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If you live in Colorado and are a first-time home buyer, you may qualify for a variety of state and local mortgage programs. If you qualify, you could receive loans and grants to help you meet down payment and closing cost requirements, even if you don’t have perfect credit or significant cash reserves.
You may also be able to combine these benefits with a loan backed by the Federal Housing Administration (FHA), US Department of Agriculture (USDA), or Department of Veterans Affairs (VA) if you don’t have enough money. for a conventional 20% down payment.
Homeownership Programs for Colorado Residents
There are many homeownership programs available through state, county, and city organizations. Many programs work like a second mortgage to cover the closing costs and down payment of your first home loan. In other situations, you can benefit from advantageous conditions on a first loan.
You may be eligible for the following programs if you have never owned a home or if it has been at least three years since you last owned a home.
Colorado Housing and Finance Authority
The Colorado Housing and Finance Authority (CHFA) offers up to 100% financing on mortgages with down payments as low as 3% of the amount borrowed. These loans can have fixed interest rates and 30-year repayment terms.
CHFA also offers a type of second mortgage to help with your down payment and closing costs. Your loan proceeds can be up to 4% of your first mortgage amount. It is also possible to defer repayment until you have repaid your main loan, refinanced it or sold your residence.
Keep in mind that borrowers must contribute at least $1,000 to a loan and meet other lender income, credit and underwriting requirements to qualify for certain products. Some of the minimum borrower requirements include:
- A minimum credit score of 620
- Attend an approved pre-closing homebuyer training (in person or online)
- Not exceed CHFA income limits on the borrower’s total income
CHFA’s general guidelines are similar to most homeownership programs. However, your lender may have additional underwriting guidelines that you will need to follow.
Colorado Housing Help Society
The Colorado Housing Assistance Corporation (CHAC) offers second mortgages to low- and middle-income households to reduce the initial burden of closing costs and down payment. Similar to the CHFA program, the borrower must make a minimum contribution of $1,000, but interest rates are low and repayment plans can be flexible.
Your primary mortgage lender will apply on your behalf for this program if you qualify.
Colorado Housing Companies
New and existing homeowners across the state can more easily access federally insured mortgages through Colorado Housing Enterprises (CHE). You may want to consider these loans if you are struggling to meet the down payment requirements for a conventional mortgage.
This organization is part of the Community Resources and Housing Development Corporation (CRHDC), which has been helping Colorado residents find housing since 1971.
Some of the programs for a first time home buyer in Colorado include:
- FHA Insured First Mortgage: This is an FHA loan for first-time buyers who have a stable income and can make a down payment as low as 3.5%.
- VA Loan: A VA secured purchase loan may not require a down payment and may not have outstanding mortgage insurance premiums.
- 502D Direct Home Loan Program: Households with very low or low income can benefit from financing. This is a USDA loan for rural communities only.
- 502 Guarantee Loan: This is another USDA Section 502 loan program that may not require a down payment or cash reserves.
- Down Payment Assistance Loan Program: This is a second mortgage with a 10-year term, and it provides up to $10,000 in funds to help pay your down payment and closing costs.
- 90/10 Loan Program: This can help you potentially reduce your mortgage insurance obligation with a first mortgage up to 90% financing and the second mortgage up to 10%.
NEWSED Community Development Corporation
Residents of the Denver metro area can receive up to $10,000 in assistance through NEWSED. This second mortgage can be used for:
- Closing costs
- Advance payment
- Redemption of interests
- Main reduction
County and city programs
There are many county and city homeownership programs that are also worth investigating. The U.S. Department of Housing and Urban Development (HUD) lists more than 30 initiatives that residents may be eligible for. Some of the participating areas include:
- Arapahoe County
- Boulder County
- Fort Collins
Program benefits and minimum qualifications may vary. Contact your local housing authority for more information.
First-Time Home Buyers Grants for Colorado Residents
You should also look for grants for first-time home buyers, as they usually don’t require repayment. Unfortunately, these are less common than down payment assistance loans for first-time home buyers.
The following grants can help you meet the down payment requirements.
CHFA Down Payment Assistance Grant
CHFA’s grant program can cover up to 3% of your first mortgage down payment with no repayment required.
The NeighborhoodLIFT program through HRDC provides up to $15,000 in down payment assistance in the Denver-Aurora area. This program is available to first-time homebuyers and repeat buyers.
Participating counties include:
Technically, this is a second mortgage, but it can be completely forgiven if you live in the house for five years. Under current program rules, each year of residency cancels 20% of the loan balance. Selling your home early requires paying the remaining balance immediately.
National Home Ownership Fund
The National Homebuyers Fund (NHF) offers down payment assistance across the United States for most home purchase and refinance loans. NHF can cover up to 5% of your mortgage amount and cancel the balance immediately or after several years.
FHA, VA, USDA, and conventional mortgages may be eligible for assistance.
How to Buy a House in Colorado
Whether you are moving to Colorado or currently renting in the state, the home buying process is similar.
Following these steps can help you choose the best mortgage and not overlook any assistance program:
- Compare aid programs. You may qualify for several statewide and local programs and grants. It may also be worth considering federal loan programs from the FHA, VA, and USDA for additional benefits.
- Find a participating lender. Not all lenders work with every program, so be sure to do your research to compare participating lenders. By considering multiple mortgage lenders who work with first-time home buyers, you’ll have an easier time finding a good deal.
- Apply for home ownership assistance. Typically, you begin the application process once the home is under contract. You can generally expect the closing process to take three weeks. Your lender will help you with this step.
- Attend a homebuyer education course. These programs typically require attending an in-person or online course for first-time home buyers prior to closing. It is possible to complete this course before submitting an offer to purchase, and the certificate of completion will be valid for up to 12 months.
- Close your loan. If you are approved, you will need to sign the closing documents once your lender finalizes your loan terms and homeownership program benefits.
Related: What is first-time buyer credit and why does it no longer exist?
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