in Denver-Aurora-Lakewood MSA counts as "Low Income" with earnings up to $102,650. The same family in Pueblo qualifies with income up to $75,350.
Financial Requirements for Colorado First-Time Buyers
Getting a mortgage in Colorado means meeting specific financial requirements that change based on your loan type and program. Learning these requirements early will help you save time and get ready for a successful application.
Credit score minimums for different loan types
Your credit score affects your loan program eligibility and interest rates by a lot.
Colorado lenders need these minimum scores:
- FHA loans: Minimum 580 for a 3.5% down payment; 500-579 needs 10% down
- VA loans: VA doesn't set an official minimum, but most lenders ask for at least 640
- USDA loans: Minimum 640 for optimized processing
- Conventional loans: Usually 620, but you'll get better terms with higher scores
- CHFA programs: Minimum 620, with better debt-to-income options when scores reach 660+
Debt-to-income ratio limits
Lenders look closely at how much of your monthly income goes to debt payments. Most conventional loans in Colorado max out at 45%, though some go up to 50% if you have other strong factors. CHFA programs let you go up to 50% DTI with credit scores between 620-659, or even 55% DTI when your score is above 660. Down payment assistance programs usually want your housing expenses to stay at or below 35%.
Down payment expectations
First-time buyers can access many assistance options even though Colorado's typical down payments are high. CHFA gives you two main options:
- Second mortgage loans up to 4% of your first mortgage (max $25,000) that you can pay back later
- Grants up to 3% of your first mortgage (max $25,000) that you never have to repay
Both programs need you to put in at least $1,000 of your own money toward the purchase.
Closing cost considerations
Closing costs in Colorado usually run between 2-5% of what you pay for the house. For an average-priced Colorado home, these costs add about $4,000-$4,500. You'll pay for things like appraisals ($300-$500), inspections ($300-$500), loan origination fees, title insurance, and prepaid taxes. Many first-time buyer programs in Colorado are a great way to get help with closing costs and down payments, making it easier to buy a home.
Best Loan Programs for Colorado First-Time Homebuyers
First-time buyers in Colorado have several government-backed programs that beat traditional financing options.
FHA loans for lower credit scores
FHA loans are the most available options to Colorado first-time homebuyers who face credit challenges. These mortgages let you put down payments as low as 3.5% if you have a minimum credit score of 580. Buyers with credit scores between 500-579 can still qualify by putting down 10%.
The Federal Housing Administration's insurance allows lenders to offer better terms to people without stellar credit histories. These loans attract first-time buyers because they were created for people who have less-than-perfect credit or limited credit history.
VA loans for military members and veterans
VA loans give active-duty service members, veterans, and eligible surviving spouses the best mortgage benefits. These loans require no down payment whatsoever and come with low interest rates without private mortgage insurance. VA loans stand out as a lifetime benefit that you can use multiple times. While the VA doesn't set minimum credit score requirements, Colorado lenders usually want scores of at least 640.
USDA loans for rural Colorado properties
USDA loans make sense if you want to buy property outside urban areas. These mortgages need no down payment and offer 100% financing. USDA loans come with lower interest rates and reduced mortgage insurance costs - only 0.5% of the loan amount annually. The program helps people with low income buy homes in eligible rural areas.
Conventional loans with 3% down options
Conventional mortgages let first-time homebuyers in Colorado purchase homes with just 3% down. Fannie Mae's 97% loan-to-value options work specifically for first-time buyers. Lenders might accept combined loan-to-value ratios up to 105% with eligible Community Seconds loans.
Colorado-Specific Assistance Programs
Colorado offers several state-specific programs to help first-time buyers get into homes, beyond what federal loan programs provide.
CHFA down payment assistance options
The Colorado Housing and Finance Authority (CHFA) gives buyers two main ways to get help. Their Down Payment Assistance Grant puts up to $25,000 or 3% of your first mortgage amount in your pocket with no need to pay it back.
You could also get their Second Mortgage Loan that covers up to $25,000 or 4% of your first mortgage as a deferred loan. CHFA First Generation helps qualified buyers with up to $25,000 in down payment assistance through a deferred second mortgage.
Grant vs. second mortgage considerations
Grants are great because you never have to pay them back - perfect if you plan to stay in your home a long time. Second mortgages give you more money (4% instead of 3%) but you'll need to pay them back eventually.
You won't have to worry about payments until you sell, refinance, or move out of the home. You'll need to put in at least $1,000 of your own money whatever option you pick.
Metro DPA for Front Range buyers
Front Range buyers can tap into metro DPA, which helps with a no-payment, zero-interest 30-year deferred second loan. The program works for people earning up to $195,600.
You'll need:
- A credit score of at least 640 (sometimes 620)
- A home purchase in specific Front Range areas (from Castle Rock to Wellington)
- The ability to get approved for a regular 30-year fixed-rate mortgage (FHA, VA, USDA, or conventional)
Required homebuyer education courses
CHFA wants you to take their approved homebuyer education course before closing your loan. Classes are free in-person and available online in English and Spanish across Colorado. Your certificate stays good for 12 months - that's how long you have to get under contract. These courses teach you everything about budgeting, credit scores, finding the right professionals, costs of buying, and what happens after you close.
Your First Step: Clear Rate Mortgage & First Time Homebuyer In Colorado
Colorado’s housing market challenges first-time homebuyers, but many paths can lead to ownership. Whether you qualify under the standard three-year rule or special cases, you may unlock support through valuable assistance programs.
Being financially prepared is key. FHA loans start with credit scores from 580, while conventional options begin at 620. With debt-to-income ratios up to 55%, flexible solutions exist. CHFA down payment aid offers grants or second loans up to $25,000 to help close the savings gap.
Federal and state programs together make homeownership more realistic than expected. Buyers who take education courses and set practical goals on budget and location can succeed in Colorado’s real estate market. Clear Rate Mortgage is here to guide you, prequalify now! and make your dream home a reality.
FAQs
1. Is it possible to buy a fixer-upper as a first time homebuyer in Colorado?
Yes, you can buy a fixer-upper if the property meets safety and livability standards. Some programs also support renovation loans that combine purchase and repair costs.
2. Can a first time homebuyer in Colorado use gift funds for a down payment?
Yes, many programs allow gift funds from relatives or close friends to cover part of your down payment. You’ll typically need a letter confirming that the gift doesn’t require repayment.
3. Do first time homebuyers in Colorado have to pay mortgage insurance?
Most buyers do if their down payment is below a certain percentage. However, the cost and terms can vary depending on your loan type and lender guidelines.
4. Are their property location limits for a first time homebuyer in Colorado?
Some assistance programs only apply to specific cities or counties. It's important to check eligibility by area before choosing a loan or property.
5. Can a first time homebuyer in Colorado buy a condo or townhome?
Yes, condos and townhomes can qualify as long as they meet program guidelines. The home must be your primary residence and comply with lending standards.
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