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The median home sales price in Colorado has reached $606,800 as of January 2025, which might make buying your first home seem overwhelming. The good news for every first-time homebuyer in Colorado is you don't need to save the average down payment of $40,560 to make your homeownership dreams real.
Colorado's assistance programs for new homebuyers are among the most complete in the country. First-time buyers can get down payment assistance up to $25,000 or 3% of their mortgage amount through the Colorado Housing and Finance Authority (CHFA). Better yet, funding remains available for 95% of the state's 82 down payment assistance programs.
Let's explore the best loan programs and assistance options available for Colorado first-time homebuyers in this piece. We'll help you understand which options suit your situation best, from FHA loans with lower down payments to CHFA's specialized programs.
Federal Loan Programs for Colorado First-Time Buyers
Federal loan programs are a vital stepping stone for Coloradans who want to buy their first home. These government-backed options help people become homeowners when they might not qualify otherwise, especially with Colorado's rising housing costs.
FHA Loans: Lower Down Payments and Flexible Credit
FHA loans give first-time Colorado homebuyers a great path to ownership when they have limited savings or credit issues. You need just 3.5% down payment with credit scores of 580 or higher. Borrowers who have scores between 500-579 can still qualify if they put 10% down.
These loans work well because they have more flexible credit standards and competitive interest rates. Lenders can offer better terms to borrowers who might not qualify for regular loans since the Federal Housing Administration insures these mortgages.
All the same, buyers should know that mortgage insurance premiums stay with an FHA loan forever, unlike regular loans where you can drop the insurance later.
VA Loans: Zero Down Payment for Veterans
Military service members, veterans, and their eligible spouses can get maybe even the best mortgage deal out there. VA loans need no down payment at all and usually come with interest rates lower than regular loans.
The VA loan program has these great benefits for Colorado's first-time buyers:
- No private mortgage insurance needed
- No penalties for early payoff
- Easier qualification rules
You'll need 90 days of wartime service, 181 straight days during peace, or six years in the National Guard or Reserves to qualify.
USDA Loans: Rural Housing Opportunities
USDA loans give you another zero-down payment choice if you want to buy in Colorado's rural or suburban areas. These loans help families with low-to-moderate income buy homes in USDA-approved rural parts of Colorado.
Most USDA loans need a credit score of 640 or better and come with income limits that change based on where you live. The best part is you'll get competitive rates and pay less for mortgage insurance compared to other programs.
Conventional Loans with First-Time Buyer Options
Regular loans, though not backed by the government, give first-time Colorado homebuyers some solid choices. The Conventional 97 program lets you buy with just 3% down if your credit score is 620 or higher.
Regular loans let you drop mortgage insurance once you own 20% of your home's value. This cuts your monthly payments quite a bit over time, though you might pay higher interest rates at first if you make a smaller down payment compared to government loans.
Colorado Housing and Finance Authority (CHFA) Programs
CHFA helps make homes more available to first-time buyers across Colorado through specialized programs. These programs work with local lenders to give buyers competitive financing with special benefits.
CHFA First Step and First Step Plus
CHFA First Step gives you the lowest interest rate among their programs, which could save you thousands on your loan. First-time homebuyers, veterans, and people buying in targeted areas can get this 30-year fixed-rate FHA loan.
The First Step Plus program adds a zero-percent second mortgage that covers up to 4% of your first mortgage amount for down payment and closing costs. You'll need a credit score of at least 620 and must complete CHFA-approved homebuyer education.
CHFA Smart Step and Smart Step Plus
Smart Step gives you more choices by adding VA and USDA-RD loans to FHA options. The Smart Step Plus program lets you pick between a non-repayable grant up to 3% of your mortgage or a second mortgage up to 4%. This program also comes with higher income limits and makes calculating your income easier.
CHFA Preferred and Preferred Plus
CHFA Preferred uses conventional loans instead of government-backed ones, which can save you money through lower mortgage insurance costs. You only need 3% down for this 30-year fixed-rate loan. The program caps mortgage insurance coverage at 18% if your income is at or below 80% AMI. Preferred Plus adds the option of a second mortgage up to 4% of your first mortgage amount.
CHFA Down Payment Assistance Options
CHFA's two main assistance options help make buying easier:
- Down Payment Assistance Grant: You can get up to 3% of your first mortgage (max $25,000) without paying it back
- Second Mortgage Loan: You can borrow up to 4% of your first mortgage (max $25,000). Payment starts when you sell, refinance, or move out of the home
CHFA requires you to contribute at least $1,000 (which can be gifted) and complete homebuyer education before closing on any of these programs.
Qualifying for First-Time Homebuyer Programs in Colorado
First-time homeownership in Colorado starts with knowing how to qualify for assistance programs. You need to meet specific criteria that lenders and housing authorities have set to get your dream home.
Credit Score Requirements
Your credit score is vital to qualify for first-time homebuyer programs. CHFA programs need a minimum credit score of 620. This applies to their First Step, Smart Step, and Preferred product lines. FHA loans might work for you with a score as low as 580 if you put down 3.5%, or 500 with a 10% down payment.
Local assistance programs can be more flexible. The CHAC Statewide Program might accept scores as low as 580, depending on your situation. Better scores will get you lower interest rates and better terms.
Income Limits and Documentation
Colorado's first-time homebuyer programs have income limits based on your household size and county. CHFA looks at the income used for credit qualification. Plus, their Smart Step program has a statewide income limit of $162,960 whatever your household size.
You'll need these documents:
- Paystubs from the last 30 days
- W-2 forms from the past two years
- Proof of other income like Social Security or alimony
Homebuyer Education Requirements
CHFA borrowers must take a CHFA-approved homebuyer education class before closing. Educated buyers make better homeowners. Classes teach important subjects like budgeting, credit effects, finding professionals, and understanding approvals.
Your education certificate is good for 12 months, and you need to be under contract before it expires. Classes are available in-person and online, in English and Spanish, usually costing around $75. Take this course early in your homebuying process - waiting could hold up your closing.
Additional Assistance Programs for Colorado Homebuyers
Colorado homebuyers have several local assistance programs beyond federal and CHFA options that make buying a home more achievable. These programs provide significant down payment support to bridge the gap between savings and closing costs.
Metro DPA Program
The Metro DPA program helps homebuyers throughout Colorado's Front Range with zero-interest, 30-year deferred second loans for down payment and closing costs. Buyers need a credit score of at least 640 (sometimes 620) and their annual income should not exceed $195,600.
The program doesn't require monthly payments—repayment happens only when you sell, refinance, or stop using the home as your primary residence.
The program welcomes both first-time and previous homeowners, making it available to a wider range of buyers. It works with conventional, FHA, VA, and USDA loans to provide options that match your financial situation.
Colorado Housing Assistance Corporation
The Colorado Housing Assistance Corporation (CHAC) helps first-time homebuyers with low-interest, flexible loans for down payment and closing costs. Applicants must put in at least $1,000 of their own money ($750 for participants in disability programs).
Legal residents who haven't owned a home in the past three years can qualify for this program. The purchased property must be your primary residence to use CHAC assistance.
Local County and City Programs
Many county and city-specific options exist in Colorado. Boulder County gives first-time buyers up to 10% of the purchase price (maximum $40,000) for homes outside Boulder city limits. The terms vary based on your income - from 3% interest amortized loans for those earning 61-80% AMI to zero-interest deferred loans for households below 60% AMI.
Aurora's Home Ownership Assistance Program gives first-time buyers up to $10,000 in zero-interest assistance. Pueblo County has specific down payment assistance for homes within city or county limits.
These local programs are a great way to get into homeownership for Colorado residents. Most require homebuyer education and have income restrictions.
Your Next Step as a First Time Homebuyer in Colorado with Clear Rate Mortgage
The dream of owning a home in Colorado can still be within reach—especially with the right support. From flexible federal loans like FHA, VA, and USDA to valuable CHFA options such as First Step and Smart Step, there are many ways to make homeownership possible. These programs offer helpful features like down payment assistance and more flexible credit guidelines.
Local options like Metro DPA and county-specific programs add even more ways to get started. With mandatory homebuyer education and layered support, you're better prepared to succeed on your journey.
Clear Rate Mortgage is here to guide you through these programs, helping you find the right fit for your goals. Ready to make your move? Prequalify now! Let Clear Rate Mortgage simplify your path as a First Time Homebuyer in Colorado.
FAQs
1. What are the benefits of using a mortgage broker as a first time homebuyer in Colorado?
A mortgage broker can help first-time homebuyers in Colorado compare multiple loan options to find the most suitable one. They also assist with paperwork and guide you through the entire process from prequalification to closing.
2. How long does it usually take to close on a home in Colorado for first-time buyers?
Most first-time buyers in Colorado close within a few weeks, depending on the loan type and documentation. Working with an experienced mortgage partner can help speed up the process.
3. Do first-time homebuyers in Colorado need a real estate agent?
Yes, working with a real estate agent is recommended for first-time homebuyers in Colorado. Agents help with finding homes, negotiating offers, and understanding contracts.
4. Can first-time homebuyers in Colorado use gift funds for their down payment?
Yes, many loan programs in Colorado allow first-time buyers to use gift funds from family or approved sources. Some programs may require a gift letter or additional documentation.
5. What is the role of prequalification for a first time homebuyer in Colorado?
Prequalification helps you understand how much you can afford before house hunting. It also shows sellers that you're a serious buyer, giving you an edge in competitive markets.
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