Most first-time homebuyers have the challenge of coming up with a down payment to make their first purchase. In the city of Boulder, loan limits are challenging due higher home values and the large down payment required. However, in the rest of Boulder County – and into Weld and Larimer counties – home values, loan limits, and loan programs are such that they can work in tandem to facilitate a first home purchase with a low down payment.
Federal Housing Administration (FHA) Loans – FHA loans have long been the “go to” loan program for lower down payments and credit scores. In fact, if the price of a home and the loan limits line up, a homebuyer can be approved with a 3.5 percent down payment. Nevertheless, the current loan limit for Boulder County is $644,000, so it barely scratches the surface to be helpful within the city limits of Boulder since the least expensive single-family home is in the $600,000 range. However, outside the city limits of Boulder, there are more opportunities to utilize FHA financing. Mortgage insurance is required for FHA loans, which allows the lender to accept more risk. The disadvantage to the homebuyer is the additional expense of the mortgage insurance.
Colorado Housing Finance Authority (CHFA) – CHFA and its lender partners have helped over 100,000 homebuyers in Colorado achieve homeownership. In fact, CHFA provides homebuyer education classes, helping first-time homebuyers learn about the homebuying process. CHFA programs generally mirror FHA programs because the current loan limit of $510,400 makes it tough to afford a first home in most of Boulder County.
U.S Department of Veterans Affairs (VA) – Lacking a local military base, Boulder County has never been a huge market for veterans. However, we do have veterans who choose Boulder County as their home, and they should compare VA financing opportunities to other options. Typically, VA loans are generous in terms of no down payment and tend to be more lenient in terms of qualifying. The current VA loan limit for Boulder County is $644,000 but contact your lending professional for possible exceptions to that limit.
U.S. Department of Agriculture (USDA) – Years ago, we used to call these farm home loans. In fact, these loan programs target rural areas. When I started selling real estate in 1978, even Lafayette and Louisville still qualified for these loans. No longer! Today, you can still qualify for them in rural areas of Boulder, Weld, and Larimer counties. Even though the name implies that the property is a farm, this is not necessarily the case. Some of these programs allow for 100 percent financing. There are geographic limits, income limits, and loan limits that can make it difficult to qualify, but it might be worth contacting your mortgage lender to see if you do.
Conventional Fannie Mae and Freddie Mac Loans – Conventional loans, widely known as Fannie Mae and Freddie Mac loans, provide a mortgage base to the housing industry. These institutions created by Congress provide liquidity to banks and mortgage companies that make loans to finance the purchase of homes. For first-time homebuyers, loans with 3 percent down are available as long as the homebuyer qualifies for the monthly payment. In Boulder County, the loan limit is $644,000.
Home Renovation Loans – Maybe all the fix-and-flip TV shows make renovating a home a common desire for first-time homebuyers in order to save money by buying a fix-up property. There are a few loan programs out there if this is the direction you want to go.
FHA 203(k) loans are designed for homebuyers who would like to rehabilitate a home. This FHA loan bases the value on the improved value of the property and thereby finances the improvements within the first mortgage. This program still comes with a 3.5 percent down payment.
Fannie Mae and Freddie Mac also offer home renovation loans that will include the cost of improvements for the first mortgage and with a 3 percent down payment.
Teachers, Police Officers, and Firefighters – There are loan programs specifically designed to help teachers, police officers, and firefighters buy their first home. The benefits could include low down payment and a more attractive interest rate.
Down Payment Assistance – CHFA, mentioned above, offers down payment assistant grants that do not need to be repaid. If you qualify, CHFA even offers second mortgage loan programs that can contribute to your down payment when you are using a CHFA first mortgage loan program.
The State of Colorado has created the First-Time Homebuyer Savings Account program. A maximum of $50,000 can be contributed to it and can grow to $150,000 without accruing state income tax. This homebuyer savings account allows people other than a homebuyer to contribute to the fund, such as family members or even wedding guests!
Check with local municipalities for other possible down payment assistance programs.
In summary, now is the time to get on track to buy your first home! Check with your Realtor and mortgage lender to come up with a plan that works for you.
By Duane Duggan. Duane has been a Realtor for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: The Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail DuaneDuggan@boulderco.com, call 303.441.5611 or visit boulderco.com.