Buying a home can be stressful but will be worth it in the long run. Having the ability to gain equity from your regular monthly payments can put you in a better financial situation and will help increase your net worth.
Colorado Housing and Finance Authority (CHFA) has an assistance program that helps with down payments and closing costs. You can get a grant up to 3% of your first mortgage. Being that it is a grant, you do not have to pay it back. The down payment assistance program is available to first time home buyers and only works with 30-year fixed-rate mortgages.
There are many Mortgage Credit Certificates (MCC’s) available in Colorado. Still, they are individualized on a county to county basis. Below is a basic overview, but information may be different based on the county where you are looking to purchase. For further information, look at the county website of the home you would like to purchase.
The MCC allows the buyer to receive a 50% federal tax credit based on the amount of interest paid on the loan. The credit cannot exceed $2,000 per year. MCC’s are available to buyers that have not owned a home in the past three years unless you are purchasing a house in a targeted area, or the buyer is a qualified veteran. Maximum income for buyers with families of 2 or less is $85,800 in non-targeted areas and $102,960 in targeted areas. For families of 3 or more, the maximum income is $98,670 in non-targeted areas and $120,120 in targeted areas. The MCC is available for fixed-rate loans for less than 40 years, and there are home price maximums.
The FirstStep program is a Colorado first time home buyer program. Veterans and non-first-time home buyers in target areas may use this program as well. It paired with a 30-year fixed-rate FHA loan that can be paired up with a 0% second mortgage to help cover closing costs, down payment, and prepaid expenses. The buyer must have a 620 credit score or no credit at all. There is a home buyer credit education course required to be completed before the closing date. The maximum loan amount is $484,350, and the buyer must contribute at least $1,000.
The Preferred Very Low Income Program can be paired with a 30-year fixed-rate Freddie Mac loan. Income requirements are based on the county in which you live. This program also offers a 0% second mortgage to help with a downpayment, closing costs, and prepaid expenses. There is a credit requirement of 620 or higher for all applicants. The buyer is required to contribute $1,000. Mortgage Insurance will be capped at 18%.
SmartStep program is available for all home buyers. It paired with a 30-year fixed-rate loan available through FHA, FHA 203(k), VA, and USDA. There is a non-repayable grant available for up to 3% of the amount of the first mortgage. Another option is a second mortgage available for up to 4% of the original loan. Income restriction is $120,100 in every county. The credit requirement is 620 or higher, but that does not restrict buyers with no credit. The buyer must contribute $1,000.
HomeAccess and HomeAccess plus are available for the Colorado first time home buyer and qualified veterans. HomeAccess also restricts eligibility to persons with a permanent disability or custodial parent of a child with a permanent disability. The first mortgage can be an FHA 203(b) or USDA 30-year fixed mortgage. There is an option for a second mortgage up to $25,000 with 0% interest and a 485-month term. Payments on the second mortgage are delayed until after the first mortgage and payments start at $200. The second mortgage goes toward a down payment, prepaid, or closing costs. The maximum loan amount is $484,350.
The SectionEight Home ownership program is designed to help people with Section 8 vouchers switch from renting to owning. This program allows you to get a 30-year fixed-rate FHA 203(b) or USDA loan If your Section 8 agency approves of the voucher. This program offers a second mortgage with 0% interest up to 4% or a grant up to 3% of the value of the first loan. There is a $120,100 income limit statewide
Preferred and Preferred Plus programs are available to all home buyers. Preferred and Preferred Plus can be used with Fannie Mae or Freddie Mac loans. A second mortgage is available for 4% of the total loan amount with 0% interest. The second loan is silent (0% interest) and payable upon sale, refinance, or if the residence is no longer the primary residence of the owner. The second mortgage must go towards principal reduction, prepaid expenses, closing costs, or down payment. The buyer is required to contribute $1,000 to the purchase. There are income restrictions on Preferred and Preferred Plus. Property mortgage insurance is capped at 18%.
There are a lot of first time home buyer programs available in Colorado. The guidelines are posted to the public so you can easily find which one is best for you. Be sure to look at income requirements and area restrictions when choosing your first time home buyer program. If you can save up and avoid Property Mortgage Insurance, you will be able to save a lot of money in the long run.