General Mortgage Loan Info
While the news might make it appear that there is a housing crisis throughout Colorado, most Colorado residents only spend about 21% of their income on their housing, making it roughly equal to the national average. In Denver, a hot housing market, there has been an increase of about 8% of the average home price. The Colorado Housing and Finance Agency (CHFA) also offers several loan programs to assist qualified first-time buyers. With the CHFA FirstStep loan, you can pair a 30-year, fixed-rate loan with closing costs and down payment assistance. To qualify, you have to be a first-time home buyer, a qualified veteran, or purchasing in an area targeted by the FirstStep program.
VA Loans in Colorado
A VA loan is made by private lenders but guaranteed by the Department of Veterans Affairs, so your lender needs to be licensed in Colorado. The VA loan program also offers a $0 money-down benefit, which can help veterans who might not have the ability to bring a large down payment to the closing table. As of January 1, 2020, VA borrowers with full VA loan entitlement are not restricted by VA loan limits. Thus, you can borrow as much as the lender is willing to lend you without having a down payment. If you do not have your full VA loan entitlement, you will be bound by Colorado’s VA loan limits, which can vary by county. Some VA buyers in Colorado may also be eligible for a property tax exemption if they meet one of the following conditions:
- If you are a 100% disabled veteran, you could qualify for a property tax exemption of 50% for the first $200,000 of your primary residence’s value.
- A property tax deferral exists for eligible veterans 65 and over or active-duty personnel.
These loans have no mortgage insurance premiums, low closing costs, no-prepayment penalty, and lower average interest rates. You can also reuse the program for veterans with entitlement remaining.
FHA Loans in Colorado
Colorado FHA loans are available for those with less than perfect credit and lower down payment. The FHA loans are insured through the federal government, which lowers the risk for lenders and allows homebuyers to take advantage of low-interest rates.
However, with the lower down payment, you will have to pay MIP (mortgage insurance premiums) as part of your monthly mortgage payment. Your closing costs will also include an upfront premium (UFMIP), which can be paid at closing or rolled into the life of your loan.
USDA Loans in Colorado
The USDA offers a program that allows you to purchase a home without any down payment. You can also finance your closing costs. The mortgage insurance, referred to as the “guarantee fee,” is typically lower than MIP insurance through the FHA. All USDA loans come with a fixed interest rate that will not adjust or fluctuate throughout the life of your loan. Another benefit is that you do not have to be a first-time homebuyer.
There are no exact loan limits through the USDA program since the amount you can borrow will be based primarily on your debt-to-income ratio. However, to qualify, you must have a credit score of 640 or greater, meet the income limits, and the property must be in a rural area. You also have to use the property as your primary residence.