2024 Colorado First-Time Homebuyer Programs and Loans

First-time homebuyers in Colorado have access to a wide range of financial assistance programs. These grants and loans can help cover down payments, closing costs and other relevant expenses. We go over available options, eligibility criteria and how to access them in further detail below.

First-time homebuyer programs in Colorado

Some first-time homebuyer programs in Colorado are governed by the Colorado Housing and Finance Authority (CHFA), while others are more local initiatives overseen by county and citywide organizations:

• CHFA Down Payment Assistance Grant
• CHFA Second Mortgage Loan
• NEWSED Community Development Corporation DPA Program (Denver)
• Boulder County Down Payment Assistance

CHFA Down Payment Assistance Grant

To be considered for a CHFA down payment assistance grant, you must commit to a 30-year fixed-rate CHFA loan. The grant covers up to either 3% of your first mortgage or $25,000 (whichever is less) and doesn’t need to be repaid.

Requirements

• Credit score of at least 620
• Fit within CHFA’s income limits according to county and loan program
• Attend a mandatory CHFA-approved homebuyer education class prior to closing
• Contribute at least $1,000 towards home purchase

Pros and cons

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CHFA Second Mortgage Loan

In addition to the grant above, the CHFA also offers down payment assistance in the form of a second mortgage loan, for up to 4% of your first mortgage amount or $25,000 (whichever is less). It will need to be repaid once you pay off the first mortgage, refinance your home or move away to a different residence.

Requirements

• Minimum credit score of 620
• Household income within CHFA limits
• Mandatory homebuyer education prior to closing
• Contribute at least $1,000 towards purchase of the home

Pros and cons

NEWSED Community Development Corporation DPA Program (Denver)

If you live in the Denver metro area, you could be eligible for a second mortgage loan of up to $10,000. The funds can go towards your down payment, closing costs, a principal reduction or an interest rate buy-down.

Requirements

• Household income under 120% of the area median income (AMI)
• Mandatory property inspection
• Mandatory homebuyer education and counseling
• Debt-to-income ratio of 45% to 50%

Pros and cons

Boulder County Down Payment Assistance

First-time homebuyers purchasing a home within Boulder County (though outside Boulder city limits) may borrow up to 10% of the purchase price, up to a maximum of $40,000. The funds may be applied towards their down payment or closing costs. Households earning under 60% AMI may qualify for a deferred loan without interest or monthly payments, to be repaid upon the sale or refinance of the home, or if the owner moves away.

Requirements

• Household income before taxes at or below 80% of the area median income (AMI)
• Mandatory home ownership training course and budgeting session
• Must contribute at least 1% of the purchase price (minimum of $2,000)
• Purchase price and/or appraised value may not exceed $489,000

Pros and cons

Colorado first-time homebuyer qualifications

Colorado offers many types of first-time homebuyer programs in addition to the options we’ve listed above. While eligibility criteria may vary, the approval process is generally the same regardless of where you apply. Here’s a step-by-step breakdown of what you’ll need to do to apply.

Steps to apply for a first-time homebuyer program

1. Choose the right program for you. Review the different types of DPA programs offered and whether you meet their criteria. You can explore all your options on the Department of Housing and Urban Development’s (HUD’s) homeownership assistance page.

2. Choose a participating lender. Once you’ve identified the DPA program that suits you best, reach out for a list of approved mortgage lenders. Keep in mind that not every lender will participate in every program. While participating lenders can help assess your eligibility, you should shop around and interview multiple ones before making your final decision.

3. Educate yourself. You may be required to attend a homebuyer education class if you participate in one of Colorado’s first-time homebuyer assistance programs. You might also have to meet program staff for a mandatory consultation before moving forward with your loan.

4. Complete the loan approval process. Once you’ve completed the steps above and chosen a lender, you can expect a property inspection and an appraisal to follow suit. The process is similar to getting a mortgage preapproval: Be prepared for an underwriter to audit your finances (including your credit score) to make sure you can comfortably take on the commitment of a new home loan. While most mortgage lenders require a minimum credit score of 620, according to Experian, the average FICO Score in Colorado was 731 in 2023.

5. Sign the paperwork and get the keys to your new home. At this stage, if everything has gone smoothly in the steps above and you’ve already been approved, you’ll be signing the paperwork to close on the loan. Once you’ve signed the dotted line, any of the loan funds you were approved for, including down payment assistance, will be applied to the transaction. Congratulations — you’re a homeowner now!

Understanding Colorado first-time homebuyer down payment assistance

First-time and sometimes even repeat homebuyers can be eligible for help with the upfront costs of their purchase. Here are the different types of financial assistance available to cover costs like your down payment or closing expenses.

Deferred second mortgage

Getting a deferred second mortgage means you’re responsible for repaying another loan. Unlike your first mortgage, though, you don’t need to make regular monthly payments on deferred mortgages. They’re sometimes called “soft second mortgages,” and usually only need to be paid off when you sell your home or refinance your first mortgage.

Forgivable second mortgage

While taking out a forgivable second mortgage also adds another claim on your home, it may be forgiven if you live there for a set period of time. If you move, refinance or sell before that time is up, however, you might have to repay the loan.

Grant

Unlike loans, grants won’t need to be repaid. But while this type of financial support is very popular for down payment assistance, it might be harder to access than other programs, especially in areas where funds are limited.

Mortgage credit certificate

Another avenue of assistance is using a mortgage credit certificate to help you save on your tax bill. This is a dollar-for-dollar tax credit for a percentage of the mortgage interest you pay each year. The percentage that’s eligible for the credit varies from state to state. If you live in Colorado, you could receive a credit for up to $2,000 worth of interest paid, depending on the amount of your loan.

Keep these things in mind about DPA programs

Down payment home assistance programs often require borrowers’ incomes to be within certain limits. They may also require a minimum financial contribution towards the purchase of the home. Make sure to check with your lender whether you’re eligible for assistance before starting the application process.

How much of a down payment do I need to buy a house in Colorado?

The down payment you need to buy a house in Colorado may vary depending on your lender and the assistance program you choose. While the gold standard for a down payment is considered to be 20% of the value of the home, the actual amount you need to put down may be as low as 3% to 5%. According to LendingTree’s latest first-time homebuyers study, the average down payment amount in Colorado in 2023 was $40,560.

Can I qualify for down payment assistance in Colorado?

To qualify for down payment assistance in Colorado, you’ll have to meet a general set of requirements. These include qualifying with an approved lender, meeting their income and credit score prerequisites, completing mandatory homebuyer education and using the home as your primary residence. Depending on the program you choose, you may have to satisfy additional criteria.

How do I apply for Colorado first-time homebuyer down payment assistance?

To apply for Colorado first-time homebuyer down payment assistance, contact the programs available in your city, county or state. Ask for a list of participating lenders and connect with them to determine your eligibility for financial aid. You can also seek advice at a housing counseling agency near you.

 Here’s what you need to know about the process of applying for a home loan.

Other first-time homebuyer loan programs

Conventional loans

Conventional loans are backed by private lenders like banks or mortgage companies, rather than by a government agency. Conventional loan programs that can be used simultaneously with down payment assistance are offered by Fannie Mae and Freddie Mac, and require only a 3% down payment.

FHA loans

FHA loans are a good option for first-time homebuyers, as they accept down payments as low as 3.5% with minimum credit scores of 580. FHA lenders are able to offer such attractive rates and terms because each loan is insured by the Federal Housing Administration (FHA) to protect lenders from loss. The FHA serves borrowers who may not qualify for conventional loans.

VA loans

VA loans are insured by the Department of Veterans Affairs. They offer mortgages to eligible veterans, active-duty service members and qualifying military spouses. Borrowers may benefit from lower interest rates, 0% down payment and, in certain cases, no minimum credit score requirement.

USDA loans

USDA loans don’t require any down payment or minimum credit score, as they’re guaranteed by the U.S. Department of Agriculture. However, borrowers are limited to homes in specified rural areas, and must also fit within a certain income threshold.

What are the best first-time homebuyer loans?

Finding the best first-time homebuyer loan can feel like an overwhelming process. To narrow down the best options for you, consider your financial situation, credit history and housing needs and whether they align with any of the eligibility criteria of these common loan programs below.

Home price trends in Colorado’s major areas

Home prices in the state of Colorado have remained relatively stable with markedly lower inflation than in the rest of the country. According to data from the Federal Housing Finance Agency (FHFA), it ranked 43rd for home price increases in the past year, at only 3.31%, compared to 6.5% in the United States in general.

The Denver-Aurora-Lakewood metropolitan area — made up of 10 Colorado counties, including the state’s capital city of Denver — ranked 85 in FHFA’s Top 100 metro areas. House prices in this metro rose steadily by 3.3% over the past year, 0.6% in the last quarter and 48.22% in the past 5 years.

In Colorado Springs, the state’s second most populous city and ranked 88 in FHFA’s Top 100 metro areas, house prices rose 2.3% over the past year and fell 0.1% in the last quarter.

What are the current mortgage rate trends in Colorado?

Our current mortgage rates forecast predicts that rates will continue to go down in 2024 and possibly stay under 7% for most of the year, giving the housing market a chance to pick up. You can compare Colorado mortgage rates on LendingTree’s mortgage rates page.