According to the Colorado Association of Realtors, the median sales price for a single family home topped $500k for the first time last April—up 17.4% since last April.
That’s good news for sellers, but it can be challenging for Colorado home buyers with small down payments or less than perfect credit.
But that doesn’t mean you’re shut out from the market completely.
An FHA mortgage opens up more opportunity for first-time home buyers who maybe couldn’t qualify for other loan products.
Let’s look at the requirements for Colorado FHA loans.
Colorado FHA loan limits and requirements
Home buyers with a low credit score or a small down payment may still be able to purchase a Colorado home using an FHA loan program.
The federal housing administration (FHA) is a government agency that sets the requirements for this loan and backs them. Because these loans are backed by the FHA, they’re seen as less risky to lenders.
While there are a number of FHA lenders in Colorado, unlike Assist Home Loans, they don’t all offer the full range of FHA loan options.
Each county in the state has its own loan limit based on the average home sales price.
Because of statewide increases in home prices, FHA loan requirements in Colorado for 2022 have increased to between $420,680 to $970,800, depending on your county.
Our Colorado FHA loan team can walk you through the specifics of loan requirements, explain what you need to qualify, and help you get there.
If you’re in Denver, the Springs, Aurora, or anywhere across the state, Denver-based Assist Home Loans is ready to help you navigate the home buying process—whether you’re purchasing your first home or refinancing your current mortgage.
Colorado FHA down payment requirements
FHA loans have the same minimum down payment anywhere in the United States.
The FHA requires a down payment of at least 3.5% (of the home’s value).
However, those with a credit score below 580 need to pay a down payment of 10% of the home’s value.
The FHA also allows borrowers to use monetary gifts from family members to pay the down payment.
FHA loan approval process
Partnering with the right lender can help you get approved for an FHA loan in Colorado. The general outline of what you can expect during the loan approval process is as follows.
Start by choosing a lender
Look for a lender, like Assist Home Loans, who has a comprehensive understanding of FHA mortgages and works with all the FHA home loan programs—not just a select few.
Pick your loan
After considering your options, it’s time to decide on the loan you want. FHA loan products can make buying a house in Colorado’s hot real estate market more accessible. The FHA also offers their own refinance products, such as the streamline refinance.
Mortgage pre-approval let’s sellers know that you’re serious about your purchase and meet basic mortgage requirements. Pre-approval also allows homeowners to quickly make an offer when they find a house they like.
Start looking for homes
Check out online resources and local real estate listings in your preferred neighborhoods.
Apply for the loan
Once you find your home, it’s time to complete the full loan application. This picks up where your pre-approval left off (and typically takes less time because you’ve been pre-approved).
While your loan is being processed, it’s an excellent time to schedule the home inspection, home appraisal, and get insurance lined up.
If your appraisal noted any repairs that need fixing, the FHA requires you to take care of them before closing.
Close on your home
Finalize the mortgage by paying the down payment and any closing costs before doing the final walk-through and getting the keys to your new Colorado home.
How are FHA loan limits determined?
All FHA loan limits are calculated according to average home sale prices in a given county.
First, the Federal Housing Finance Agency (FHFA) analyzes the housing data to calculate the conforming loan limits. Then, the U.S. Department of Housing and Urban Department (HUD) uses that information to set the FHA loan limits.
The FHA loans are capped at between 150% and 66% of the conforming lending limit.
The lowest limits have been dubbed the FHA “floor” and apply to loans in most states, while the FHA “ceiling,” the highest loan limit, is restricted to high-cost areas like Arapahoe County, Denver, Aurora, Garfield or Pitkin.
How to qualify for an FHA loan in Colorado?
FHA loan requirements in Colorado generally have easier eligibility requirements compared to conventional loans.
However, all applicants must still meet the minimum national FHA loan requirements to qualify.
First-time homebuyers in Colorado may be eligible for additional programs like the Colorado Housing and Finance Authority (CHFA) Down Payment Assistance Grant, Second Mortgage loan, or the NEWSED Community Development Corporation Down Payment Assistance program.
In addition to borrowing under FHA limits, the FHA loan eligibility requirements you must meet include:
- Down payment, depending on your credit score: 3.5% for most , although it can be as much as 10% for those with credit scores below 580
- Proof of 24 months of continual employment
- Proof of income, for the past 24 months
- No foreclosures or bankruptcies in the past 24 months
- Credit score of at least 500
- A debt-to-income ratio (DTI) of 43%, although some buyers can meet eligibility with a DTI of up to 56%
- The property must be your primary residence: FHA loans are not available for income or vacation properties (but there are FHA loans for homeowners looking to refinance their home loan)
- FHA loans requires two different insurance premiums: The Up Front Mortgage Premium (UFMIP) and the yearly Mortgage Insurance Premium (MIP).
- UFMIP premiums cost 1.75% of your total loan amount, and can be rolled the expense into their mortgage. MIP premiums range between 0.45% and 1.05% of your mortgage amount and are paid in 12 equal installments, added to your monthly mortgage payments
- A home appraisal: Any recommended repairs or safety hazards should be addressed before closing
Reach out to Assist Home Loans for Honest and Trustworthy Loan Officers
Buying a home for the first time is an investment — we don’t need to tell you that.
But it doesn’t need to be impossible. FHA loans are popular with first-time buyers due to having more inclusive eligibility requirements than conventional mortgages.
If you are unclear whether you meet the minimum FHA requirements or whether an FHA Colorado loan is right for your family, reach out to the home loan experts at Assist Home Loans.
Start your application online.
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