First-time home buyers frequently face the challenge of saving for a large enough down payment for their first home purchase. (Photo: Pexels).

Duane Duggan, Realtor and Author RE/MAX of Boulder

First-time home buyers frequently face the challenge of saving for a large enough down payment for their first home purchase. Home price appreciation rates along the Front Range often exceed 10% a year, making it virtually impossible for a first-time home buyer to outsave the market. This means time is of the essence in order to be able to buy a first home. In the city of Boulder, loan limits are tough due to higher home values and the large down payment required. However, in the rest of Boulder County – and into Weld and Larimer County – lower home values, loan limits, and loan programs are such that together, they can make for the perfect combination for a first-home purchase.

Federal Housing Administration (FHA) loans – FHA loans have long been the “go to” loan program for lower down payments and credit scores. In fact, if the price of a home and the loan limits line up, a homebuyer can be approved with a 3.5% down payment. Nevertheless, the current loan limit for Boulder County is $747,500, so it barely scratches the surface to be helpful within the city limits of Boulder, since the least expensive single-family home is in the $650,000 range. However, outside the city limits of Boulder, there are more opportunities to utilize FHA financing. Mortgage insurance is required for FHA loans, which allows the lender to accept more risk. The disadvantage to the homebuyer is the additional expense of the mortgage insurance.

Another unique opportunity for first-time home buyers is to purchase a duplex, triplex, or a fourplex with 3.5% down. The catch is that you will need to owner-occupy one of the units. Nonetheless, it’s a great way to start a real estate portfolio with a low-down payment and have the tenants paying for a substantial chunk of the mortgage payment.

Colorado Housing Finance Authority (CHFA) – CHFA and its lender partners have helped over 100,000 homebuyers in Colorado achieve homeownership. In fact, CHFA provides home buyer education classes that help first-time home buyers learn the process of buying a first home. CHFA programs generally mirror FHA programs. However, the current loan limit of $548,250 makes it difficult to afford a first home in most of Boulder County.

U.S Department of Veterans Affairs (VA) – Without a local military base, Boulder County has never been a huge VA market. However, we do have veterans who choose Boulder County as their home, and they should be sure to compare VA financing opportunities to other options. Typically, VA loans are generous in terms of no down payment and tend to be more lenient in terms of qualifying. In 2022, there is virtually no limit on the loan amount, other than what you qualify for based on VA loan underwriting standards. Check with your mortgage lender for current details, rates, and closing costs.

U.S. Department of Agriculture (USDA) – Years ago, we used to call these farm home loans because these loan programs target rural areas. When I started selling real estate in 1978, even Lafayette and Louisville still qualified for these loans. No longer! Today, you can still qualify for them in rural areas of Boulder, Weld, and Larimer counties. Even though the name implies that the property is a farm, this is not necessarily the case. Some of these programs allow for 100% financing. There are geographic limits, income limits, and loan limits that can make it difficult to qualify, but it might be worth contacting your mortgage lender to see if you do.

Conventional-Fannie Mae and Freddie Mac – Conventional loans, widely known as Fannie Mae and Freddie Mac loans, provide a mortgage base to the housing industry. These institutions created by Congress provide liquidity to banks and mortgage companies that make loans to finance the purchase of homes. For first-time homebuyers, loans with 3% down are available as long as the homebuyer qualifies for the monthly payment. In Boulder County, the loan limit in 2022 is $747,500.

Home Renovation Loans – Maybe all the fix-and-flip TV shows make renovating a home a common desire for first-time homebuyers in order to save money by buying a fix-up property. There are a few loan programs out there if this is the direction you want to go.

FHA 203(k) loans are designed for homebuyers who would like to rehabilitate a home. This FHA loan bases the value on the improved value of the property and thereby finances the improvements within the first mortgage. This program still comes with a 3.5% down payment.

Fannie Mae and Freddie Mac also offer home renovation loans that will include the cost of improvements for the first mortgage and with a 3% down payment.

Teachers, Police Officers and Firefighters – There are loan programs specifically designed to help teachers, police officers, and firefighters buy their first home. The benefits could include low down payment and a more attractive interest rate.

Down Payment Assistance – CHFA, mentioned above, offers down payment assistance grants that do not need to be repaid. If you qualify, CHFA even offers second mortgage loan programs that can contribute to your down payment when you are using a CHFA first mortgage loan program.

The State of Colorado has created the First-Time Homebuyer Savings Account program. A maximum of $50,000 can be contributed to it and can grow to $150,000 without accruing state income tax. This homebuyer savings account allows people other than a homebuyer to contribute to the fund, such as family members or even wedding guests!

Check with local municipalities for other possible down payment assistance programs.

In summary, now is the time to get on track to buy your first home! Check with your Realtor® and mortgage lender to come up with a plan that works for you.

By Duane Duggan. Duane is an award-winning Realtor® and author of the book Realtor for Life. He has been a Realtor for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career. He has been awarded two of the highest honors bestowed by RE/MAX International: The Lifetime Achievement Award and the Circle of Legends Award. For questions, email [email protected], call 303.441.5611 or visit boulderco.com.