Home prices are continuing to go up in Colorado making it trickier than ever to become a first-time homeowner.

In Boulder, the median home sales price made was $1.35 million in December 2021. That’s up by approximately $350,000 in the same month in 2020.

Longmont prices rose dramatically as well with a median price of $580,000. That’s a 18 percent jump from December 2021.

Fortunately, there are a number of loan programs that offer down payment grants and closing cost assistance for first-time home buyers provided by the Colorado Housing and Finance Agency (CHFA).

The following are some of the best first-time homebuyer loan options:

FHA Loans
For people who have never owned a home, FHA financing is the most preferred home loan due to the fact that borrowers only need a 3.5% down payment. That comes out to $20,300 needed on a $580,000 home. Moreover, the qualifying credit scores can be as low as 580 and the borrower’s monthly gross income needs to be just two times more than their monthly debts including the new home payment. This is a great starter program for low-income borrowers.

Conventional Loans
Conventional loans require a 680 or higher minimum credit score to get 97% financing, or come in with just a 3% down payment up to the conforming loan limit which is based on the county. Borrowers with credit scores below 680 and above 620 credit score may qualify with a 5% to 20% down payment. Mortgage insurance is not mandatory when your down payment is more than 20 percent.

USDA Loans
USDA mortgage loans are available to borrowers who meet the low-to-median income rules and when the home has an address in an eligible USDA designated rural or suburban area. The USDA is attractive as there is no down payment requirement for borrowers who have a 620 or above credit score.

VA Loans
Veterans, reservists, and spouses of the U.S. military may be qualified to get a VA home loan. This loan offers 100 percent financing and mortgage insurance is not necessary. Military veterans who have a credit score between 580 to 620 are still eligible unless the lender has strict overlays.

HomeReady and Home Possible Loans
Freddie Mac and Fannie Mae created the HomeReady and Home Possible loan programs for low-income first-time homebuyers whose income is not more than 100% of the area median income requiring just a 3% down payment and a 620 credit score.

Jumbo Loans
For higher priced homes and loans that don’t fit the guidelines and limits of Conventional, FHA, VA or USDA, there are still 5 percent down jumbo loans. They are currently being structured as either a single loan at 95 percent of the home’s value or a 1st loan of 80 to 90 percent of the purchase price and a 5 to 15 percent home equity line of credit (HELOC). Depending on the credit markets, jumbo mortgage lenders will tighten their maximum loan to value (LTV) down to 90 LTV.

Colorado First-Time Home Buyer Programs
CHFA provides down payment assistance and grants to first-time home buyers. The minimum requirements for a mortgage have to be satisfied.

Requirements include:
• Minimum 620 middle FICO credit score
• Attend a home buyer education course
• Income must not be above 100% of the area’s median income in Weld or Boulder county
• Up to 3% may be used for your down payment
• No repayment is required

By William Cook, Omni Fund, Inc.. William is a Senior Mortgage Consultant at Omni Fund, Inc. He is well versed in Conventional, FHA, jumbo mortgages and loans for self-employed borrowers. For more information, visit coloradoloanpro.com or e-mail [email protected]. NMLS# 1048392