Colorado’s mix of outdoor and urban living offers no end of opportunities. But the state’s higher-than-average home prices might seem intimidating for a first time home buyer in Colorado. Don’t let home prices run you off. Benzinga can help you understand everything you need to know to buy your first home in the Centennial State.
Best Lenders for First Time Home Buyers in Colorado:
The Housing Market in Colorado: An Overview
Before you get a purchase quote, take some time to get to know the Colorado housing market. Here’s a brief overview:
- Total households: 2,082,531
- Median list price: $365,000
- 3 most expensive cities in Colorado to buy a house:
- 3 most affordable cities in Colorado to buy a house:
- Fort Collins
Preparing for a Mortgage
Know the mortgage inside and out to take some of the stress out of the process. Here’s an overview of the process:
- Take a look at your credit. Your credit score, a 3-digit number that determines how well you handle debt, plays a significant role in the mortgage process. Lenders require you to have a minimum credit score in order to get a mortgage. Your credit score also impacts your interest rate. A high credit score usually means you have a more responsible credit history. Lenders may offer you a lower interest rate if you have a high credit score. You can get a free copy of your credit reports from annualcreditreport.com. Review your reports for errors and report any errors to the reporting agency.
- Get preapproved. Contact at least 3 lenders for a quote. Review your quotes, compare interest rates, fees and discounts. Choose a lender and apply for preapproval. Keep in mind that a preapproval isn’t a commitment. You can still change your mind and go with another lender when you finalize your mortgage.
- Find your new home. Look at houses in your preferred location. An experienced real estate agent can be very helpful. Decide which home best fits your preferences and put in an offer.
- Apply for a mortgage. Decide which lender and mortgage type you prefer. You may even want to get new quotes. Once you decide on a lender, you’ll need to complete a formal application. Your lender will also want to see documentation of your income and savings. You’ll need to provide documents such as:
- A copy of your driver’s license or state identification
- Documentation of any name changes
- Your recent pay stubs
- Your 2 most recent W-2s
- Your 2 most recent tax returns
- Your recent bank statements
- Proof of any other income
- Documentation of your down payment
Here are the credit score minimums for some of Colorado’s lenders.
Mortgage options can be confusing. Here are the most common mortgages you’ll run into:
- FHA: An FHA loan, backed by the Federal Housing Administration, is an appealing choice for many first time home buyers. This is because of its low down payment and credit score requirements. Let’s say you have a credit score of 580 or higher. You may be able to make a down payment as low as 3.5%.
- USDA: The U.S. Department of Agriculture backs USDA loans to help low- and moderate-income borrowers buy a home in a rural area. You may be able to get a mortgage if you meet the income requirements.
- VA: Current service members and veterans may qualify for a VA loan. These mortgages have low or no down payments and flexible credit requirements. The Department of Veterans Affairs oversees and insures these mortgages.
- Conventional: A conventional loan isn’t overseen or supported by a government agency. Conventional loans can be conforming or non-conforming. When a loan conforms, it means that it meets Fannie Mae and Freddie Mac's standards for purchase. Fannie Mae and Freddie Mac are government-sponsored enterprises that invest in mortgage loans. A non-conforming loan doesn’t meet Fannie and Freddie’s standards for purchase.
- Jumbo: Jumbo mortgages are a great example of non-conforming mortgages. These large loans exceed Freddie Mac and Fannie Mae’s mortgage limits.
First Time Home Buyer Programs in Colorado
Saving up for a down payment can take time. Colorado offers programs to help make the home buying process more affordable. Here are a few options:
- CHFA FirstStep: This Colorado Housing and Finance Authority program offers a 30-year fixed-rate mortgage with an affordable interest rate. You must meet income limits to qualify and you must be a first time home buyer. You also must purchase a home within the program’s price limits. Borrowers can qualify with no credit score. If you have a credit score, it must be 620 or higher.
- CHFA Down Payment Assistance Grant: This grant pays up to 3% of your mortgage if you use a CHFA mortgage. You don’t need to repay the funding since it’s a grant.
- CHFA Second Mortgage Loan: This loan pays up to 4% of your mortgage costs. You don’t have to repay the loan until you pay off your mortgage or sell or refinance your home. You must get a CHFA mortgage to get a second mortgage loan.
Contact a participating lender to learn more about CHFA mortgages.
Current Mortgage Rates in Colorado
Your mortgage rate is how much you pay to borrow money from a lender. Lenders need to cover expenses and stay profitable. To do that, they charge interest. Mortgage rates are fixed or adjustable. A fixed interest rate means that the rate is always the same, no matter how long you have a mortgage.
An adjustable-rate mortgage means that lenders can change the rate. These mortgages usually start with a fixed rate. A 5/1 ARM mortgage has a 5-year fixed-rate period followed by annual adjustments.
Colorado’s 30-year fixed-rate mortgage rate is less than the national average, but its 15-year fixed-rate mortgage and 5/1 ARM rates are higher. Lenders change mortgage rates every day. They do this in response to what’s happening economically. Benzinga updates mortgage rates frequently to reflect these changes.
Closing a Mortgage
Closing occurs at the end of the mortgage process because your lender has reviewed your financial documentation, asked you for additional information when needed and approved you for the mortgage. The final step is your closing meeting, where you sign the final paperwork for the mortgage.
Your lender must have your Closing Disclosure, or summary of your final payments, ready at least 3 days before your meeting. Ask your lender if you have any questions.
Here are the average closing time for some Colorado lenders:
5 Best Mortgage Lenders in Colorado for First Time Home Buyers
Ready to get some mortgage quotes? Here are the best mortgage companies for first time buyers:
1. Best Overall: Quicken Loans®
Quicken Loans® offers an online application process and an easy-to-navigate website.
You can view its mortgage rates online for easy shopping. It has several educational resources on its website and mortgage calculators you can use to estimate your monthly payments.
Its customer service is top-notch. Quicken Loans® offers several mortgage options — including FHA, VA and USDA loans, conventional loans and jumbo loans.
2. Best for In-Person Service: US Bank
US Bank makes it easy for first time mortgage borrowers to work with someone in person. However, you’ll still have technology tools to speed things along.
You can do an online preapproval and complete your mortgage application online. U.S. Bank offers online mortgage rates and FHA, VA, conventional and jumbo mortgages.
3. Best for Online Service: guaranteed Rate
You might like guaranteed Rate if the in-person experience isn’t for you.
It offers an entirely online application process backed with high customer service ratings. It also has a user-friendly website and online rates.
guaranteed Rate offers FHA, VA, conventional and jumbo mortgages.
4. Best for Service Members: Veterans United
If you’ve logged some time in the military, Veterans United’s loans will likely be the best deal. Unlike other veteran-marketed loan programs, Veterans United only accepts active duty and veteran military members.
In addition to no-down-payment loans, you’ll also eliminate the private mortgage insurance you’ll have to pay with other mortgages.
Veterans United is also more forgiving of lower credit scores. Interest rates are lower than average.
5. CrossCountry Mortgage: Best for Self-Employed
CrossCountry Mortgage makes it easy for all types of homebuyers to get approved for a mortgage. Their flexible requirements can help you get financing, with no employment or income verification and no minimum DTI. CrossCountry Mortgage offers traditional loan terms, as well as more flexible home payment plans with their 40-year loan program.
It’s also easier to get approved if you’re self-employed. Tax returns are not required and you’ll only need one year of self-employment income history and a minimum credit score of 580. CrossCountry Mortgage can also help you get approved on assets alone, like your bank statements, stocks and bonds, or retirement accounts.
Choose the Right Colorado Lender
Choosing your first mortgage lender is a big decision. Sure, you can get a refinance quote down the road, but why not start out with the best rate possible? Take your time throughout the process, contact multiple lenders and trust your gut.
If a lender seems “off,” choose a different one. Research local down payment assistance programs in addition to statewide programs, because you never know what you might qualify for. Take all the steps and you’ll be in your dream home before you know it.
Frequently Asked Questions
1) Q: How do I get pre-approved?
First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!
2) Q: How much interest will I pay?
Interest that you will pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.
3) Q: How much should I save for a down payment?
Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first time buyers. Check out the lenders that specialize in making the home buying experience a breeze.
Get Ready for Take Off
Rocket Mortgage® is an online mortgage experience developed by the firm formerly known as Quicken Loans®, America’s largest mortgage lender. Rocket Mortgage® makes it easy to get a mortgage — you just tell the company about yourself, your home, your finances and Rocket Mortgage® gives you real interest rates and numbers. You can use Rocket Mortgage® to get approved, ask questions about your mortgage, manage your payments and more.
You can work at your own pace and someone is always there to answer your questions — 24 hours a day, 7 days a week. Want a fast, convenient way to get a mortgage? Give Rocket Mortgage® a try.