Colorado First-Time Homebuyer Programs

Down payment assistance programs

Down payment assistance (DPA) programs in Colorado can help first-time homebuyers compete in a hot housing market, especially in major cities like Denver and Boulder. With a high cost of living and homes selling fast, many buyers may feel priced out. Colorado first-time homebuyer programs are designed to ease the burden and make homeownership more accessible.

Here are a few options to consider.

CHFA Down Payment Assistance Grant

For those obtaining a mortgage through the Colorado Housing and Finance Authority (CHFA), the associated CHFA Down Payment Assistance Grant can significantly reduce upfront costs. The statewide program offers up to $25,000 or 3% of the loan amount, whichever is less, and it doesn’t require the money to be paid back.

Those looking to take advantage of this CHFA grant will need to work with an approved lender who will apply the grant money to the mortgage during the home purchase process.

Requirements

The requirements for CHFA’s Down Payment Assistance Grant are as follows:

• Credit score of at least 620
• Income below CHFA area limits for your location and household size
• Completion of a homebuyer education class
• Minimum $1,000 contribution toward the home purchase

CHFA Second Mortgage Loan

The CHFA Second Mortgage Loan is another DPA program in Colorado that operates as a second mortgage for the down payment on a home. With this loan, you can get up to $25,000 or 4% of the loan amount, whichever is less. It’s also available statewide.

“This loan can be used for the down payment, and can be paid off once the primary mortgage on the home is fully paid, or you sell or refinance the home, whichever comes first,” said Andrew Fortune, the founder of Great Colorado Homes, a brokerage in Colorado Springs.

Requirements

The requirements for CHFA’s Second Mortgage Loan are the same as the CHFA DPA grant:

• Credit score of at least 620
• Income below CHFA limits for your location and household size
• Completion of a homebuyer education class
• Minimum $1,000 contribution toward the home purchase

Pikes Peak Down Payment Assistance program

The Pikes Peak Down Payment Assistance program offers down payment assistance to buyers purchasing a home in El Paso County, including the Colorado Springs area.

The program offers a zero-interest loan, which provides up to 5% of the main loan amount and acts as a second loan to help with your down payment or closing costs. All DPA loans are 30-year fixed-rate loans. There’s no first-time homebuyer requirement or maximum total purchase price.

Andrew Fortune said a unique feature of the program is how the loan balance reduces over time. 

“Half of the loan goes away after five years if you keep living in the house,” Fortune said. “The other half goes away after 30 years.”

Requirements by loan type

To qualify, you must purchase a home in El Paso County and meet additional requirements based on your loan type. Eligible loan types include Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA) and Freddie Mac HFA Advantage loans

MetroDPA program

MetroDPA is an assistance program for buyers with annual incomes under $210,150 who are purchasing in one of several approved areas across Colorado, including the following counties:

• Adams
• Arapahoe
• Boulder
• Broomfield
• Denver
• Douglas
• Elbert
• Jefferson
• Larimer

The program offers a zero-interest, payment-free and 30-year deferred second loan that covers some or all of your upfront costs. However, the program doesn’t disclose the maximum amount of assistance available online.

Requirements

In addition to the above criteria, borrowers must generally:

• Have a credit score of at least 640 (620 in some cases)
• Complete a homebuyer education course
• Occupy the home as their primary residence within 60 days of closing
• Have a maximum debt-to-income (DTI) ratio of 50%

Colorado Housing Assistance Corp.

The Colorado Housing Assistance Corp. (CHAC) was established to help Colorado residents realize the dream of owning their own home. CHAC offers a variety of programs aimed at education and assistance, including a second mortgage loan program.

This CHAC program is available to first-time homeowners who meet eligibility requirements and are able to pay 1% of the sales price from their own funds.

Requirements

These are the CHAC eligibility requirements:

• No homeownership in the last three years
• Demonstrated need for assistance
• Must use the home as your primary residence
• Full disclosure of income and assets for all people over 18 living in the home
• Proof of residency
• Meet home price and asset limits, if applicable
• Completion of a homeowner education class

Eligibility and application process for Colorado DPA programs

The eligibility and application process for Colorado’s first-time homebuyer programs can vary by provider, but most have similar basic requirements.

In general, down payment assistance programs in Colorado require:

• A credit score of 620 or higher
• Total household income below area limits, which vary by county, city or household size
• Completion of a homebuyer education class
• Use of an approved mortgage lender
• First-time buyer status, meaning you haven’t owned a home in the past three years

» FIND OUT: How much should you put down on a house?

Creative mortgage products for first-time homebuyers

Creative mortgage products like assumable loans or interest-only loans can help people without enough savings for upfront costs or those who don’t meet the eligibility requirements for most homebuyer programs.

“Creative mortgages work best for people who do not fit into the regular boxes,” Andrew Fortune said. “This could be small business owners, people with strong savings but no steady paycheck, or folks with past credit problems who are now back on track.”

But be aware, these types of products have some drawbacks. Some have payments that go up after a few years, Fortune said. 

“That can surprise buyers if they are not ready,” Fortune said. “Other loans may cost more in the long run or have fees that are not easy to see at first. You could even end up owing more than the house is worth if home prices fall.”

Here are a few examples of creative mortgage products:

• 2-1 buydowns: With 2-1 buydowns, you get a lower interest rate for the first two years to ease into mortgage payments.
• Assumable loans: With assumable loans, you’ll take over a seller’s low-rate FHA or VA loan.
• Interest-only loans: Interest-only loans let you pay only interest for the first few years before full payments begin.
• Bank statement loans: For bank statement loans, lenders verify your income using bank deposits instead of W-2s or pay stubs.
• Conventional loans based on area median income: Programs like Fannie Mae’s HomeReady and Freddie Mac’s Home Possible are designed for buyers earning under 80% of the area median income (AMI). These programs offer just 3% down, reduced mortgage insurance and better rates than standard loans.
• Rent-to-own: You’ll rent the home now and apply part of the rent toward the purchase price later with a rent-to-own home.
• Shared equity mortgage: With a shared equity mortgage, the city, program or investor helps fund the home and shares in its future value.
• Shared appreciation mortgage: You don’t pay interest each month with a shared appreciation mortgage. When you sell, you repay the loan plus a share of the profit.

» COMPARE: Best mortgage lenders for first-time buyers

First-time homebuyer education and resources

Many mortgage assistance programs require potential home buyers to take a homeowner education class prior to the closing date. The purpose of this is to give new homeowners the best start possible when it comes to such a huge financial undertaking.

“[You] learn how loans work, how much you can afford and what your monthly payments will look like,” Andrew Fortune said. “You also learn how to save money for your down payment and how to build good credit. The class explains how to read your loan papers, what happens during closing and how to avoid common mistakes. It even teaches you how to care for your home once you move in.”

Most down payment programs require this type of class because it helps buyers make smart choices. When you know what to expect, you feel more confident and less stressed. You also have a better chance of keeping your home long-term.

Here are a few resources to look into for first-time homebuyer education:

• CHFA: Completing a CHFA-approved class is required for CHFA mortgage loans. The CHFA offers both in-person and online homebuyer education classes throughout the state. These classes cover topics like budgeting, understanding credit, finding a real estate agent and the costs associated with buying a home.
• eHome America: You can take a self-paced homebuyer education course online through eHome America. After completing the course, participants typically must engage in a follow-up call with the education provider to receive their certificate.
• Habitat for Humanity of Metro Denver: You can sign up for a homebuyer education class focusing on insurance, managing money and being a good neighbor through Habitat for Humanity of Metro Denver.

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