Colorado FHA Loans

The FHA loan program makes homeownership possible for those who may not qualify for conventional loans, such as those with less-than-perfect credit or limited savings. With more flexible credit requirements and low minimum down payments, FHA home loans are designed to help low-income buyers purchase the home of their dreams.

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Achieving Affordable Home Ownership with Colorado FHA Loans

The Federal Housing Administration (FHA), a division of the Department of Housing and Urban Development (HUD), works with private lenders to offer FHA loans, which are federally backed mortgages. If the borrower defaults, the lender can be guaranteed to recoup a portion of its losses, making it more likely to extend credit to borrowers who might not qualify for conventional loans. 

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Federal Housing Administration (FHA) Loan Requirements

Colorado FHA loan requirements are looser than those for conventional home loans, making them suitable for those with lower credit scores. 

You can qualify for an FHA loan with a minimum credit score as low as 500, though those with scores between 500 and 579 must provide a larger down payment of 10%. Down payment requirements for those with a credit score of 580 or better are just 3.5%. 

There are no income thresholds, though lenders will typically expect a debt-to-income ratio no higher than 43%. Some lenders will provide mortgages to those with DTIs up to 57%, the maximum threshold.

Lastly, you must not have been through bankruptcy or foreclosure for at least two years and must pay both an upfront and annual mortgage insurance premium. 

FHA Loan Assistance Programs in Colorado

If you can’t afford a large down payment, Colorado offers various FHA down payment assistance programs. 

The Colorado Housing Assistance Corporation offers a second mortgage program with lower interest rates and affordable payments to first-time homebuyers who provide up to 1% of the loan amount as a down payment. To qualify, you must attend a homebuyer education course.

The Colorado Housing and Finance Authority provides down payment assistance grants of up to 3% of the home’s price or $25,000, whichever is lesser, for a 30-year fixed-rate mortgage. You may also choose a down payment loan, up to the lesser of $25,000 or 4% of the purchase price. This loan is deferred until you pay off the first home loan, sell the property, or refinance.

Lastly, the Community Resources & Housing Development Corporation oversees the NeighborhoodLIFT program, which offers up to $15,000 in down payment assistance for those who meet the eligibility guidelines. The home must be a primary residence with up to four units, and this program is only available in Adams, Arapahoe, Denver, Douglas, and Jefferson County.

Why Choose Arnaiz Mortgage for Your Colorado FHA Mortgage Needs?

Our team is here to assist you with all aspects of securing an FHA loan in Colorado, from getting pre-approved to picking up the key to your new home. Thanks to our in-depth knowledge of the Colorado market, we can match you with banks or private lenders that are part of the FHA program and whose loan requirements match your profile.

As we understand that getting an FHA loan in Colorado can be a daunting prospect, we’ll guide you every step of the way, finding helpful programs in your area that can help reduce the upfront expenses of your home purchase. We’re also here for you when you’re ready to refinance your FHA loan, or even if you’d like to select a different product, like VA loans, for your refinance. 

You can contact us anytime if you have questions; we’re always here to help. 

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Frequently asked questions about Colorado FHA Loans

  • How much down payment is needed for an FHA loan in Colorado?

    The amount of money you need to put down depends on your borrower profile. If you have a credit score of 500 to 579, you’ll need to provide 10% down, but buyers with scores of 580 or better only need to provide a 3.5% down payment.

  • Are there any special programs for first-time homebuyers with FHA loans in Colorado?

    There are several statewide programs that can assist first-time home buyers with the expenses of an FHA loan. For example, the Colorado Housing and Finance Authority will provide either 3% of the total loan or $25,000, whichever is lesser, as a down payment assistance grant, which does not need to be repaid. However, you must complete a homebuyer education course and work with an approved lender.

    Numerous Colorado counties have their own DPA programs, such as the Douglas County Housing Partnership’s DPA offerings for those buying within the county. When you work with us, we’ll find local payment assistance programs that match your profile.

  • What are the current FHA loan limits in Colorado?

    Every year, the Federal Housing Finance Agency sets the conforming loan limit for conventional loans by county; the FHA loan limit in the corresponding county will be 65% of this amount.

    Colorado FHA loan limits for a single-family home range from $498,257 to $1,149,825 in high-cost areas like Aurora, Denver, and Lakewood. To see the maximum loan amount in your specific county, you can check the Federal Housing Administration website.

  • How do I apply for an FHA loan in Colorado?

    To get started, first ensure that you meet the program’s requirements. If your credit score is below 579, you’ll have limited loan options. As such, consider working with a financial advisor to get your credit back into good shape. You should have a DTI at or below 43% to ensure the best approval chances.

    Gather all of your financial information, including two years of tax returns, pay stubs, two months of bank statements, and a list of your debts. If you intend to use gift funds for your down payment, you’ll also need a gift letter. You’ll then fill out a pre-approval form to see how much you can afford.

    After this, you’ll work with a real estate professional to find a home you’d like to purchase, put in an offer with the seller, and fill out the loan application. This application will have much of the same information as the pre-approval.

    The lender will begin processing your loan by verifying that all the information is correct before scheduling an FHA appraisal. This will uncover any issues with the home and ensure it is worth as much as the purchase price. The loan then moves to underwriting, when everything is checked again for a second time, and finally to closing.

  • Can I use an FHA loan to buy a home in a rural area of Colorado?

    Yes, the FHA program is available all throughout Colorado, including in rural areas. 

    However, if you are a low-income borrower seeking to buy in a rural area, you may explore USDA loans, which require no down payment and have advantageous interest rates. You will need to check the USDA Income and Property El

  • What are the benefits of choosing an FHA loan over a conventional loan in Colorado?

    Because FHA loans are insured by the government, lenders will accept credit profiles that wouldn’t qualify for a conventional mortgage, including lower credit scores and a higher debt-to-income ratio.

    Additionally, FHA loans don’t require PMI, though they do require an upfront and annual mortgage insurance premium. These premiums are typically lower than what you would get through PMI.

  • What are the closing costs associated with an FHA loan in Colorado?

    You should expect to pay between 2% and 5% of the loan in closing costs, which include appraisals, title searchers, underwriting and origination fees, and inspection fees. Thankfully, numerous assistance programs provide grants or interest-free loans to cover these expenses.