Colorado First Time Home Buyer – 2019 Loan Programs
Are you looking to purchase your first home? Our first time home buyer programs might be the perfect solution to help you obtain the financing you need to buy the home you desire. We provide excellent home financing options, and encourage you to compare our offered loan terms to other mortgage lenders.
Colorado First Time Home Buyer Loans
There are 5 types of first time home buyer loans. You may select different loan terms, such as a fixed rate or adjustable rate mortgage, and the number of years to repay the loan (such as a 30 year fixed rate mortgage).
Types of Mortgages:
- Conventional Loans – Conventional loans offer the best loan terms to borrowers with good or excellent credit, as well as those who can afford to place a larger down payment. If you are able to put 20% or more down, you will be able to avoid paying private mortgage insurance (PMI). However, conventional loans also offer low down payment options, such as programs that only require 3% down.
- FHA Loans – FHA loans are a good option for borrowers who may not be able to qualify for a conventional loan. The qualification requirements for FHA loans are much more lenient than conventional loans. This includes options for home buyers with credit scores as low as 500 (in order to qualify for a 3.5% down payment, you must have a credit score of at least 580).
- USDA Loans – USDA loans provide home buyers the opportunity to purchase a home without any down payment. These loans are intended for borrowers with low-to-moderate income. In addition to not requiring any money down, you can also finance the closing costs into the loan. This means you can essentially buy a home with no money out of pocket!
- VA Loans – Active duty military members and veterans can apply for a VA loan which allows you to buy your first home without any down payment. These loans are not available to the general public, but exclusively to military/veterans.
- Jumbo Loans – Any loan that does not meet the conforming or FHA loan limits is a jumbo loan. If you want to buy a more expensive home, and have the income to qualify, we provide what are known as jumbo loans up to $2,000,000.
The above 5 loans are the main first time buyer options that exist. We can help you determine which loan is the right fit for you based on your particular needs and eligibility.
FHA Loans for First Time Home Buyers
For those that do not qualify for a conventional loan, an FHA loan is likely to be the best loan option. The current basic FHA loan requirements are:
- Credit – Some FHA lenders are known to allow a 580 FICO score. All of our home loan products require a 620 credit score. Some other aspects of credit that are evaluated are past bankruptcies, foreclosures, tax liens, and judgements. You can read more about the FHA credit requirements, here.
- Employment – FHA loans require 2 years of verifiable employment history. It is acceptable to have changed jobs in some instances, especially if you have stayed in the same line of work or industry. The employment requirements are not very strict, just as long as you show evidence of 2 years history of reliable employment.
- Debt-to-Income – The most important aspect of your income is not the total amount, but what percentage of your income is used to pay debts. This is known as your “debt-to-income ratio”. FHA loans allow a maximum DTI ratio of 43%, which includes your new mortgage payment, and any auto loans, credit cards, or other types of debts that show on credit (such as student loans and personal loans). The maximum amount your mortgage payment can be compared to your monthly income is 29%. You can learn more about FHA income guidelines, here.
- Property – The property must meet “minimum property standards“. This includes basic standards of living conditions that must be met, which ensures both a safe and healthy home to live in, and to ensure the FHA/HUD that if the home were to foreclose that it has a decent chance of being resold by due to providing a quality living space (the FHA insures the mortgage, if it defaults and forecloses, HUD is responsible to sell the home, so they only insure homes that meet specified standards.
There are certainly both advantages and disadvantages to FHA loans. The advantages would be the easier qualification guidelines, low down payment option, competitive interest rates, and other appreciable aspects such as loan assumability. The disadvantages would be costly mortgage insurance. FHA loans require all loans to pay two types of mortgage insurance. You can calculate how much FHA mortgage insurance costs using our FHA payment calculator.
Colorado Down Payment Assistance Programs
As a resident of Colorado, or soon to be be resident, you might quality for assistance for your home purchase. This includes a variety of down payments and grants that are available. Our loan specialists have a great deal of expertise on these programs, and can help you understand the qualifications, and see if you are eligible. It is certainly worth the effort to find out!
Colorado Housing Assistance Corporation (CHAC):
The CHAC provides a down payment assistance program for low and moderate income families. The loans are provided as a second mortgage, and are repaid on a monthly basis. The assistance can be as much as 6% of the purchase price, or up to $10,000 (whichever is less).
To begin the application process, borrowers must first attend a CHAC approved home buyer class. Following this, an application for assistance can then be filled out. Successful applicants are expected to adhere to certain guidelines, which includes:
- The borrower cannot have owned any residential property in the past three years.
- Contribute $1,000 towards the down payment and/or closing costs.
- The property must be inhabited as a primary residence. Should it not be used this way, the loan will be due back in full, along with any accumulated interest immediately.
- Income can not exceed 80% of the average median income (AMI) for the location of the property.
- Full disclosure of income and assets for every person that will be living in the home must be provided
- At closing, no money back is provided.
- Should the borrower pay off the entire first mortgage, the remaining amount on the CHAC loan will be due.
To learn more about the CHAC program and it’s requirements, click here.
Colorado Housing Finance Agency (CHFA):
The Colorado Housing Finance Agency offers two different down payment assistance programs:
- CHFA DPA Grant – The CHFA offers a grant up to 4% of the purchase price. On a $300,000 home, this would be $12,000! The down payment assistance program is available to use with an FHA loan. If you want some assistance to see if you qualify for the CHFA DPA Grant, a loan specialist can help.
- CHFA SmartStep– The CHFA offers program, which is a special home buying loan attached to down payment assistance. We do not offer or collaborate on the SmartStep program. If you are interested in the program, you can learn more about SmartStep here.
The Mortgage Credit Certification (MCC) tax credit provides you an opportunity to reduce your tax bill, as well as enhance your home loan application by reducing your debt-to-income ratios. How this works, is you can deduct up to $2,000 off your federal tax bill each year. The MCC allows up to 30% of your annual interest to be eliminated (with the cap being at $2,000). Some great news, is this can be used in addition to standard mortgage interest deductions!
Colorado First Time Home Buyer Classes
If you would like to be eligible for a down payment assistance program, or if you would like to increase your knowledge about homeownership, the home buying process, and mortgages, you will want to attend a homebuyer education class. The CHFA (Colorado Housing Finance Agency) recommends the following:
- CHFA Home Buyer Education –
- Community Housing and Resources Development Corporation
- Denver Housing Authority –
- Boulder Housing Authority –
If you live outside of the greater Denver area, or intend to purchase a home in a different area, you may view a list of local housing authorities and certified homebuyer education courses here. Additionally, you may search our website for your local city or county in Colorado. We have compiled thorough details of local programs, including local down payment assistance programs, and local homebuyer education classes. To search our website, please use the search bar located in the top right corner above the navigation menu.
Frequently Asked Questions
How much do I need for a down payment?
It depends on the type of loan you want. USDA and VA loans often will not require any down payment. FHA loans require a 3.5% down payment. Conventional loans typically require either 3% or 5%. If you receive down payment assistance, you may not need any money for your down payment.
What is the maximum loan amount that I can qualify for?
The amount that you will be allowed to borrow will depend mostly on your income, as well as the particular type of loan you are interested in. There are maximum loan limits for each type of mortgage program which are set at the county level. Conforming loan limits are the maximum loan amounts allowed for conventional mortgages. FHA loans have their own loan limits. This is not necessarily how much you can borrow though, but the maximum amount allowed in your location. The amount that you can personal qualify for will be based upon your income, and how much debt you have. For most loans, your monthly mortgage payment, along with your monthly debts may not exceed 43% of your income.
Can I buy a home without a real estate agent?
It depends on your state and the type of loan program. For some states, you must use an agent. In other states, you are not required to use a real estate agent for many loan program, such as conventional mortgages. However, some loan types require that you use a real estate agent regardless of your location, such as USDA loans.
Do you have first time home buyer loans for bad credit?
Yes, we offer mortgage options for borrowers with bad credit. This includes FHA loans for bad credit, which you can possibly be approved with a credit score as low as 500. However, a 580 credit score is required for the 3.5% down payment. If your credit score is between 500-579, then you will need to put 10% down.
Can I buy a home if I owe tax debt?
For government-backed loans, such as FHA, VA, and USDA loans, you can buy a home with tax debt as long as you have made a payment plan with the IRS, and are not behind on the payments. Any federal debt must be in good standing in order to get a government-based mortgage. If your tax debts have moved into the status of a tax lien, this will prevent you from getting a home loan until it is resolved.
Can I buy a home if I have student loans?
As long as you are not delinquent on the student loan payments, and the monthly payments do not cause excessive debt-to-income ratios, you can still get a mortgage.
Can I buy a home without my spouse?
A common question is if you can buy a house without your wife or husband. The short answer is yes. There are numerous reasons someone may want to exclude their spouse from a mortgage application, such as lower credit, lack of job history or income, or one spouse having excessive debt that could prevent an approval. You may be able to qualify and get a home loan without your spouse.
How do I know if I am ready and prepared to own a home?
It is critical to consider the often unexpected expenses of buying a home. This includes repairs, maintenance, and of course furnishing the home, monthly utilities, and all other expenses that are associated with homeownership. A common mistake is to just look at the difference in rent to your total mortgage payment. Almost every year, you can expect to have to pay for various upkeep to keep the property functional. This can include anything from repairing a hot water heater that broke, to landscaping, and various maintenance.
Something else financial consultants advise is that you have at least 3 months of reserves. This means that you could afford to make your new mortgage payment for at least 3 months in the event that you lose a job or have some other unforeseen circumstance that the savings would be needed for. This is not a requirement for most home loans, but it is good advice to consider.
Have more questions about buying your first home? Give us a call at 1-800-731-3560.