Colorado First-Time Homebuyer Guide

Home to some of the most breathtaking views in the country, Colorado offers its residents natural landscapes of unparalleled beauty. If you’re a Colorado renter dreaming of making the jump to homeownership, know that there are a series of programs in place to help homebuyers make it easier to fund a down payment and qualify for a loan. Read on to learn more about first-time programs and loans available to Colorado shoppers looking for their first home.

Benefits of Being a First-Time Homebuyer in Colorado 

Being a first-time homebuyer in Colorado comes with a series of benefits over other states, and those benefits go beyond the great mountain air and stellar skiing opportunities. Some advantages you may have access to as a resident of the Centennial State include the following: 

• Local down payment assistance: Dozens of towns and cities in Colorado offer down payment assistance to new residents. 
• Grant opportunities: State-wide down payment assistance is available through the Colorado Housing and Finance Authority. Some low-income residents may qualify for assistance issued through a grant, which does not need to be repaid. 
• Homebuyer education opportunities: The Colorado Housing and Finance Authority also offers a complete homebuyer education course, which you can use as a jumping-off point to learn about managing a mortgage. 

Qualifications for First-Time Homebuyers in Colorado

While some home shoppers may assume that they will only qualify as a first-time homebuyer if they have never purchased a property before, this is not necessarily true. Colorado uses the Department of Housing and Urban Development (HUD) definition of a first-time buyer, which includes almost everyone who has not held an ownership interest in a property in the last three years. 

Under this definition, you may qualify for first-time buyer programs, even if you owned a home in the past. For example, if you declared bankruptcy and lost a previous property in your liquidation settlement, you might still be able to use first-time buyer programs and down payment assistance if you lost control of the home more than three years ago. Review previous ownership dates and documentation if you aren’t sure if you will qualify as a first-time buyer. 

Questions to Ask Before Buying Your First House in Colorado

While buying a home can be a good investment, it’s also a very personal decision. Waiting until it’s the right time for you to purchase a property can better set you up for financial success managing the loan. Before you start comparing mortgage loan options, be sure to ask yourself the following questions. 

1. What are Your Personal Long-Term Goals? 

Before considering anything else, think about where you are in your life right now and how a home purchase would influence your progress toward your goals. For example, if you’re settling down and looking for a way to begin investing in the future, buying a home could make sense because property values have risen historically over time. However, if what you really need right now is the flexibility to explore other career options or living arrangements, buying a home could be too large of a commitment at this time. 

2. What is Your Financial Situation?

Owning and maintaining a home includes a series of additional payments you might not be used to budgeting for when you rent. Some examples include: 

• Property taxes
• Mortgage insurance 
• Loan funding fees when using a government-backed mortgage 
• Homeowners insurance 
• HOA fees

New American Funding (NAF) offers a mortgage payment calculator designed for Colorado residents. Use the calculator to anticipate the full monthly cost of a mortgage loan where you want to buy and consider if your income can support your payments. If not, it can be helpful to take some time to pay down other outstanding debts and to become more established in your career before buying. 

3. What are Your Housing Needs?

Next, think about your housing needs in the long-term and how they may change. Start by locating a few areas where you know you might want to buy, considering factors like access to public transportation and proximity to work or school when selecting areas to shop in. 

Consider the size of your family and the number of bedrooms you’re likely to need. If you have plans to expand your family in the future, you may want to shop larger, while retirees may want to downsize. Get specific in your list of house wants and needs and write down the characteristics of your dream home. This process will make it easier to narrow down your property search in the future.

4. What is the Trend in the Real Estate Market?

Tracking how home prices are changing in your local market can help you get a great price on your home. Bookmark a few homes that fit the general idea of what you are searching for on a real estate database and monitor how quickly they sell and for what price. When it looks like the market is cooling down, you might want to consider starting the search for the right property. 

5. What are Your Mortgage Options?

If your finances seem to be in order and a home purchase makes sense based on your current life goals, the next step is to consider mortgage options. There are multiple types of mortgage loans, with each loan type coming with its own set of advantages and disadvantages. We will go into more detail on the multiple types of mortgage loans in later sections. You may want to review your credit score and debt levels to learn more about the types of loans you may qualify for. 

First-Time Homebuyer Statistics in Colorado

• Average home price in Colorado: $540,838

• Minimum down payment in Colorado: 0% to 3.5%

How to Apply for First-Time Homebuyer Loan Programs in Colorado

Is now the right time to buy? Getting your first mortgage loan doesn’t need to be stressful or complicated. Use the following basic steps to apply for first-time homebuyer loan programs and assistance as a Colorado resident. 

1. Determine Your Budget 

Applying for a home loan may affect your credit score, so it’s worthwhile to hold off on applying until you know that you’re likely to be approved. Use the mortgage calculator linked above to calculate an anticipated average mortgage payment and create a plan to save up your down payment. If your budget and income can support a home purchase, you may want to move to preapproval. 

2. Get Preapproved for a First-Time Home Mortgage

The first concrete step in the homebuying process is to get preapproved for a mortgage loan. When you apply for preapproval, lenders look at your financial and personal information and offer a tentative quote for financing, subject to underwriting. Your preapproval letter will provide you with a maximum dollar amount that you can borrow, which will serve as your budget when you shop. 

This point in the buying process can also be a good time to apply for a down payment assistance program. The Colorado Housing and Finance Authority (CHFA) is the state authority that offers and manages down payment assistance programs. The CHFA currently offers two down payment assistance program options for first-time buyers with one issued as a forgivable grant and another issued as a second mortgage.

• Down Payment Assistance Grant: The CHFA’s Down Payment Assistance Grant may offer up to $25,000 to assist in your journey toward homeownership. This grant does not need to be repaid and is aimed at low-income buyers. 
• Second Mortgage Loan: The CHFA’s Second Mortgage loan offers up to $25,000 in deferred down payment assistance, issued as a second mortgage. The loan is due when you sell the home, refinance your loan, or move to another permanent residence. 

3. Hire a Real Estate Agent 

While having a real estate agent isn’t a necessity to buy a home, it does speed up the buying and offer processes. Real estate agents may also have access to special listings before they hit online real estate databases, which can allow you to see homes before the general public. NAF Homes,* an affiliate of NAF, can be an excellent resource for connecting with local real estate agents. 

4. Start the Search for Your Dream Home

Most homebuyers will tell you that the shopping process is the most fun part of buying a home, but it’s important to keep your final goal in mind as you tour properties. Sit down with your agent to discuss features that you absolutely must have in your next home, as well as preferences where you may be a bit more flexible. Your agent will put together a list of homes that meet your preferences as well as your budget and tour them with you until you find a home that you’re comfortable making an offer on. 

5. Make an Offer 

When you find the home of your dreams, you and your agent will propose a sale using an offer letter. The offer letter is a formal agreement to buy a home and includes details like the purchase price that you’re offering and any contingencies to the sale. If the homeowner accepts your offer or makes a counteroffer that you agree with, it’s time to move toward the closing process. 

6. Conduct a Home Inspection 

If you’re using a mortgage loan to buy a home, there are a few important steps between having an offer accepted and closing on the deal. One of the most important steps is the home inspection, during which a home condition expert will take a tour of your home and note any areas where you are likely to need repairs in the future. 

The inspection gives you an inside look at the true condition of the home you’re buying. While they might not be required by lenders, home inspections do help you estimate costs you might incur after the sale closes. Note that the inspection is not the same thing as the appraisal, which is required by mortgage lenders to get a rough estimate of your home’s value before the sale. 

7. Close the Deal and Become a Homeowner

If the inspection and the appraisal come back without major issues, your lender will schedule a closing meeting. During closing, the title of the property will be transferred to your name, and you will pay your down payment and sign on your loan. After closing concludes, you are officially a homeowner. 

5 Traditional First-Time Homebuyer Programs in Colorado

First-time buyers in Colorado have access to a series of mortgage loan programs, which can make buying a home easier for a particular segment of the population. If you have a lower credit score or more debt, a government-backed mortgage loan could be an option. 

Conventional Loan

Conventional loans are some of the most common types of loans for first-time buyers, as they do not have income or location restrictions. Conventional loans require a down payment as low as 3% but will usually require buyers to come with a higher credit score to receive lower rates. Conventional loans usually have lower interest rates when compared to government-backed loans, which can make them popular with buyers who have established credit profiles. 

FHA Loan

If you have a lower credit score or more outstanding debt, a Federal Housing Administration (FHA) loan could be the right choice for you. Designed for lower-income residents, an FHA loan may allow you to buy a home with a down payment of 3.5% and a credit score as low as 540 points. Some lenders may even allow you to purchase a home using an FHA loan with a score as low as 500 points if you have a 10% down payment. FHA loans also have more lenient income and debt requirements, which can be useful if debt payments make up a larger percentage of your household expenses. 

VA Loan

VA loans, which include insurance from the U.S. Department of Veterans Affairs (VA), are mortgage loans designed to make homeownership possible for people who have served in the armed forces. Members of the Coast Guard and Reserves may also qualify, as well as a few family members of those who have served. The biggest benefit of a VA loan is its 0% down payment requirement, which may allow you to buy a home while only paying closing costs upfront. 

USDA Loan

A USDA loan, backed by the U.S. Department of Agriculture, may allow you to buy a home in a rural or suburban area with a 0% down payment. To qualify, your home must be located in a rural area as defined by the USDA, as this program was put into place to promote homeownership in less developed parts of the country. Search for your address here to see if the property you’re buying meets location criteria. You must also meet income and debt-related eligibility as well, which are related to your local median income. 

Closing Assistance Programs

If you choose not to have your loan underwritten through a CHFA-approved lender, you may still be able to access down payment assistance through your local government. For example, Boulder County offers some low-income residents up to $40,000 in no-interest loans when they buy a home in the area. Review your county and town government websites to learn more about down payment assistance available in your new area of residence. 

What Are the Mortgage Rates in Colorado?

Mortgage rates are constantly changing, influenced by factors like the overall movement of the American economy, local housing supply and bond interest rates.

Tracking how mortgage rates are changing over time can help you buy a home at the most advantageous time. NAF maintains a list of dynamic average mortgage rates, updated daily to provide you with the most up-to-date rate information. 

Shopping for Your First Home in Colorado 

Colorado residents have access to a number of buyer programs and assistance options when shopping for their first home, including forgivable grants from the Colorado Housing and Finance Authority. Before shopping, consider your personal finances and the multiple types of loans available. Monitor how interest rates are changing over time to lock in a great price and do your homework comparing property prices as well. Knowing your options and leaving yourself with time to compare all aspects of each loan option can streamline the buying process.

Are you on the path to homeownership? Getting preapproved with NAF may be the right next step.

Colorado First-Time Homebuyer FAQs

Is There an Income Limit for First-Time Homebuyers in Colorado?

No, there is no income limit for first-time homebuyers in Colorado on a state level. Individual programs may have income restrictions related to your local median income. 

Can a Low-Income Person buy a House in Colorado?

Yes, there are a series of down payment grants and loan opportunities that can make buying a home possible for low-income residents of Colorado. Consider an FHA loan if you have more debt or less established credit, as these loans have more lenient qualification standards. 

How Much Does a First-Time Buyer Have to Put Down in Colorado?

Most first-time buyers shopping in Colorado will need to put down 3% for their home purchase when using a Conventional loan and 3.5% down when using an FHA loan. A USDA or VA loan may allow you to buy a home with 0% down. 

Does Colorado Have First-Time Buyers’ Programs?

Yes, Colorado offers a series of first-time buyers’ programs issued through the Colorado Housing and Finance Authority. Down payment assistance is available as both a grant or second mortgage, and there are also options for loans with advantageous interest rates as well. 

Do you Have to Pay Back Down Payment Assistance in Colorado?

You may need to pay back down payment assistance that you receive in Colorado that is issued as a loan instead of a grant. However, the terms of when the assistance needs to be paid back may vary – some options only need to be repaid when you sell your home or refinance. 

 

* NAF Homes, Inc. is an affiliate of New American Funding and does not originate mortgage loans or issue loan commitments.  NAF Homes, Inc. is a MI Real Estate Broker #6505431109, Tel. 844-626-1300.

NMLS #6606. www.nmlsconsumeraccess.org. Terms and Conditions Apply.  This is not a loan commitment or guarantee of any kind. Loan approval and rate are dependent upon borrower credit, collateral, financial history, and program availability at time of origination. Rates and terms are subject to change without notice.  All mortgage loan products are subject to credit and property approval.  © New American Funding, LLC. New American and New American Funding are registered trademarks of New American Funding, LLC. All Rights Reserved. Corp Office 14511 Myford Rd, Ste 100, Tustin, CA 92780. Ph 800-450-2010.