The beautiful outdoors, abundant job opportunities, and gorgeous weather are just some reasons many Americans choose Colorado as their home base.
And the rising demand for a home makes properties pricey. Case in point: the average home price in the state is already over $450,000 after having gone up by 12 percent in a year. Single-family homes can now cost nearly $539,000 from barely $300,000 five years ago.
All these data mean that the average down payment is less likely an amount many Americans can afford, especially for those planning to relocate here over the last 12 months.
Fortunately, the state offers many ways to make it affordable:
1. Explore Others Loans Besides Conventional Mortgage
Several Americans can actually qualify for home loans that offer not only low down payment but also low interest and even credit score. A mortgage loan can fall under the following categories:
- FHA loan – This loan program by the Federal Housing Administration (FHA) is ideal for both first-time and repeat home buyers whose down payment is 3.5 percent of the purchase price. It also works for people with a credit score of at least 620. But even if they score even lower than this, they can still qualify and pay a down payment of only 10 percent.
- VA loan – This is a good mortgage option for those who have served the force, are members of the selected reserve, or spouses of veterans and active-duty personnel. The minimum credit score is still 620 and, most of all, doesn’t require a down payment, although private mortgage insurance (PMI) is necessary.
- Jumbo mortgage – A jumbo mortgage kicks in when the property’s value goes beyond the conforming loan limit of $548,250 even after paying a 20 percent down payment. Under this program, potential homeowners can pay a minimum of only 10 percent. If they pay the standard 20 percent, they can avoid PMI.
- USDA rural development loans – This loan is a good choice for Americans who prefer to live in rural areas of Colorado. As long as the applicant meets the income limit criteria, they can build a house or buy land with no down payment.
2. Use Cash Gifts
Some family members, bosses, colleagues, and friends may consider handing cash gifts on weddings or birthdays. They may also provide a substantial amount to help them manage their taxes.
Either way, recipients may use the money to pay for the down payment or settle the closing costs provided that:
- The lender and the mortgage program chosen allows it (the applicant may need to submit a gift letter; meanwhile, loan options like rural development and FHA allow gift funds).
- The gift was unexpected, which means the recipient didn’t ask for it.
- The cash funds are not a loan or part of any debt.
- These gifts come from somebody who has a personal relationship with the applicant (and they need to prove it through their gift letter to the lender).
3. Look into the State’s Assistance Programs
Colorado offers different mortgage assistance grants and programs that can cover down payment, closing costs, or mortgage (or any combination of the three).
One of the most popular is the aid options by the Colorado Housing and Finance Authority (CHFA) that include the FirstStep and the FirstStep Plus grants that borrowers can use together.
The FirstStep program is a mortgage loan exempted from tax and offers low interest rates for a 30-year fixed-rate loan. Those who qualify can then opt to get a second mortgage, FirstStep Plus, and obtain up to 4 percent of the first-mortgage amount. They can use the money to cover the down payment, closing costs, and other fees.
The requirements can be stringent. The assistance programs apply only to selected areas, and the borrower’s income and the purchase price must be within limits according to their location. They also need to attend an education class for first-time homebuyers.
However, the minimum credit score is low at 580. Further, they need to contribute $1,000 to the purchase price.
For low- to moderate-income families who want to live in El Paso County, including Colorado Springs, can try to qualify for the Turnkey Plus Mortgage Program, where they can receive down payment assistance of no more than 4 percent of the home loan.
As homes become more expensive in places like Colorado, raising funds for the down payment can be challenging, but it doesn’t mean it’s not doable. Borrowers can now explore various options to make it more affordable, from non-conventional loans to state assistance programs.
Please note: I reserve the right to delete comments that are offensive or off-topic.