Colorado First-Time Home Buying Assistance Programs for 2022

Colorado First-Time Home Buying Guide

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    By Kim Franke-Folstad

    (Last Updated – 07/2022)

    There’s something for just about everyone in Colorado — especially those who love the great outdoors. The state is known for its ski resorts, hiking and biking trails, and 300 days of sunshine each year.

    But for first-time homebuyers in Colorado, putting down roots can be a challenge, whether they’re hoping to find a home in a mountain town, in the suburbs, or in bustling downtown Denver. According to Redfin, the median home sales price in Colorado had risen to $627,400 by May 2022, a 15% increase in 12 months. Boulder County also saw a 15% rise, to a median of $795,000, and Greeley saw a 24% spike, to $450,000.

    Fortunately, Colorado homebuyers may be able to get financial help through programs offered by the state and some cities and counties. There also are longstanding federal programs that could improve a buyer’s chances of success.

    Recommended: The SoFi Guide to First-Time Home Buying

    Who Is Considered a First-Time Homebuyer in Colorado?

    First things first: The definition of first-time homebuyer is more expansive than it seems.

    For most programs offered in Colorado, and elsewhere, applicants are considered first-time homebuyers if they haven’t owned a home for the past three years.

    6 Colorado Programs for First-Time Homebuyers

    Most first-time homebuyer programs in Colorado are designed to help low- to moderate-income buyers who need help coming up with a down payment or closing costs.

    Program participants typically must meet eligibility requirements regarding their income, credit scores, and debt-to-income ratio (DTI). There also may be limits on how much the home costs, and it usually must be owner occupied. Also, at least one of the buyers must complete a homebuyer education course.

    Recommended: Understanding Mortgage Basics

    1. CHFA FirstStep and FirstStep Plus

    The Colorado Housing and Finance Authority (CHFA) provides several assistance options for first-time buyers. The FirstStep and FirstStep Plus program offers qualifying first-time homebuyers, veterans, and buyers who are purchasing in a targeted area a 30-year fixed-rate FHA loan along with the opportunity to apply for a deferred second loan to put toward their down payment or closing costs.

    The FirstStep Plus no-payment, 0% interest second mortgage may be for up to 4% of the first mortgage amount.

    Qualifications include:

    •  Borrowers must have a 620 or higher credit score

    •  Maximum DTI of 50% to 55% (depending on credit score)

    •  Borrowers must meet household income and purchase price limits

    •  Second mortgage must be paid in full upon a sale or refinance, or if property is no longer the borrower’s primary residence

    •  Must attend an approved homebuyer education class

    •  Must make a minimum borrower financial contribution of $1,000 toward the purchase of the home (may be a gift)

    •  No cosigners or non-occupying co-borrowers

    For more information, go to the CHFA site or contact your regional CHFA office for answers to general questions.

    To apply, contact a participating lender .

    2. CHFA HomeAccess and HomeAccess Plus

    The HomeAccess and HomeAccess Plus program offers qualifying first-time homebuyers and veterans a 30-year fixed-rate USDA, VA, or FHA loan that may be paired with a 0% interest second mortgage of up to $25,000 for down payment/closing cost assistance. Applicants must have a permanent disability or a child with a permanent disability.

    Qualifications include:

    •  Borrowers must have a 620 or higher credit score

    •  Maximum DTI of 50% to 55% (depending on credit score)

    •  Must meet income and purchase price limits

    •  Must attend a homebuyer education class

    •  Must make a minimum borrower contribution of $500 toward the purchase (may be a gift)

    •  No cosigners or non-occupying co-borrowers

    See the flyer to get more information and apply with one of the two participating lenders.

    3. CHFA SectionEight Homeownership and SectionEight Homeownership Plus

    The SectionEight Homeownership and SectionEight Homeownership Plus program offers 30-year fixed-rate USDA and FHA loans to first-time homebuyers and qualified veterans who receive Section 8 assistance. The first mortgage may be paired with down payment assistance through a CHFA grant or a second mortgage.

    The grant is for up to 3% of the first mortgage amount. A 0% interest, no-payment second mortgage for up to 4% of the first mortgage amount may be available.

    Qualifications include:

    •  Borrowers must have a 620 or higher credit score

    •  Maximum DTI of 50% to 55% (depending on credit score)

    •  Total borrower income cannot exceed $148,120 regardless of county, targeted or non-targeted area, or household size

    •  Maximum loan limit is the lesser of $647,200 or an amount determined by FHA or USDA guidelines

    •  Must attend a CHFA-approved homebuyer education class

    •  Must make a minimum borrower financial contribution of $500 to $750 toward the purchase of the home (may be a gift)

    •  No cosigners or non-occupying co-borrowers

    To get more information or to apply with one of the two lenders listed, see the flyer .

    4. Other CHFA Homebuyer Programs

    If you aren’t sure whether you’ll qualify as a first-time homebuyer, here are some other CHFA programs you might want to look into:

    CHFA SmartStep and SmartStep Plus offers eligible borrowers a 30-year fixed-rate FHA, VA, or USDA loan that may be paired with down payment assistance in the form of a second mortgage.

    CHFA Preferred and Preferred Plus offers homebuyers a 30-year fixed-rate Fannie Mae HFA Preferred or Freddie Mac HFA Advantage loan that may be paired with a second mortgage for down payment assistance.

    CHFA Preferred VLIP is only for very low-income borrowers. It offers a 30-year fixed-rate Freddie Mac HFA Advantage loan that may be paired with a second mortgage for down payment assistance.

    Here again are the income limits . To apply to a specific program, you’ll have to work with a participating lender .

    5. CHAC Down Payment Assistance Program

    The Colorado Housing Assistance Corporation (CHAC) provides low-interest second loans to low- and moderate-income first-time homebuyers who need help with their down payment and closing costs.

    Qualifications include:

    •  Borrower income limits are set at 80% of the area median income in most communities and 115% of the area median in Arvada

    •  Must make a minimum borrower contribution of $1,000 ($750 for disability program), and this amount generally cannot be a gift

    •  Must attend a CHAC homebuyer education class

    •  Must disclose all income sources for occupants over 18

    •  Must provide proof of legal residency for all household members if requested

    •  Home price and asset limits apply

    For more information, go to this page . Applications for CHAC assistance are submitted through your mortgage lender.

    6. Mortgage Credit Certificate

    First-time homebuyers in Colorado also may benefit from obtaining a mortgage credit certificate through a CHFA-approved lender. Borrowers can use a certificate to claim a portion of their mortgage interest, dollar for dollar, up to $2,000, as a federal tax credit every year for the life of their loan.

    You can apply for the credit certificate when you take out a home loan through a participating lender .

    Other Colorado Homebuyer Programs by Location

    If you’ve already chosen the Colorado city or county you hope to make your home, you also may want to research local buyer assistance programs.

    If you can’t find assistance in your chosen location, check back occasionally for new offers. Some first-time homebuyer programs base their opportunities (and deadlines) on the funds they expect to become available. When their money runs out, they may press pause.

    Aurora Assistance Program

    Aurora’s Home Ownership Assistance Program was created to assist low- and moderate-income first-time homebuyers. It provides up to $10,000 in assistance to buyers in Aurora who need help covering down payment and closing costs. For information on benefits and requirements, you can check out the program online , email [email protected], or call 303-739-7000.

    Boulder Programs

    The city of Boulder is offering several assistance opportunities to low-, moderate-, and higher-middle-income first-time homebuyers. The programs include down payment assistance loans and grants, as well as a program that offers homes for sale at below-market prices to income-eligible owner-occupiers.

    You can get eligibility requirements and how to apply by going to the program’s website . You also can email [email protected] or call 303-441-3157 with questions.

    If you’re planning to purchase in Boulder County but the home is outside the city limits, ask your lender about other programs that may be available to you.

    Douglas County Down Payment Assistance

    The Douglas County Housing Partnership offers a down payment assistance program to first-time homebuyers, with preference given to borrowers who currently live and/or work in the county. For information on the benefits and requirements, check out the website or call the partnership at 303-784-7857.

    Eagle County Down Payment Assistance

    Eagle County’s program has a few variations, and your assistance may be based on the type of first mortgage you obtain, where you plan to live, your income, and other factors. Get more information at the program’s website . If you have questions, you can email [email protected] or call 970-328-8770.

    El Paso County Turnkey Plus Mortgage Program

    The El Paso County “Turnkey Plus” Mortgage Program offers a partially forgivable down payment assistance loan to people who want to purchase a home in El Paso County, including in Colorado Springs. Check out the program’s website or email [email protected]

    MetroDPA Program

    The MetroDPA down payment assistance program is for homebuyers with up to $150,000 of qualifying income who purchase a home in the Front Range, from Castle Rock to Wellington. For information on benefits and eligibility requirements, check out the program’s website , or email [email protected] or [email protected]

    How to Apply to Colorado Programs for First-Time Homebuyers

    The way to get more information about each program, and apply, is described above.

    Often an approved lender is the go-to for assistance programs.

    Recommended: Understanding Mortgage Basics

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA mortgage limits by area by area.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans , to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.

    First-Time Homebuyer Stats for 2022

    Ever wonder where you fit amid the mix of buyers who are out there shopping for their first home? Here are some stats from a recent National Association of Realtors® Profile of Home Buyers and Sellers:

    •  Percentage of buyers nationwide who are first-time buyers: 34%

    •  Median household income of first-time buyers nationwide: $86,500

    Type of home purchased by first-time buyers:

    •  Detached single-family home: 80%

    •  Townhouse/rowhouse: 9%

    •  Condo/apartment (five or more units): 1%

    •  Duplex/condo/apartment (two to four units): 2%

    •  Other: 8%

    Median home price of first-time homebuyers: $252,000

    Median down payment of first-time homebuyers: 7%

    Median age of first-time homebuyers: 33

    Relationship status of first-time homebuyers:

    •  Married: 50%

    •  Single females: 20%

    •  Unmarried couples: 17%

    •  Single males: 11%

    First-time homebuyers with kids nationwide:

    •  No children: 70%

    •  One child: 15%

    •  Two children: 11%

    •  Three or more children: 5%

    Additional Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    A robust assortment of mortgage and down payment help in Colorado allows qualifying first-time homebuyers to hit paydirt. Others will have to blaze their own trail to find a mortgage that’s a good fit.

    Keep in mind that borrowers who go with a conventional loan don’t necessarily have to come up with a 20% down payment. (And most buyers don’t.)

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

    View your rate


    FAQ

    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for some government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications.

    Is there a first-time homebuyer tax credit in Colorado?

    Yes. The CHFA administers a mortgage credit certificate program that allows qualifying borrowers to claim a portion of their annual mortgage interest as a federal credit every year for the life of their loan.

    Is there a first-time veteran homebuyer assistance program in Colorado?

    The CHFA’s programs offer homebuyer benefits for veterans.

    VA home loans are available nationwide to eligible service members, veterans, and eligible surviving spouses.

    What credit score do I need for first-time homebuyer assistance in Colorado?

    Most homebuyer programs offered by the Colorado Housing and Finance Authority require a minimum 620 credit score.

    But requirements may vary from one program or organization to the next, and some programs use criteria other than credit scores to determine a borrower’s eligibility. You can check with the organization or lender offering first-time homebuyer assistance to get specific financial requirements.

    What is the average age of first-time homebuyers?

    The median age of first-time buyers is 33.


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