The Colorado Housing and Finance Authority invests in development projects across the state. Since its founding in 1973, the CHFA has invested more than $18.9 billion in Colorado’s economy. Now, you could join one of the 111,000+ buyers who have achieved homeownership through their housing program. This guide will walk you through the benefits and requirements.
What Is the CHFA?
For more than 40 years, the CHFA has worked to invest in community development projects. They promote affordable housing across Colorado. With the resources they offer, more borrowers are able to qualify for homeownership. Plus, they help connect individuals to affordable rentals.
Similar to other programs, the CHFA is not responsible for funding borrowers. Rather, the CHFA partners with lenders and communities to reach the entire state. Through its partners, the CHFA offers affordable home loans and homebuyer education courses.
In addition to the above, they also have indirect projects. For instance, they help developers build more affordable housing in Colorado. And, they help local businesses get capital to promote jobs and economic growth.
They take a well-rounded approach to revitalization. Their programs impact citizens at both the local and state-wide level. Thus, the CHFA is highly regarded.
Qualification and Requirements
The CHFA isn’t just about promoting affordable homeownership. They take a long-term perspective and, therefore, also promote responsibility. To do so, they invest heavily in homebuyer education.
Their programs involve both home purchase and refinance programs. You do not have to be a first-time homebuyer to qualify for most of their programs. However, to qualify, you must meet some general requirements.
Minimum Credit Score
Like any home loan program, your credit score will be a consideration. For this program, you must have a credit score of 620 or higher. On an 850-point scale, 620 is a “fair” score. If you want to qualify for the CHFA Advantage program, you will need a score of 680 or higher, which is a “good” score on the scale.
If you have a higher credit score, that’s great. That means your interest rate will be lower and you may qualify to borrow more overall. On the other hand, if you have a lower credit score, you may still be able to purchase a home. The CHFA also works to get borrowers into the FHA, VA, and USDA Rural Development programs. You may qualify for one of these programs with a score as low as 580.
Another consideration is that the CHFA does have income limits. This program is for low and moderate income earners in Colorado. The income limits vary depending on the specific CHFA loan terms. For some, the income limits are as low as $39,000 and as high as $152,000.
The county in which you live and the number of people in your household will impact how much you can earn while still qualifying for the program. If you go through one of their government-backed programs, like the FHA, the specific guidelines set by that program will apply. This could mean that moderate income earners will be able to qualify, even if you exceed the conventional loan income limits.
If you meet the above requirements, you can then go through the process of attending a homebuyer education class. This can be in-person or online. However, the class has to have the CHFA seal of approval. This is only required for purchases, and it must be completed before closing on the home.
Homebuyer education may not be free. A course could cost $99. Any co-borrowers taking the program will generally have to pay $50. However, co-borrowers may not have to take an education course at all.
While you can get down payment and closing cost assistance from the CHFA, you will have out-of-pocket expenses. The CHFA requires you to make at least a $1,000 investment when purchasing a home. However, this money can be a gift from a family member or friend.
The CHFA Home Loan Programs
The CHFA can connect borrowers with many different programs. There are differences between them, but the main qualifying factor will be how much you earn.
Your Income May Determine Your Program
Household income limits depends on your county, but the maximum income limit for nine of their programs is $115,600 regardless of your county of residence.
The CHFA First Step and the CHFA First Step Plus programs may have higher limits. For instance, a targeted household with three or more residents in Boulder County could still qualify while earning up to $152,000 annually. They will not be able to take out a loan higher than $484,350.
The limits for how much a person can borrow through the CHFA programs are generous. However, income limits can disqualify many middle-class borrowers. It’s important to look at the income limit sheet for the various programs and see where you fall.
Low income borrowers may find it easiest to qualify for the CHFA HomeAccess program. Purchase limits for this program go up to $453,100, while income limits cap at $65,100 for a three or more person household in Boulder county.
Comparing the Programs
The CHFA offers three conventional loans and four government-backed loans. It’s easier to qualify for the latter.
All of their conventional loan programs have a 97% LTV (Loan-To-Value) ratio. That means you will have to cover no more than 3% of the purchase price. And, assistance programs are available to pay for those costs.
Here’s a look at their conventional loan programs:
- CHFA Advantage: With a minimum credit score of 680, this is the most difficult CHFA program for which to qualify. You will not need mortgage insurance.
- CHFA Preferred: This program has a minimum credit score of 620. You will need mortgage insurance if you finance 80% or more of the purchase cost.
- CHFA Preferred Plus: This program also has a minimum credit score of 620. Mortgage insurance may also apply to this program, but you can qualify for down payment assistance through the CHFA.
Here’s a look at their government-backed programs:
- CHFA SmartStep: Going through this program will vet you a FHA, VA, USDA Rural Development loan. The requirements of each respective loan program will apply.
- CHFA SmartStep Plus: This program also includes FHA, VA, USDA Rural Development loans. But, this program means you can get CHFA down payment assistance.
- CHFA FirstStep: The FHA guidelines will apply to this loan program.
- CHFA FirstStep Plus: This program also follows FHA guidelines, but you can get CHFA down payment assistance.
Down Payment and Closing Cost Assistance
The CHFA does offer assistance for users of the CHFA Preferred Plus, CHFA SmartStep Plus, or the CHFA FirstStep Plus programs. Their assistance can come in the form of a grant or a second mortgage to help you afford a home.
The CHFA FirstStep Plus only allows for assistance in the form of a second mortgage. If you qualify for financial assistance in the form of a second mortgage, the money can go towards the closing costs and/or the down payment. You can still qualify even if you put some of your own money on the table for the down payment.
Some loan programs do not allow you to accept a monetary gift from a friend or family member to cover costs associated with your home purchase. Fortunately, CHFA does not fall into this category. The CHFA does allow for you to apply a monetary gift from someone else towards your down payment or closing costs.
If you know someone willing to give you money towards your home purchase, you should definitely take them up on that offer. Doing so will not impact your expenses or interest rate, and it will only help you.
However, if someone is loaning you money towards your home purchase, the process is not so simple. There are specific requirements relating to any loan you get (whether from a financial establishment or a friend/family member).
If someone gives you money with the expectation that you will repay them, you must inform your mortgage lender. The lender will then factor your monthly repayment amount into your debt-to-income (DTI) ratio and expenses. Taking a loan – and, therefore, inquiring a new expense – may alter your borrowing limits.
Most lenders frown upon borrowers getting a loan for down payment and/or closing costs. Some do not allow it at all. Talk to your lender for clarification. They will be able to best explain the reasoning. However, being able to buy a home will ultimately come down to commitment and affordability.
Down Payment Assistance Grant
The Down Payment Assistance Grant that CHFA offers covers up to 4% of your mortgage. For instance, if purchasing a $200,000 home, you may get up to $8,000 towards it.
The minimum down payment for most CHFA programs is 3%, so this can more than cover your required down payment. You can use the remainder as an additional down payment or apply it to closing costs. You can also put all of the money towards closing costs. In either case, it will reduce how much cash you have to put on the table to buy a home.
The great thing is that you do not have to repay the money you get through this grant. So, if you qualify, you should definitely considering using this financial resource. However, it’s worth noting that higher interest rates will apply to your mortgage if you take this grant.
Second Mortgage Loan
Many borrowers will qualify for the Second Mortgage Loan the CHFA offers. This loan can cover up to 5% of your mortgage. That is equal to up to $10,000 on a $200,000 home purchase.
This is more than enough to cover the down payment (minimum is 3% for most programs). You can also apply the remainder to the down payment, or you can use the remainder for closing costs. You can also apply all of the money towards closing costs if you desire.
This is a loan, so you will have to repay it over time. However, you may not have to begin paying it back immediately. The CHFA can actually defer repayment until certain events. For instance, you might not have to repay it until your mortgage is entirely paid off or you sell or refinance your home.
Since you have to repay this money, you shouldn’t take a second mortgage without considering your options. If you are able to cover the minimum down payment and closing costs out-of-pocket and/or have someone gift the money, that should be your first choice. It’s good financial sense to avoid borrowing money unless it’s the only option.
Interested in learning more about the CHFA programs? Ready to compare all of your mortgage options? Reach out to us for more information or to get started with the exciting home buying process.