First-Time Homebuyer Programs in Colorado

The down payment on a new home often presents the biggest hurdle for first-time homebuyers. In Colorado, with an average home value of $543,500, you would need a down payment of $108,700 to avoid private mortgage insurance.

Fortunately, first-time homebuyer programs in Colorado can help you achieve homeownership. There are also mortgages that allow you to put less down on a home, though these usually come with income requirements and require mortgage insurance. MoneyGeek explores several state-specific and government-backed first-time homebuyer programs for people from different financial backgrounds.

Colorado offers grants and loans to assist first-time homebuyers with both down payment and closing costs. We have compiled the first-time homebuyer programs offered by Colorado Housing and Finance Authority (CHFA) to help you find the best option for your particular needs and situation.

The CHFA FirstStep and FirstStep Plus programs offer 30-year fixed-rate mortgages backed by the Federal Housing Administration (FHA) for first-time homebuyers and qualified veterans. FirstStep Plus includes a second mortgage for up to $25,000 or 4% of the first loan. This silent second mortgage has no monthly payments or accrued interest and must be repaid when the property is sold, refinanced or is no longer the borrower’s primary residence. The funds can be used for down payment, closing costs and prepaids.

The CHFA HomeAccess and HomeAccess Plus programs provide 30-year fixed-rate FHA, VA, or USDA loans for borrowers with a permanent disability or those caring for someone with a disability. The HomeAccess Plus program offers a second mortgage of up to $25,000, which carries a zero-percent interest rate and requires no monthly payments initially. Payments for this second mortgage are deferred until the first mortgage is paid off, the home is sold, refinanced, or is no longer the primary residence. The second mortgage has a term of 485 months, with payments of $200 per month beginning in the 361st month. These funds can be used for down payments, closing costs, prepaid items, or to reduce the principal balance.

The CHFA Down Payment Assistance Grant offers homebuyers up to 3% of their first mortgage loan amount, or a maximum of $25,000, to help cover down payment or closing costs. This assistance does not require repayment. The grant can be accessed with one of CHFA's first mortgage loan programs.

The CHFA Down Payment Assistance Second Mortgage Loan provides homebuyers with up to 4% of the first mortgage loan amount, or a maximum of $25,000, to assist with down payment or closing costs. This comes in the form of a deferred second mortgage with no monthly payments or interest. It must be repaid when the first mortgage is paid off, the home is sold or refinanced, or the property is no longer the borrower's primary residence.

Aside from statewide first-time homebuyer programs in Colorado, there are also city-specific programs available to help you pursue homeownership in a city of your choosing. Check out the table below for some of the cities in Colorado that provide first-time homebuyer programs for potential residents.

In Colorado, zero-down-payment loan programs allow homebuyers to purchase a home without putting any money down. USDA and VA loans are two government-backed options that offer no down payment requirements.

USDA loans are a financing option offered by the U.S. Department of Agriculture through its Rural Development Guaranteed Housing Loan program. These loans cater to individuals seeking to purchase a home in rural areas. They provide an opportunity for homeownership without the need for a down payment, making them an attractive option for many potential homebuyers.

USDA loans offer several benefits, including no down payment requirement and competitive interest rates. These loans are designed to support homebuyers in rural areas, providing an affordable path to homeownership. The conditions of USDA loans include using the property as a primary residence and adhering to certain property and income criteria.

To qualify for USDA loans, the property must be located in a USDA-eligible rural area with a population of less than 35,000 people and be 2,000 square feet or below. Additionally, there are income limits that vary depending on the location. For example, in Delta County, CO, the income limit for a four-person, low-income household is $75,350, while in Eagle County, CO, it is $104,100. These criteria ensure that the loans are accessible to those who need them most.

VA loans are a unique mortgage option issued by the U.S. Department of Veterans Affairs. These loans are designed to support veterans, active-duty service members, and eligible military spouses in purchasing homes. By offering favorable terms, VA loans help those who have served the country achieve homeownership.

What makes VA loans appealing is their no-down payment requirement, which eases the upfront financial burden. Unlike conventional loans, VA loans do not require private mortgage insurance (PMI), reducing the overall cost of the loan. Additionally, these loans typically offer lower interest rates compared to private loans. As of November 2024, the APR for a 15-year fixed-rate VA loan in Colorado is 6.12%, while a 30-year fixed-rate VA loan is 6.37%.

To be eligible for a VA loan, you must meet specific criteria. These include your length of service or service commitment, duty status, and character of service. Additionally, you may need to meet certain income limits based on your location. A valid Certificate of Eligibility (COE) is also required to apply. Understanding these requirements is crucial to determine if you qualify for a VA loan and can benefit from its advantages.

First-time homebuyers in Colorado can take advantage of low-down-payment loan programs that allow them to finance their home with a down payment of 3.5% or less. These programs include conventional, FHA and FHA 203(k) loans.

FHA loans and conventional loans are often compared as they are the two most common types of mortgages available. FHA loans require a minimum down payment of 3.5%, whereas conventional loans require as low as 3% for first-time homebuyers. Conventional loans typically have stricter credit score and debt-to-income ratio requirements, making them less accessible for some borrowers compared to FHA loans.

Currently, the APR for a 15-year fixed-rate conforming loan in Colorado is 6.00% (November 2024), while the APR for a 15-year fixed-rate FHA loan is 6.55%. APRs on FHA loans can be higher due to additional fees and extra costs associated with government-backed loans.

Use our FHA vs. conventional loan calculator below to compare both mortgage programs and determine the best option for you.

We have addressed frequently asked questions about first-time homebuyer programs in Colorado to help you choose the best option and move closer to homeownership.

Explore additional MoneyGeek resources for first-time homebuyers in Colorado to help you with the homebuying process.