If you’re looking to buy or refinance a home in Colorado, you don’t have to do it alone. Here’s what to know about the different types of home loans, mortgage rates in the Centennial State, and how to get free money for your down payment.
What Are Today’s Mortgage Rates in Colorado?
For Tuesday, July 19, 2022, here are the current mortgage rates in Colorado. The average 30-year fixed mortgage rate is 5.600%. The average 30-year fixed mortgage refinance rate is 5.590%. Today, the average 15-year fixed mortgage rate is 4.870%.
Looking at variable rate loans, the average 5/1 adjustable-rate mortgage (ARM) rate is %.
This information is from Bankrate’s latest survey of the nation’s largest mortgage lenders.
Current Mortgage Rates in Colorado
How Much of a Mortgage Do You Need in Colorado?
When taking out a mortgage, you’ll typically need to give the lender a down payment at closing. The amount of the down payment depends mostly on the type of loan you get and limits set by the lender. Conventional loans require at least 3% down, while FHA loans require a minimum of 3.5% or 10%, depending on your credit score. And if you qualify for a VA loan, you may not need a down payment at all.
Colorado has several down payment assistance and other homebuyer programs that can help you afford a home. Talk to your lender about what you can qualify for.
Lenders may require a larger down payment if you’re borrowing more than a certain amount, if you’re not a first-time buyer, or if your credit score is low. That’s why it’s a good idea to check out different lenders and ask about their requirements before applying for a mortgage. The table below shows how much a down payment might cost in different metro areas in Colorado.
|Metro Area||Median Home Price||3.5%||10%||20%|
|Denver – Aurora – Lakewood||$662,200||$23,177||$66,220||$132,440|
Types of Home Loans Available in Colorado
When you start shopping for home loans, you may notice there’s no one-size-fits-all mortgage. The major mortgage programs include FHA loans, VA loans, and conventional loans, and lenders may also offer customized mortgages of their own. Each mortgage type has its own credit score, down payment, and debt-to-income ratio (DTI) requirements.
An FHA loan is a mortgage that’s guaranteed by the Federal Housing Administration and available through most private lenders. Because FHA loans are backed by a government agency, lending guidelines are more flexible. Homebuyers may qualify for an FHA loan with a credit score of 580 and a down payment of at least 3.5%, or a credit score of 500 and a down payment of 10%. DTI ratio requirements are also looser at a maximum of 50%.
But FHA borrowers pay upfront mortgage insurance and monthly mortgage insurance, “so these mortgages are a little more expensive (than conventional loans) even though interest rates are low,” says Nicole Rueth, a producing branch manager with Fairway Independent Mortgage Corp. in Colorado. “But FHA could help you qualify for a mortgage that you otherwise wouldn’t be able to get using a conventional loan.”
VA loans are mortgages backed by the U.S. Department of Veterans Affairs and are available to eligible service members, veterans, and surviving spouses. Each lender sets its own credit score and DTI ratio requirements. “For anyone who’s a veteran, the VA loan is far and away the best mortgage program,” Rueth says. “It has better interest rates, there’s no money down, and no mortgage insurance.” However, borrowers will have to pay an upfront funding fee that ranges between 1.4% and 3.6% of the home’s purchase price.
Conventional loans are mortgages that aren’t backed by a government agency. To qualify, borrowers typically need a credit score of at least 620, a maximum DTI ratio of 45%, and a down payment of at least 3%—though mortgage insurance kicks in if the down payment is under 20%. It’s “a fantastic option if you fit within the box,” Rueth says. “The interest rates and mortgage insurance are going to be better (than on FHA loans) if you have a high credit score. They’re also more widely accepted by sellers.”
First Time Homebuyer Programs in Colorado
First-time homebuyer programs provide buyers with cash to cover some of the major costs of buying a home. Depending on the program, you might receive a grant that doesn’t have to be repaid—as long as you follow guidelines—or a repayable loan to use on the down payment, closing costs, mortgage points, or principal reduction. Many assistance programs are open to first-time and repeat buyers who meet eligibility requirements.
There are many homebuyer assistance programs in Colorado, and some are statewide while others are geared toward counties, cities, or towns. To apply, you’ll need to first find a mortgage lender that accepts down payment assistance. “A good lender will know all the programs and offer the one that’s best suited to you,” Rueth says. “They’ll go through the rationale of why the program is best and the others are inferior or not applicable due to earnings.”
Listed below are some of the major initiatives.
Metro Down Payment Assistance
The Metro Down Payment Assistance program offers a no-interest, no-payment second mortgage to first-time and repeat homebuyers in the Denver area. The loan amount varies, depending on several factors, and it’s forgiven after the borrower lives in the home for three years. Funds can be used toward the down payment, closing costs, prepaid points, or principal reduction. Applicants must live in a designated area, have a credit score of at least 640, and earn less than $150,000.
Colorado Housing and Finance Authority
The Colorado Housing and Finance Authority (CHFA) is a statewide agency that provides financial assistance to homebuyers in Colorado. With both options, the money can be used toward the down payment and/or closing costs.
- Down payment/closing cost assistance grant: This program provides up to 3% of the purchase price of the home as a grant, which the borrower won’t have to repay.
- Second mortgage loan: This program provides up to 4% of the purchase price of the home as a second mortgage. The buyer won’t have to repay the loan until they pay off or refinance the mortgage, sell the home, or stop using the home as a primary residence.
To determine your eligibility and apply, you’ll first need to find a CHFA participating lender and go through your options. The lender will check if you fall within CHFA’s credit score and income limits, then take you through the application process. You’ll be asked to attend a homebuyer education course and put at least $1,000 toward the home purchase.
Colorado Housing Assistance Corporation
The Colorado Housing Assistance Corporation (CHAC) is another statewide agency that provides financial assistance to first-time homebuyers (borrowers who haven’t owned a home in the past three years). The assistance comes in the form of a second mortgage that must be repaid, and the money can be used toward the down payment and closing costs. Borrowers will need to meet income requirements, contribute at least $1,000 toward the loan, and take a homebuyer education course.
How to Refinance Your Mortgage in Colorado
Homeowners refinance their mortgages for many reasons: to capture a lower interest rate, borrow cash, remove private mortgage insurance from the loan, or take someone off the mortgage. The process for refinancing an existing mortgage in Colorado is the same as in other states. You can start by shopping around with several mortgage lenders to see which offers the best refinance rate. Your interest rate will mostly depend on your credit score and loan-to-value ratio (LTV), which compares your mortgage balance to your home’s market value.
You should also pay attention to any fees the lender charges. Refinance closing costs typically range between 3% and 6% of the loan balance, so you need to consider whether you’ll stay in the home long enough for any monthly savings to outweigh the upfront costs, although there are no-cost refinance options available. To calculate your break-even point, take the fees and divide them by your monthly savings. So if you paid $8,000 in fees and you’re saving $250 a month, it would take you 32 months (nearly three years) to break even.