Allow me to make an educated guess; you are tired of renting and looking to take the next big step and buy your first home! Buying your first home is extremely exciting – but it can be daunting as well.
Luckily, first time home buyers in the state of Colorado have access to an exceptional array of support throughout the home buying journey. This ranges from advice and educational resources, to cash and fiscal assistance through programs helping with down payments. In this article, you will be able to explore and learn about a broad range of options and programs that can be tailored just for you.
Over the past couple of years, Colorado has seen a dramatic increase in people moving to our lovely state as they attempt to escape from larger metropolitan areas and into a more relaxed and generally more positive live-work balance. Because of this, the average home price in the Centennial State has increased substantially. As of May 11 of this year, Colorado has seen an overall 17.1% price growth over this time last year, with the average home price sitting at $545,000 which is almost double the national average.
Don’t let this information deter you though! Since we have seen such a quick inflation of home prices year over year, this has attracted and ultimately drawn many investors to buy property in Colorado, and we expect to see a substantial growth in construction and new homes being available throughout 2022 and 2023 as more developments are built.
Back to what drew you to this blog post originally: First-time home buyers, like myself dear reader, make up the majority of people looking to buy now and in the foreseeable future. We are looking for the edge and ways that we can get the most bang for our buck, especially as interest rates are forecasted to grow at a steady pace. Lets discuss a few different options that we could utilize to see our dreams of property ownership come to fruition.
The majority of home buyers are still under the assumption that low down payments are associated with government backed loans, however Conventional Loans – loans that are not insured by a federal agency – now offer low down payments too. Conventional 97, for those that qualify based on a number of factors, would allow first time home buyers to put down no more than 3% on the price of their new home, using a Loan-to-Value (LTV) structure. To qualify for this loan option, you will need a credit score of 620 or higher, have a debt-to-income (DTI) ratio of no more than 43%, and be able to classify either yourself or significant other as a first time home buyer meaning that you have not owned property within the past 3 years before you apply for this style of loan.
When researching Conventional 97 loans, you will likely come across the term, “HomeReady”. This type of loan will take income guarantees into consideration as you compare which loan option works best for you. HomeReady allows borrowers to include income generated from a non-occupant co-borrower, like a parent, and income from a non-borrower household member to assist in qualifying for the loan. HomeReady also permits borrowers the use of non-traditional credit profiles, meaning people who have either limited or no credit. In short, HomeReady applies more flexible guidelines to allow for more borrowers to qualify for the loan program.
Another type of loan that is very appealing for first time home buyers is an FHA Loan. FHA (Federal Housing Administration) is a mortgage that is insured by the government and then issued by an agency approved lender or bank. An FHA Loan is attractive because it is designed to be utilized by people and families that fall into the low- to moderate-income bracket, have less than perfect credit, and have minimal cash to put down on their new house.
As long as your credit score is at least 580, you can borrow up to 96.5% of the value of a home, meaning the required down payment would be a justifiable 3.5%. Additionally, if you are just starting to establish credit, and have a credit score between 500 and 579, you can still qualify for an FHA Loan from various banks as long as you are able to put down 10% of the homes value.
A example of a lesser known loan type would be a USDA Home Loan. Backed by the U.S. Department of Agriculture, a USDA Loan is designated for people and families who live in, or are moving to, what would be considered a “rural” community. The USDA usually defines a “rural” community as having a population of less than 20,000, meaning that smaller towns situated across the Grand Valley would be classified as rural. Towns like Montrose, Palisade, Delta and Fruita are all potentially covered by an USDA Loan.
Most of the main stipulations to be eligible for a USDA Loan revolve around income. To qualify, there is an income cap that a borrower must be at or below, which for Colorado equals to no more than 15% of the local median income. You will need proof of a steady job over the course of the past two years, a credit score of at least 640, and a DTI ratio of 41% or less. Along with strict income requirements, the home you would be applying the loan to needs to be classified as your primary residence as no vacation homes or investment properties are allowed to be covered by this specific loan.
CHFA (Colorado Housing and Finance Authority) operates throughout the state, and provides educational resources, and down payment assistance. To qualify for the CHFA Program, all borrowers need to have a credit score of 620 or higher, they must attend a CHFA-approved homebuyer education class either in person or virtually prior to the closing of the loan, and be able to make a minimum financial contribution of $1,000. There are also income requirements, where the borrower(s) must make an equal or lesser annual income per county requirements, information that can be found by studying the attached chart. CHFA Programs offer 30-year fixed-rate mortgages in the form of an FHA Loan.
CHAC (Colorado Housing Assistance Corporation) is another example of an educational and assistance program available statewide for first-time homebuyers.Similar to the CHFA Program, CHAC offers down payment assistance for those who qualify, as well as counseling and education courses. To qualify for the CHAC Program, borrower(s) must have a total household income of no more than 80% of the Area Median Income (AMI) for the county where you plan to buy.
Hopefully, reading this has put your mind at ease, and has given you some direction as you continue with your own research into how we can all become future homeowners.
Do you have any further questions? Reach out to our experienced team at Vertex Realty Partners and we will be happy to help!
Or stop into our centrally located office at:
601 Main St. Suite B
Grand Junction, CO 81501