Many borrowers want to know how Colorado down payment programs work on a home loan. They are concerned that state program rules and a higher assistance rate may shape their home loan review. This guide explains what lenders may look for so you can move forward with confidence.
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What Should Colorado Borrowers Know Before Getting a Mortgage?
SHORT ANSWER
Colorado Housing and Finance Authority offers down payment help as either a 3% grant or a 4% second mortgage, and a borrower takes one or the other rather than both. Taking either form of help raises the interest rate on your first mortgage. Smart Loan Savings Educational Content
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| Colorado Home Loan Detail | The Rule or Amount |
|---|---|
| Down payment assistance grant | The lesser of 3% of your first mortgage or $25,000 |
| Down payment assistance second mortgage | The lesser of 4% of your first mortgage or $25,000 |
| Taking both the grant and the second mortgage | Not allowed, one or the other |
| Effect of taking either form of help | A higher interest rate on your first mortgage |
| Minimum credit score | 620 mid-score |
| Your minimum contribution toward the purchase | $1,000, and a gift may cover it |
| Using assistance money for your $1,000 contribution | Not allowed |
| Subordinations allowed on the second mortgage | One |
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| Colorado Program Rule | How This Rule Works on Your Colorado Home Loan |
|---|---|
| Colorado Housing and Finance Authority Sets the Rules, Your Lender Builds the File | Colorado Housing and Finance Authority is the state housing finance agency, and it is not the lender on your loan. The agency writes the program rules, supplies the funding, and purchases the loan after closing. It states plainly that it does not qualify homebuyers. Your loan officer takes the application, underwrites the file against both the agency’s program rules and the lender’s own guidelines, and funds the loan at closing, including advancing the grant money. The agency reimburses the lender when it purchases the loan afterward. One thing sets Colorado apart from many states: the agency services many of its own loans, so a borrower applies through a lender and then makes monthly payments to Colorado Housing and Finance Authority. |
| You Choose One Form of Help, Not Both | Colorado Housing and Finance Authority offers two forms of down payment help, and a borrower may use one or the other rather than both. The Down Payment Assistance Grant provides the lesser of 3% of your first mortgage loan amount or $25,000, and a grant is not repaid. The Down Payment Assistance Second Mortgage Loan provides the lesser of 4% of your first mortgage loan amount or $25,000, and that second mortgage is owed back. The one reason to consider the second mortgage over the grant is the extra percentage point of help, which on a $400,000 first mortgage comes to roughly $4,000 more toward what you owe at closing. Borrowers using the CHFA FirstGeneration or HomeAccess programs receive the full $25,000 regardless of how large the first mortgage is. |
| The Higher Rate Is the Price of the Help | Colorado Housing and Finance Authority states that a higher interest rate applies when a borrower takes either the grant or the second mortgage. The higher rate is charged on your first mortgage, and you pay that rate for as long as you hold the loan. Help of a few thousand dollars at closing therefore costs you a larger monthly payment across the years you own the home. Whether the higher rate is worth the assistance depends on how long you plan to keep the mortgage, which is worth calculating before you choose. |
| The Second Mortgage Limits Your Future Refinance | Choosing the repayable second mortgage attaches a condition few borrowers hear about in advance. Repayment on the second mortgage is deferred, meaning you make no monthly payment on that second mortgage, until you sell the home, refinance the first mortgage, or stop living in the home. If you later refinance into Colorado Housing and Finance Authority’s own FHA Streamline Refinance, the second mortgage may be resubordinated, which means the second mortgage stays in place behind your new first mortgage. Refinancing into any other loan requires paying the second mortgage off in full. Colorado Housing and Finance Authority also allows only one subordination over the life of that second mortgage. |
| The $1,000 You Contribute Yourself | Colorado Housing and Finance Authority requires a Minimum Financial Investment of $1,000 from the borrower on every loan. That $1,000 counts toward your down payment or your closing costs rather than sitting on top of them, and a gift from a family member or another eligible source may be used to meet the requirement. The one source the $1,000 cannot come from is the assistance money itself. A borrower expecting the grant to cover every dollar due at closing will be short by at least $1,000, so adding that figure to your cash-to-close estimate early keeps the gap from appearing days before you sign. |
| What the Grant Cannot Be Used For | The grant assists with your down payment, your closing costs, and prepaid items such as the first year of homeowners insurance. Colorado Housing and Finance Authority lists four things grant money cannot do. It cannot pay off your existing debts, which rules out using grant money to lower your debt-to-income ratio so you qualify. It cannot cover a gap between a low appraised value and a higher sales price. It cannot fund a repair escrow account when a home needs work after closing. And it cannot satisfy your $1,000 minimum contribution. |
| Where Leftover Grant Money Goes | The grant is calculated as a percentage of your loan, so the grant figure rarely lands exactly on what you owe at closing. When grant money remains after your down payment and closing costs are covered, that leftover money cannot be handed to you as cash back. Colorado Housing and Finance Authority allows leftover grant money to go toward a larger down payment, your mortgage insurance premium, real estate commissions, or a reduction of your first mortgage balance, and there is no cap on how much may go toward reducing that balance. The grant is also calculated in whole dollars and rounded down, so any cents are dropped. |
| What Else Shapes Your Colorado Payment | Down payment assistance covers what you owe at closing, and assistance does not change what you owe each month afterward. Your monthly payment carries principal, interest at the higher assistance rate, property taxes, and homeowners insurance. Colorado handles the tax side unusually, applying two separate assessment rates to the same home and leaving your assessed value alone when you buy. How those assessment rules work, and why a home insured through the state FAIR Plan may not meet your lender’s coverage requirement, is covered in our guide to Colorado property tax and insurance rules. |
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| What Lenders Check | How Colorado Program Rules Affect Your Loan File |
|---|---|
| Your Credit Score | Colorado Housing and Finance Authority requires a 620 mid-score, and there may be exceptions for a borrower who has no credit score at all. |
| Your Household Income | Income limits vary by household size, by county, by whether the home sits in a federally targeted area, and by which loan program you use. |
| Where the Home Sits | A federally targeted area may carry higher income limits and higher purchase price limits than the same program allows elsewhere in Colorado. |
| Your Homebuyer Education | Every borrower using a first mortgage from Colorado Housing and Finance Authority takes an approved class before closing, and in-person classes are free. |
| Your Interest Rate | Taking either form of help raises the rate on your first mortgage, which raises the monthly payment a lender measures against your income. |
| Your Plans After Closing | Selling within nine years, with a gain on the sale and income above a federal limit, can trigger a recapture tax on loans funded through tax-exempt bonds. |
| Sources Used on This Page | Colorado Housing and Finance Authority, Homeownership Frequently Asked Questions — chfainfo.com | Colorado Housing and Finance Authority, Down Payment Assistance — chfainfo.com | Colorado Housing and Finance Authority, Down Payment Assistance Options — chfainfo.com |
| Colorado home loan guidelines follow federal program standards. Individual lender rules may apply and vary by program. This page is provided for educational purposes only. Smart Loan Savings Educational Content | |
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| People Also Ask | Why These Questions Matter |
|---|---|
| Can you get both the CHFA grant and the CHFA second mortgage? | Colorado Housing and Finance Authority allows a borrower to take the Down Payment Assistance Grant or the Down Payment Assistance Second Mortgage Loan, and not both on the same first mortgage. The grant provides up to 3% and is not repaid, while the second mortgage provides up to 4% and is owed back. |
| What happens to a CHFA second mortgage if you refinance? | Refinancing into Colorado Housing and Finance Authority’s own FHA Streamline Refinance may allow the second mortgage to stay in place behind your new first mortgage. Refinancing into any other loan requires paying the second mortgage off in full, and only one subordination is allowed over the life of that second mortgage. |
| How much of your own money do you need for a CHFA loan? | Colorado Housing and Finance Authority requires a Minimum Financial Investment of $1,000 from the borrower, which counts toward your down payment or closing costs. A gift from a family member or another eligible source may be used, and assistance money cannot cover that $1,000. |
| Explore Our Learning Center | What You’ll Find Inside |
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| Mortgage Basics Guide | Simple explanations of core terms like principal, interest, escrow, and PMI |
| Income and Employment Requirements | How income, self-employment, bonuses, and job gaps affect your approval |
| Credit & Approval | Credit score requirements, how to improve your score, and how lenders approve a file |
| Homebuying Tips | Preparing for a mortgage, choosing the right program, and avoiding common mistakes |
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| Refinance Guides | Rate-and-term, cash-out, and streamline refinance options explained plainly |
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