There are plenty of reasons to buy a home in Colorado — you can’t deny its beautiful views and great outdoor activities. But that mountain home can be pretty pricey. A good mortgage rate can help you save money, whether you’re buying in downtown Denver or picturesque Aspen.
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Quick Look – Best Mortgage Lenders in Colorado
- Bank of Colorado: Best Overall
- New American Funding: Best for Credit-challenged Borrowers
- Academy Mortgage: Best for First-time Home Buyers
- FirstBank: Best for Low-income Applicants
- Wells Fargo: Best for Full-service Customers
What is a Mortgage Rate?
You probably need a loan to pay for your Colorado abode — that loan is called a mortgage. You’ll pay a small monthly fee to the lender, known as interest, for borrowing that money. That interest is based on something called the prime rate, which is determined by individual banks and influenced by what the largest banks in the industry charge. You can lower the rate you pay by getting a purchase quote from multiple lenders before you settle on one.
What Factors Impact Your Mortgage Rate?
Banks set their rates based on the prime rate and the exact number varies from 1 lender and borrower to the next. There are several factors that affect the mortgage rates Colorado borrowers pay individually, including:
- Credit score: The higher your credit score, the better your chances of getting a great rate. Your credit score is an ongoing number you can check by pulling a free annual credit report. You can improve it by:
- Paying your bills on time
- Keeping your account balances well below the limits
- Consistently paying your bills over many years
- Down payment amount: A lender will typically require you to pay a percentage of the principal at closing as a down payment. A large down payment can give a lender confidence that you’ll repay as well as reduce the amount you borrow overall.
- Length of loan: Consider a shorter-term loan if you want to save on interest. The longer the lender will have to wait for the payoff, the higher the interest you’ll pay.
- Location of property: Your interest rates are based on the interest rates in Colorado. You can use comparison tools to determine how much, on average, you’ll pay.
- Interest rate type: Those concerned about expensive monthly payments may choose an adjustable-rate mortgage versus a fixed rate.
- A fixed-rate mortgage issues 1 interest rate that you pay for the entirety of the loan.
- An adjustable-rate mortgage gives you some breathing room with a low introductory rate. At a specified time, however, that rate increases to put itself in line with the current interest rate.
- Type of lender: Interest rates fall within a range among lenders. Small local banks may have the leniency to offer you a better rate than a corporate lender with stricter policies. Credit unions are nonprofits that answer to members; for-profit financial institutions answer to shareholders. For that reason, you may be able to get a better rate with a credit union than with a bank.
- Type of mortgage: There are multiple loan types available outside of the conventional loans most mortgage lenders offer. The government backs loans that lenders issue to consumers to encourage borrowing and keep the economy strong. All these loan types, including conventional, must follow government guidelines. Government-backed options simply give lenders more leeway in issuing loans, potentially letting someone with slightly lower credit or income to qualify.
What is a Mortgage Type?
Another factor affecting your mortgage rates in Colorado is the type of loan you get. Here are 4 types of mortgage options that could apply to you:
- Conventional: A conventional loan isn’t backed by the federal government, so your rates are often higher. There are 2 types of conventional loans:
- Conforming loans describe loan amounts that fall below the limits set by the federal government. For 2019, that limit is $484,350.
- Nonconforming loans exceed that amount and include jumbo loans, which are available for dollar amounts in the low millions. You’ll typically need good credit and a large down payment to be approved for a jumbo loan.
- FHA: The Federal Housing Administration works with lenders to back loans for borrowers who might not qualify for a conventional loan. These loans have low down payment requirements, low closing costs and allow a lower credit score to qualify.
- USDA: The U.S. Department of Agriculture has a rural development program that provides assistance to lenders for loans to lower-income home buyers who live in areas designated as rural.
- VA: To help out those who have served, the Veterans Administration backs loans to active service military members, as well as veterans. The VA works with certain lenders, who handle the loan with the VA’s backing.
What is a Mortgage Term?
Before a lender allows you borrow hundreds of thousands of dollars for a mortgage, you’ll first be asked how long you plan to pay it back. The best mortgage companies offer a variety of term options, including:
- 30-year fixed: With a 30-year fixed mortgage, you lock in an interest rate that you’ll pay throughout the course of your loan — a 30-year max.
- 15-year fixed: A 15-year mortgage gives you less time to pay back the full amount, which means you’ll have a higher monthly payment. The benefit of this option is that the interest rate is typically lower since the lender gets its money back sooner.
- 5/1 ARM: This adjustable-rate mortgage requires that you pay a fixed rate for the first 5 years, with the rate adjusting in the 6th year and possibly continuing to change every year thereafter.
Current Mortgage Rates in Colorado
Lenders get information on their interest rates from a rate sheet, which can be distributed as often as every day. As the economy changes, the Federal Reserve adjusts the federal funds rate. In response to that change, as well as the economy as a whole, lenders adjust their own interest rates.
You can save money by keeping an eye on interest rates and locking in a low rate. We regularly update our numbers to factor in typical interest rates in Denver, Colorado Springs, Boulder and Aurora.
|Loan Type||Current Mortgage Rate|
|5/1 ARM (adjustable rate)||3.60%|
Calculating Interest in Colorado
There are plenty of online calculators that automate the process of determining how much you’ll pay. Interest is calculated by dividing the interest rates by the total number of payments, then multiplying that total by the loan principal. When you know how much you’ll pay over the life of the loan, you can see how much that 30-year loan will actually cost you in interest.
|City||Average Home Value||Loan Term||Current Rate||Monthly Payment||Total Interest Paid|
|Colorado Springs||$296,100||30-year fixed||3.63%||$1,351.20||$190,332.48|
Lender Credit Score Minimums in Colorado
When you approach a lender for a mortgage, one of the first steps is to pull your credit report. You’ll need a minimum credit score to qualify, and that minimum varies based on the lender you choose.
|Lender||Minimum Credit Score Required|
|Alliant Credit Union||620|
5 Best Mortgage Lenders in Colorado
1. Best Overall: Bank of Colorado
The Bank of Colorado checks all the boxes, whether it’s customer service or availability of government-backed loan options.
The Bank of Colorado is still a small business at heart and operates with just over 600 employees in a handful of states.
The Bank of Colorado offers customer service by phone and chat in addition to its branches.
2. Best for Credit-challenged Borrowers: New American Funding
New American Funding could be the way to go if you’re concerned about your credit.
The independent lender has the flexibility to loan money to those who might be denied by corporate lenders.
New American offers a non-qualified mortgage in addition to conventional, FHA and USDA loans, which allow you to use alternative sources of income to qualify.
3. Best for First-Time Home Buyers: Academy Mortgage
Academy Mortgage is one of the best lenders for first-time buyers in the state and has multiple branches across Colorado.
Not only is there a wide range of government-backed options available, but Academy Mortgage also works with the Colorado Housing Finance Authority.
Through CHFA, Academy Mortgage can offer assistance with your down payment or closing costs.
4. Best for Low-Income Home Buyers: FirstBank
Low-income borrowers will be interested in FirstBank’s Affordable Housing Program, which bases its loan on the income of the applicant.
Your income is compared on the average community income, so if you’re buying in an area that’s higher income than you are, you could be at an advantage.
These housing programs provide low closing costs and the option of either a fixed-rate or adjustable-rate mortgage.
5. Best for Full-service Customers: Wells Fargo
Some customers prefer to do all their banking in one place. Wells Fargo is a nationally-recognized big-box lender with a wide range of products for customers.
Wells Fargo has a convenient online application process for its mortgages in addition to checking, savings and other loan programs.
Once you’ve applied, you can use the yourLoanTracker tool to check the status.
Find the Right Lender
You can find a Colorado lender that meets your needs, whether you’re buying your first home, selling and purchasing a new house or looking for a refinance quote. Determine whether you prefer a lender with local branches before you start shopping. Even local lenders may not have the personal touch. You may prefer a nonprofit option like a credit union, many of which specialize in personalizing interactions with its members.
Looking to Refinance?
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Frequently Asked Questions
1) 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.
2) 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!
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.