Being able to buy a home is an outstanding achievement. It is a long-time dream for many.
Purchasing your own house means that a person is ready to face independence. There are challenges affiliated with this.
But nothing will replace the feeling of facing all the problems alone. The sense of achievement will be there when a person bought his/her first house.
There are times that the challenges happen even before the person opens the door of the house, especially in Colorado. The prices of homes increase very fast.
It is hard to get the dream of having the first house because of the price. Becoming a homeowner feels challenging to achieve.
Although, there are options as a Colorado first-time homebuyer. There are affordable loan programs.
State and National Loan Programs will help a first-timer buy their first house in Colorado. Learn more about these programs that are accessible for first-time homebuyers with this article.
National First-Time Home Buyer Programs
The National Loan Programs are accessible for all. These programs are not restricted to first-time home buyers.
With these programs, it is possible to have a mortgage with a limited down payment or low credit scores.
If a buyer has a low credit score, FHA Loans is perfect for him/her. FHA Loans is the best for its low credit score and low down payment.
Those who have low credit scores of 580 or higher can get down payments as low as 3.5%. The Federal Housing Administration allows them to purchase their home with low credit scores.
The FHA ensures that borrowers with scores as low as 500 can get a loan. However, they are required to give a 10% down payment because of their low score.
Another condition of FHA is they are required to get Mortgage Insurance. Once they get their insurance, they cannot cancel it.
Conventional loans are known for their limited mortgage insurances and low down payments for home buyers.
They can get a conventional home loan if the mortgage meets the requirements. Fannie Mae and Freddie Mac set the criteria.
A first-time home buyer can get a conventional home loan as low as 3%. Also, if the buyer pays for at least a 20% down payment, he/she does not need to pay for the mortgage insurance.
Usually, most lenders require a credit score of 620 as a requirement for them to qualify for a conventional mortgage. On the other hand, having a score of around 740 gives the buyer the best interest rates.
The Veterans Affairs Loans are known for their low down payment for the military members, veterans, and their surviving spouses. The U.S. Department of Veterans Affairs assures mortgages for them.
If someone qualifies, there are benefits in their loans. The following are the benefits of VA Loans:
- There is no minimum credit score.
- There is no down payment.
- Mortgage insurance is not needed.
Although there are benefits, the person still needs to pay for the VA funding fee.
U.S. Department of Agriculture is the one who issues USDA loans. It’s possible through USDA Rural Development Guaranteed Housing Loan Program.
USDA Loans are loans with a zero-down-payment mortgage. USDA Loans are for rural and suburban homebuyers.
Buyers with credit scores of 640 or higher can get streamlined processing. On the other hand, people with lower scores should meet more requirements.
CHFA First-Time Home Buyer Loan Programs
CHFA provides purchase loans, closing cost assistance, and down payment. CHFA has a network of mortgage lenders that helps them provide for home buyers.
It is better to contact a CHFA participating lender because the program availability and eligibility requirement may change. Also, by communicating with a CHFA participating lender, the buyer can figure out the best program for him/her.
Highlights and Eligibility Requirements of CHFA
- There is a home buyer education. It is offered in English and Spanish.
- There are down payments and closing cost assistance in purchasing a home.
- The buyer should have a minimum of 620 credit scores.
- The buyer should complete an online or in-person CHFA homebuyer education course.
- The buyer should meet the income limits. It can vary depending on location and household size.
- The buyer must create a minimum financial contribution, and it should be at least $1,000.
- The buyer should also meet the required qualifications of the CHFA participating lender.
CHFA Mortgage Programs
CHFA Mortgage programs are best known because of their low down payment and government-backed loans.
They offer inexpensive programs for first-time homebuyers. It encourages them to be responsible and to have affordable homeownership.
The qualified borrowers can have both CHFA mortgages that have the down payment and closing cost assistance programs.
The CHFA’s loan programs include USDA loans, FHA loans, Conventional loans, and VA loans.
CHFA Down Payment Assistance Grants
CHFA down payment assistance grants are known for their closing cost assistance and down payment assistance.
In this program, the borrower can get up to 3% in his/her CHFA 30-year mortgage. It’s for his/her down payment grant.
CHFA down payment assistance grants does not require any repayment.
CHFA Down Payment Second Mortgage Loan
CHFA down payment second mortgage loans are known for their down payment assistance and closing cost assistance. They are like CHFA down payment assistance grants, but there are differences.
In this program, the borrower can get up to 4% of their CHFA mortgage amount. It’s for their down payment.
On the other hand, the second mortgage is required to be repaid. It can be avoided if the borrower sells, refinance, or paid all the first mortgage balance.
In buying a house in Colorado, it is essential to evaluate the borrower’s credit number. Then, please find out how much home they can afford.
It is also essential for them to enroll in the first-time homebuyer education class in Colorado. Borrowers can look it up on CHFA because they have free courses, in person or online.
Taking up this class will help them to find out the best house and program for them.
Tips for First-Time Home Buyers
First-time homebuyers need to think about their decision carefully. They should conduct research and evaluate everything before deciding.
Below are the tips to help first-time homebuyers in deciding on their dream house:
It is better if the buyer has enough money for their first house. It is hard to buy a home if they don’t have the means to do it.
We listed the main costs that they need to consider in saving for their home:
- Down Payment – There are different down payments required depending on the type of mortgage they will choose and the lender. Some conventional loans ask for 3% down for home buyers with high credit numbers.
Even though it is a small down payment, it is hard to save. That’s why it is essential to calculate everything, so the buyer has a system in saving money.
- Closing costs – Closing costs are the fees and expenses that the buyers need to pay in finalizing their mortgage. It’s usually ranging from 2% to 5% of their loan amount.
The buyer can ask their seller to pay for a portion of their closing costs. With that, they can save for some expenses, like home inspections.
- Move-in expenses – Buyers should save some money for their move-in costs. There are some immediate home repairs, furnishings, and upgrades that are needed after the home purchase.
Evaluate the Home You Can Afford.
It is better if the buyer has figured out the home they can afford before looking for it. Some online home affordability calculators can help them.
These calculators can help them calculate the price range based on their debt, income, down payment, and credit score.
Check your Credit and Strengthen it.
The buyer’s credit score can help them determine if they are qualified for a mortgage. Credit score will also affect the interest rate of the lenders.
They can strengthen their credit score with the help of these:
- The buyers should pay all their bills on time. Also, keep their credit card balances low as much as possible.
- The buyers should not close a credit card which can lower their score. Keep their credit cards open.
- The buyers should continuously track their credit scores.
- The buyers should also get a copy of their credit reports from credit bureaus. Then, dispute the errors that could lower their score.
Purchasing the first house for a person can be stressful. They are going to undergo a very long process.
It is difficult for them because it is their first time. That’s why it is crucial to conduct research and understand everything before buying a house.
We hope that the process will not discourage any buyers from purchasing their first home. Even though it is hard, it’s still an achievement that everyone wants to have.
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