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2022 First-Time Homebuyer Programs in Colorado

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State and local governments in Colorado offer several first-time homebuyer programs that allow qualified people to receive down payment and closing cost assistance. You will need to meet all the requirements, however, which include income limits for the buyer and specific geographic locations for the home. The programs also often require minimum occupancy periods and payback requirements if you refinance or sell your home. Understanding all the requirements will help you to choose the program that’s right for you.

Colorado statewide and local first-time homebuyer programs

Colorado residents who meet income and other requirements have several options for homebuying assistance, both at the state and local level. Below is a brief overview of programs throughout the state.

Program nameAssistance amountAssistance typeWhere it’s available
Colorado Housing and Finance Authority (CHFA) Down Payment Assistance GrantUp to 3% of first mortgage for down payment and/or closing costsGrantAll counties and cities in Colorado
CHFA Down Payment Assistance Second Mortgage LoanUp to 4% of first mortgage for down payment and/or closing costsSecond mortgage loanAll counties and cities in Colorado
NEWSED CDC Down Payment Assistance Variable amount for down payment and closing costs, up to $6,500 depending on needSilent second loanDenver metropolitan area (Adams, Arapahoe, Broomfield, Denver, Douglas and Jefferson counties)
MetroDPA Down Payment Assistance Up to 6% of a 30-year loan for down payment and closing costsForgivable second mortgageAdams, Arapahoe, Boulder, Broomfield, Denver, Douglas, Elbert, Jefferson and Larimer counties
Boulder County Down Payment AssistanceUp to 10% of purchase price for down payment and closing costs (not to exceed $40,000)10-year loan or deferred loan, depending on incomeBoulder County outside of Boulder city limits

What to know about different types of down payment assistance

Homebuyers need to be very aware of the type of down payment assistance they receive. Whether you’ll need to pay the loan back at all, the amount of repayment you must make if you must and the deadlines for repayment all vary significantly, depending on the type and program.

Grant. A grant does not need to be repaid, although you do need to know any specific requirements attached to the grant, such as income limits.

Second loan or second mortgage. With a second loan or second mortgage, a second lien in addition to the mortgage is secured against your home. In many cases, no interest is charged and you don’t have to make monthly payments. Second loans and mortgages often become due when the home is sold or refinanced, or once the homeowner has lived in the home for 30 years.

If a second loan or mortgage is forgivable, your obligation to pay it vanishes once the terms of forgiveness (such as living in the home for a certain period of time) are met.

Loan. Some assistance is provided as a loan, with low interest rates and a reasonable term.

How Colorado first-time homebuyer programs work

LendingTree reviewed Colorado’s homebuyer assistance programs in 2022 to create the list of programs here. It’s always a good idea to double-check with community housing authorities and local nonprofits, however, as new homebuyer programs may be funded throughout the year.

The following five steps are part of the approval process for nearly all homebuyer assistance programs in Colorado.

Complete the program’s requirements for homebuyer education. Most Colorado programs require prospective homebuyers to take seminars in homebuyer education. The courses are intended to ensure that homebuyers understand the requirements for homeownership, as well as benefits and potential pitfalls.

Get a mortgage approval from an approved lender. Programs typically work with approved mortgage lenders, and you’ll need to secure mortgage approval from them to receive the assistance. Be sure to note the financial requirements. Some program credit requirements may be more stringent than other loan types not tied to assistance. If debt or poor credit has been an issue for you in the past, discuss the requirements with a loan officer to see if there are options.

Familiarize yourself with the income limits. Homebuyer assistance programs are intended to help folks with low to moderate incomes, so they all have income limits. Knowing these for the specific program is very important, as limits vary according to your family size, income in the area and other aspects of the program. Check the individual program’s website to find out current limits.

Find out the payback requirements. Many second mortgages and loans need to be paid back when specific events occur, such as the sale of the home or refinancing of the mortgage. Others are paid over a certain number of years or become due once you’ve lived a specific number of years in the home. Because of the high variability, you’ll save yourself unwelcome surprises by finding out the payback requirements.

Be aware that interest rates are likely to be higher than those in regular loan programs. Many of these programs set higher interest rates to account for higher risk.

Colorado first-time homebuyer program requirements

Because there are many steps involved in assistance programs, it’s prudent to find out the financial and other requirements before you start the process. The requirements are often stricter than those for regular mortgages. Review the specific details below to figure out which programs match your situation.

Program name Credit score minimumDTI ratio maximumMaximum income limitHow long you have to live in home
CHFA Down Payment Assistance620Contact programVaries by county and program typeContact program
NEWSED CDC Down Payment AssistanceNo minimum45%Total for all residents must not exceed 80% of median income for DenverNo minimum
MetroDPA Down Payment Assistance640Unknown$150,000Unknown
Boulder County Down Payment AssistanceUnknownUnknown60%-80% of median income for Boulder CountyUnknown

THINGS YOU SHOULD KNOW

You’ll need to check what the individual program limits are first so that you don’t start the process only to find out your earnings are too high. Income limits vary by family size and median income for the area in which you’re looking to purchase.

You can check the most up-to-date Colorado income limits by visiting the U.S. Department of Housing and Urban Development (HUD) website and entering your state and county information.

National first-time homebuyer programs

In most cases, you’ll also need to qualify for one of the loans below to receive state homebuyer assistance. These are known as “national first-time homebuyer programs,” though most aren’t only for buyers of first homes.

Conventional loans. Mortgages known as “conventional” aren’t insured by any government entity. They have stricter requirements and more generous loan limits than government-backed mortgage programs. The Fannie Mae HomeReady and Freddie Mac Home Possible programs are popular conventional first-time homebuyer loans. They feature more flexible mortgage insurance premiums for qualified buyers than some other loan types.

FHA loans. The Federal Housing Administration (FHA) backs loans for borrowers with lower credit scores and higher debt ratios than conventional lenders will allow. However, FHA loan limits are lower than those for conventional loans. Note that although FHA guidelines allow financing for borrowers with scores as low as 500, some Colorado programs require scores in the 620-640 range.

VA loans. The U.S. Department of Veterans Affairs (VA) guarantees VA loans for active-service military members, veterans and their spouses. VA loans don’t require down payments or mortgage insurance. Although VA loans don’t require a down payment, they do include closing costs, with which some Colorado programs offer assistance.

USDA loans. Low- to moderate-income prospective homebuyers can buy homes in rural areas via loans insured by the U.S. Department of Agriculture (USDA). USDA loans don’t require a down payment but will have closing costs.

FAQs about Colorado’s first-time homebuyer programs

Who qualifies as a first-time homebuyer in Colorado?

Most Colorado programs consider you a first-time homebuyer if you haven’t owned a house in the past three years, following the definition given by HUD.

Can I qualify for down payment assistance in Colorado?

You can qualify if you are approved for a mortgage by an approved lender and meet program requirements, including income limits and geographic requirements.

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

It depends on what kind of mortgage you get. USDA- and VA-backed mortgages do not require a down payment. Conventional loans can require as little as 3% down, and FHA mortgages require 3.5%. Some Colorado programs require a payment of $1,000 with a conventional loan.

Home price trends in Colorado’s major areas

Home prices in Colorado rose over the past year. In Denver County, the median home price increased 12.3% from the second quarter of 2020 to the second quarter of 2021, to $520,815, according to data from the National Association of Realtors. The monthly mortgage payment moved $163 higher as a result.

The median home price in El Paso County climbed 14.8% to $392,899. (It’s home to the state’s second-largest city, Colorado Springs.) The monthly mortgage payment rose $154.

 

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