Do You Think a Big Down Payment Is Needed to Buy a Home? Think CHFA.

One of the most enduring misconceptions among home buyers is that a large down payment — typically 20% — is required in order to buy a home.  Nothing could be further from the truth.

FHA loans only require a 3.5% down payment, although they come with a mortgage insurance requirement which lasts for the life of the loan. Because of that, you’ll need to refinance with a conventional loan once you exceed 20% equity in your new home.

Conventional (non-FHA) loans don’t necessarily require a 20% down payment either. To compete with FHA loans, there are lenders who require as little as 3% down payment, often without mortgage insurance. If they do require mortgage insurance, it can be eliminated once your equity rises to 22%, although that requires a new appraisal, which can cost $400 or more.

Best of all, however, the Colorado Housing & Finance Authority (CHFA, pronounced “Chaffa) can get you into a home with as little as $1,000 out of pocket cost. CHFA loans have income limits, but they are reasonable, up to $120,100 in the metro area. Their website is super helpful and easy to navigate at www.chfainfo.com.

At that website you’ll learn the complete process involved in getting approved for a CHFA loan. One of the first steps is to take a free buyer education class that covers every aspect of the home buying process as well as ownership responsibilities after closing.

CHFA loans are only obtained through mortgage lenders, not from CHFA directly, and Golden Real Estate can connect you with a CHFA-approved lender. 

If you’re a veteran with an honorable discharge, you are eligible for 100% financing, but there’s a funding fee.  That fee, however, is waived if you have a service related disability. Even if it isn’t waived, the fee can be included in the mortgage so that you can literally close on a VA loan with zero money out of pocket. Earnest money submitted is refunded to you at closing! We can also connect you with a VA-approved lender.

‘Conforming’ Loan Limits Raised

Until recently, the conventional loan limit was $417,000. Anything above that was considered a “jumbo” loan, which had stricter credit requirements and higher interest rates.  But things have changed.

Last week, Fannie Mae and Freddie Mac, the two government-sponsored entities that purchase the bulk of mortgage loans from lenders, raised that limit to $484,350 for much of the country.  In some regions with higher property values however, including metro Denver, the limit is now $561,200. This is good news for borrowers, as conventional loans allow a smaller down payment percentage versus that of Jumbo loans – as little as 3%.

Contact your mortgage broker to see if it makes sense for you to buy (or sell, for that matter) before mortgage rates rise further. If you don’t have a mortgage broker call us. We can put you in touch with several professionals we know and trust