Colorado routinely ranks as one of America's healthiest and happiest states to live in. With something to offer just about everyone that likes the outdoors, The Centennial State is about as unique as it gets. Hiking, skiing the Rockies, and an excellent golf scene are just a few of the activities you'll find.
Many will find it no surprise, then, to find out that housing in Colorado has been in demand over the past five years or so. And while the national housing market has shown signs of beginning to slow down in the second half of 2022, Colorado still experiences more demand than much of the United States.
Thankfully, given these trends over the past few years, the state has invested in a number of first-time home buyer programs designed to increase home ownership rates across Colorado.
Finding a home to buy in Colorado
In the past few years, finding a home to buy in Colorado has been tricky. Limited supply has led to bidding wars and historically low mortgage rates only increased demand more. But with supply growing and mortgage rates at decade highs, the tides have turned a little.
Still, the average home price in Colorado is about $591,189, based on data from Zillow. Not exactly conducive to first-time homeownership for those struggling to save up his or her first down payment.
In fact, in the twelve month period that ended in June 2022, home values were up a staggering 21%. But as you can see in the graphic below, the seemingly endless increase in home prices has started to flatten out a bit.
Given the state of the real estate market in Colorado right now, purchasing your home in Colorado will require you to save up a substantial down payment. The below table will outline estimated down payment costs at this time.
Average home value
Down payment of 3.5% (FHA loan)
Down payment of 10%
Down payment of 20%
Keeping these figures in mind, we'll now review the various loan programs you may consider to buy your home. Then, we'll jump into Colorado specific first-time home buyer programs, and closing cost/down payment assistance.
Related: Get My First-Time Home Buyer Guide
Mortgage options for first-time buyers in Colorado
Because you are looking to buy your first home, you have a number of options to consider how you'd like to finance your new home - some of the below are reserved for first-timers only, while others are open to anybody.
Generally, your options to finance your new home are as follows:
FHA loans - Backed by the Federal Housing Administration, FHA loans offer flexible approval criteria for those with credit scores as low as 580. They also only require a 3.5% down payment.
Conventional loans - These are "normal" mortgages you take from a lender/bank. They usually carry terms between 15-30 years, and may carry fixed or adjustable interest rates.
Conventional 97 - An alternative to FHA loans, the Conventional 97 program only requires down payments of 3% and carry less ongoing fees.
USDA loans - The USDA program is reserved for those buying homes in qualifying rural settings. Applicants must also meet income and purchase price limits.
VA loans - Reserved for Veterans, active service members, and surviving military spouses. VA loans carry very little fees and waived private mortgage insurance requirements.
Colorado specific (CHFA) loans - More on this below
First-time home buyer assistance programs in Colorado
Most states across the country have a housing agency that manages these programs on behalf of the state. Colorado is interesting in that they have three different agencies offering programs across the state. These agencies are:
The Colorado Housing and Finance Agency (CHFA)
The Colorado Housing Assistance Corporation (CHAC)
Community Resources and Housing Development Corporation (CRHDC)
Let's take a look at some of these programs.
1. CHFA FirstStep and FirstStep Plus
Colorado's FirstStep and FirstStep Plus programs are state run programs that offer FHA loans to those looking to purchase their first homes. All loans will be structured as 30-year fixed rate mortgages.
As you'll remember, FHA loans are known for their relaxed approval criteria - FirstStep approved lenders across CO generally want credit scores of at least 620, though you may be able to find a lender that will accept 580.
To participate in the program, you'll need to:
Complete a CHFA-approved home buyer education course
Contribute a minimum of $1,000 of your own money to your new home purchase
Not exceed CHFA income limits
These income limits vary by county and household size but are generally accessible to anyone making less than $105,000 in a one person household.
Colorado down payment assistance
Some of the housing agencies listed above, along with other state-funded groups, also offer down payment assistance to Colorado residents. Down payment assistance is an all-encompassing term to describe grant or loan programs that can help qualifying Coloradoans to more easily afford the expenses incurred to buy a house: your down payment and closing costs.
1. CHFA down payment assistance
The CHFA offers a great down payment program in the form of a grant, meaning that you'll never have to repay the money. CHFA down payment assistance allows you to receive up to 3% of your financed mortgage amount as a grant, meaning that borrowing $300,000 could lead you to receive an additional $9,000.
There is the option with this program to bump up the assistance to 4%, though doing so will transition the program into a second mortgage based program, where you will need to pay back the assistance that you receive. But this second loan is not payable until you pay off your first mortgage, sell your home, or refinance your existing mortgage.
2. CRHDC NeighborhoodLIFT
In a collaborative effort with Wells Fargo and NeighborWorks America, you may be eligible to receive up to $15,000 of down payment and closing cost assistance. This program is not limited to first-time home buyers, and NeighborhoodLIFT also provides a home buyer education course.
To qualify for NeighborhoodLIFT, you'll need to:
Buy a home in Adams, Arapahoe, Denver, Douglas, or Jefferson County
Be within accepted program income limits
Be buying a detached home, townhouse, condominium
Do note, however, that first responders such as teachers, firefighters, and emergency medical technicians do have higher income thresholds in an attempt to reward them for their service.
3. CHAC Statewide Program
CHAC offers a couple of different programs across Colorado, one specifically for buyers in certain cities and counties, and the other for buyers statewide. The program descriptions online are fairly vague, but generally, you'll need to have a household income less than or equal to 80% of the area's median income.
We've heard from buyers in Colorado that it is oftentimes easier to just call CHAC, at (303) 572-9445.
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