Colorado CHFA Down Payment Assistance

Quick Facts

• Program suite: CHFA offers two flagship options—the Down Payment Assistance Grant (no repayment) and the Down Payment Assistance Second Mortgage (0% interest, deferred, forgiven after three years).
• Loan pairing: Assistance attaches to CHFA first mortgages (conventional, FHA, VA, USDA) originated by participating lenders statewide.
• Income & purchase limits: Updated annually; for 2025, Denver metro income cap reaches $157,800 for most programs with purchase prices up to $726,200.
• Homebuyer education: Mandatory eight-hour class plus one-on-one counseling for first-time buyers; available online and in person.
• Timing: Funds reserved at mortgage application and disbursed at closing to cover down payment, closing costs, or prepaid expenses.

Why It Matters in 2025

Colorado’s housing market remains competitive despite moderating price growth. Median home prices hover near $600,000 in Front Range communities, leaving many qualified buyers short on down payments. In response, CHFA expanded its DPA grant pool for 2025 and increased maximum assistance to $25,000 on the second mortgage option. The agency also rolled out a “Payment Advantage” conventional loan with reduced mortgage insurance, making monthly payments more manageable when layered with down payment support.

Another 2025 upgrade is automated underwriting integration. Participating lenders now receive real-time eligibility feedback through the CHFA Connection portal, shrinking approval timelines. CHFA also offers targeted incentives for essential workers—teachers, nurses, and first responders—via lower interest rates on the first mortgage when paired with the DPA grant. Buyers in rural resort counties such as Eagle, Summit, and Routt can combine CHFA assistance with USDA Guaranteed Loans, stretching affordability in areas where tourism drives prices upward.

Program Options Explained

1. Down Payment Assistance Grant: Provides up to 3% of the first mortgage amount with no repayment obligation. Ideal for buyers needing modest funds to reach 3%–5% down. The grant cannot be used with CHFA Preferred Very Low Income Program but pairs with most others.
2. Down Payment Assistance Second Mortgage: Offers up to 4% of the first mortgage, capped at $25,000. It carries 0% interest, no monthly payment, and is forgiven after three years of owner occupancy. Selling, refinancing, or moving out within three years triggers repayment.
3. CHFA SmartStep Plus: Bundles a competitive fixed-rate FHA mortgage with the second mortgage, targeting credit scores 620–659. Provides manual underwriting flexibilities for buyers with limited credit history.
4. CHFA SectionEight Advantage: Integrates Housing Choice Voucher homeownership payments with DPA, allowing voucher holders to leverage monthly assistance toward mortgage payments while receiving grant funds for closing costs.

Eligibility Deep Dive

• Credit Requirements: Minimum 620 FICO for most programs; 660 for manufactured homes. CHFA accepts alternative credit (utility bills, rental history) for borrowers lacking traditional credit as long as they demonstrate 12 months of on-time payments.
• Income Limits: Determined by county and household size. For example, 1–2 person households in Denver County can earn up to $157,800, while rural counties may have lower caps (~$130,200). Lenders access the latest limits via CHFA’s matrix.
• Homebuyer Education: Take CHFA’s HUD-approved class through eHome America or local housing counseling agencies. Certificates remain valid for 12 months. A separate CHFA loan orientation is required for SectionEight Advantage participants.
• Occupancy: Borrowers must occupy the property within 60 days of closing and maintain primary residence status. Non-occupying co-borrowers are typically prohibited.
• Assets: No strict asset caps, but borrowers must contribute at least $1,000 of their own funds (gift funds count for FHA/VA with restrictions). Reserves of 2–3 months’ mortgage payments improve underwriting strength.

Application Roadmap

1. Pre-Approval: Select a CHFA-approved lender. Gather pay stubs, W-2s, tax returns, bank statements, and credit reports. Discuss which DPA option suits your situation.
2. Education Course: Complete the required homebuyer education early. Upload your certificate to the lender’s portal. Schedule counseling to review budget and maintenance expectations.
3. Loan Reservation: Once under contract, your lender locks the CHFA first mortgage and reserves DPA funds via CHFA Connection. Reservation lasts 60 days (90 for new construction).
4. Processing & Underwriting: Provide appraisal, title work, and insurance quotes. Address conditions promptly—common items include updated bank statements or letters of explanation for credit inquiries.
5. Closing Disclosure: Review final numbers at least three days before closing. Ensure the DPA grant or second mortgage amount appears accurately to cover desired costs.
6. Closing: Sign first and second mortgage documents. Funds are wired to the title company, reducing cash-to-close. Record the second deed of trust where applicable.
7. Post-Closing: Register for CHFA homeowner resources, including webinars on maintenance, budgeting, and foreclosure prevention.

Strategies to Strengthen Your Application

• Reduce Debt-to-Income (DTI): Pay down revolving debt to keep back-end DTI below 45%. CHFA may approve up to 50% with strong compensating factors.
• Document Gifts: If receiving family assistance, complete the gift letter and provide donor bank statements showing ability. Season funds in your account 60 days before closing to avoid sourcing issues.
• Leverage Tax Credits: Combine DPA with the CHFA Mortgage Credit Certificate (MCC) to claim up to 20% of annual mortgage interest as a tax credit. This boosts purchasing power and offsets long-term costs.
• Target Eligible Properties: Single-family homes, condos, townhomes, and manufactured homes on permanent foundations qualify. For multi-unit purchases (2–4 units), ensure you plan to occupy one unit and meet reserve requirements.
• Plan for Reserves: Set aside savings for maintenance, especially in mountain communities with extreme weather. Demonstrating reserves reassures underwriters you can handle surprise expenses.

Making the Most of Forgiveness Terms

If you choose the second mortgage, staying in the home for at least three years ensures forgiveness. Track the anniversary date and avoid unnecessary refinancing within that window. If interest rates drop significantly, analyze whether the savings outweigh repaying the second mortgage. Consider energy-efficiency upgrades funded through utility rebates instead of new financing during the forgiveness period.

Avoiding Common Roadblocks

• Late Education Completion: Lenders cannot close without the certificate. Schedule courses as soon as you begin shopping.
• Underestimating Closing Costs: Even with DPA, you may need to cover appraisal fees, inspections, and earnest money upfront. Budget $3,000–$5,000 beyond assistance.
• Property Condition Issues: CHFA follows FHA minimum property standards. Address peeling paint, roofing issues, or safety hazards before appraisal reinspection.
• Income Fluctuations: Self-employed borrowers must document two years of stable income. Provide year-to-date profit/loss statements verified by a CPA.
• Insurance Gaps: Secure homeowner’s insurance early; mountain or wildfire-prone areas may face limited carriers. Without proof of insurance, closing will delay.

Post-Purchase Support and Risk Management

CHFA offers ongoing coaching through its Homeowner Resource Center. Services include:

• Budgeting workshops covering utilities, HOA dues, and seasonal costs.
• Foreclosure prevention counseling with HUD-certified advisors.
• Access to EnergySmart Colorado assessments to reduce utility bills.
• Information on property tax exemptions for seniors, veterans, and disabled homeowners.

Join neighborhood associations or Nextdoor groups to stay informed about local resources such as down payment repayable grants for energy retrofits or wildfire mitigation support. Keep detailed maintenance logs to protect resale value and ensure warranty claims are honored.

Case Study: Teacher Buying in Colorado Springs

Alicia, a public school teacher earning $68,000, qualified for a CHFA Preferred loan with a 3% DPA grant. After completing an online education course and counseling session, she secured a $420,000 townhouse. The grant covered $12,600 of down payment and closing costs. She layered a $1,000 contribution from savings and received $2,000 in seller credits. By combining the CHFA MCC, she anticipates $1,200 annual tax savings. She joined the Colorado Springs Housing Counseling Collaborative to plan for HOA assessments and used EnergySmart rebates to install efficient lighting, lowering utility bills.

Frequently Asked Questions

Can I use CHFA assistance if I owned a home before? Yes. First-time buyer status is not required for most programs, though some offer better rates if you have not owned in the past three years.

Is there a minimum loan amount? Generally $50,000. High-cost areas seldom encounter this issue, but rural properties with low purchase prices should confirm with lenders.

What happens if I refinance within three years? The second mortgage must be repaid at closing. Grants do not require repayment. Evaluate the interest savings carefully before refinancing early.

Can DPA funds cover earnest money? Funds disburse at closing, so you must provide earnest money upfront. However, the DPA can reimburse you on the closing statement, effectively replenishing your savings.

Does CHFA cap debt ratios for student loans? Loans in income-driven repayment are counted at actual payment amounts. For deferred loans without payments, lenders use 0.5% of the balance to calculate monthly debt.

By combining CHFA’s down payment assistance with education, budgeting, and long-term planning, Colorado buyers can navigate a tight housing market and achieve sustainable homeownership without draining savings.