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FHA Loans Colorado

FHA loans are one of the best ways for young home buyers to achieve the home of their dreams in beautiful Colorado, renowned for its pioneer spirit and outdoorsy lifestyle. Colorado FHA loans can help make your homebuying dreams come true sooner than you could ever imagine!
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The average Colorado home has an appraised value of approximately $531,605, but a typical Coloradan makes only $50,501 per year. With interest rates as high as 7.57% right now, FHA loans help those with less-than-perfect credit scores or a low income compete in the housing market and find the primary residence they intend to stay in for the long term.

If you’re ready to seek financing for the perfect home in Colorado, District Lending is here to help. We offer competitive rates and a stress-free application process. We’ll also guide you through all the Colorado FHA loan requirements and help direct you to additional resources, such as down payment assistance. When you work with District Lending for an FHA loan in Colorado, you can be assured of a smooth experience and plenty of mortgage support.

Colorado FHA Loan

FHA loans are government-backed loans like VA loans. They're managed by the Federal Housing Administration (FHA), a subset of the Department of Housing and Urban Development. The FHA works with select private lenders who sign on to the FHA program.

Should a borrower default, the government will step in and reimburse the lender. This government insurance makes lenders more willing to accept credit scores below their typical threshold. FHA loans also have less stringent requirements for debt-to-income ratio and require a smaller down payment, which is incredibly useful for low-income borrowers.
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Colorado FHA Mortgage Requirements

To participate in the FHA loan program in Colorado, you need to meet a few stipulations. These are typically looser than the requirements for conventional loans, but as with other mortgage products, FHA lenders will be more willing to work with you if you have a better financial history. Here's what you need to qualify for an FHA loan in Colorado.
  • Credit Score

    You can have a much lower credit score with an FHA loan than a conventional home loan, but the catch is that you’ll need a larger down payment if you have a lower credit score.

    Those with credit scores between 500 and 579 will need to provide a 10% down payment, while those with credit scores of 580 or above only need to put 3.5% down. As the average Colorado resident puts down about 14%, using Colorado FHA loans greatly lowers the bar for those seeking their first home.

    This doesn’t mean that every lender will work with you, though, so work to rehab your score before applying. With a better score, you’ll benefit from less money down and lower interest rates, reducing your monthly costs.

  • Down Payments

    As mentioned, borrowers still have down payment requirements as with any other loan, but they are specifically tied to the borrower’s credit score. The low down payment stipulations are part of what makes the FHA program so attractive to borrowers.

    Unlike with conventional financing, you will need to notify the Federal Housing Administration if you are using gift funds as part of your down payment through what is known as a gift letter. This assures the lender that you’re not taking out an additional loan amount to pay for this and that the funds are provided without the expectation of repayment.

  • Personal Finances

    Like with conventional loans, FHA lenders will need to see your debt-to-income (DTI) before approving your loan. There are higher limits on DTI for FHA loans. You can have up to a 57% DTI, meaning that up to 57% of your income goes to debt service. For conventional loans, this is typically capped at 43%. Given that Colorado residents have the sixth-highest consumer debt in the nation, many find FHA loans one of the best ways to secure a loan, even with a high DTI.

    However, 57% is simply the Federal Housing Administration (FHA) limit, and some lenders may not work with you if your DTI is that high. Reduce your other financial obligations and repay your debts for the best chance at financing.

  • Closing Costs

    Your closing costs for an FHA loan are about the same as for a conventional loan, or approximately 3% to 6% of the overall loan value. However, FHA loans come with the added burden of the upfront mortgage insurance premium (UMIP), which protects the lender in case of default. This is usually about 1.75% of the total home cost.

  • Real Estate Market

    FHA loans have limits, which we’ll discuss in further detail shortly.

    This can make it difficult for FHA borrowers to purchase in high-cost counties, where the average purchase price may exceed what they can afford. For example, the median sales price in Pitkin County is a shocking $7 million, making it nearly impossible for low-income borrowers to buy homes in places like Aspen.

    However, finding homes in areas close to major cities is possible. El Paso County, home to Colorado Springs, has a median sales price of $480,000, meaning there are plenty of homes within the limits of this metropolitan area. Grand Junction’s county, Mesa, has a median sales price of $415,000, making it another good option.

    The most affordable area of Colorado is Otero County, home to only about 18,000 people. This county has a median sales price of just $102,000.

Colorado FHA Loan Limits

FHA loan limits vary by year and by county. This ensures people have a fair opportunity to use an FHA loan, even if they live in an area with an above-average home price.
  • Credit Score

    The average Coloradan has a FICO score of about 718, putting most on track for a 3.5% down payment on an FHA loan. Home buyers with lower credit scores should prepare for a 10% down payment. To ensure that you qualify for an FHA loan from a variety of lenders, aim to have at least a 580 score.

    Quick Pre-Qualification With District Lending

    District Lending makes getting pre-approved with our online application process easier than ever. Explore the many loan types we offer and learn within a few hours whether you can qualify for an FHA loan, a conventional fixed-rate mortgage, or any other options.

  • Down Payment Requirements

    FHA loans require 3.5% down for borrowers with a score of at least 580. If you have a lower score, you’ll need to provide at least 10%. However, you should always strive to pay as much as you can down, as this will help you get better rates and pay less in interest over time.

    Payment Assistance Programs in Colorado

    Thankfully, there are a variety of financial assistance programs that will help you get the funds you need for your FHA loan. There are plenty of excellent programs that help borrowers with a Colorado FHA loan:

    • Boulder County Down Payment Assistance Program

    • City of Aurora Down Payment Assistance

    • Colorado Housing and Finance Authority

    • Colorado Housing Assistance Corporation

    • Denver Metro Mortgage Assistance Program

    • Denver MetroDPA Program

    • Denver NEWSED Community Development Corporation

    • Douglas County Housing Partnership

  • Mortgage Insurance

    As with other loans, you will need to pay mortgage insurance, which helps protect the lender in case of default. You will have an upfront mortgage insurance premium (UMIP), to be paid at close, as well as an annual mortgage insurance premium (MIP). This is in contrast to the monthly mortgage insurance premium that those with conventional mortgages have to pay.

    Your MIP will range between 0.50% and 0.75%, depending on how much you put down and how large your loan was.

  • FHA Loan Limits

    The Federal Housing Finance Agency sets the limits by which FHA loans are bound, but your loan limits will be lower than the conforming loan limit. Here are the loan limits when you purchase a single-family home with Colorado FHA loans in the major metropolitan areas:

    • Boulder – $856,750

    • Breckenridge – $1,006,250

    • Colorado Springs $517,500

    • Denver-Aurora-Lakewood $816,500

    • Durango $655,500

    • Edwards $1,149,825

    • Fort Collins $632,500

    • Glenwood Springs $1,149,825

    • Greeley $560,050

    • Montrose $561,200

    • Steamboat Springs $1,012,000

    Areas outside of these major metropolitan areas all have the same FHA loan limits: $498,257.

How District Lending Can Help

District Lending strives to provide the best experience possible for those seeking an FHA loan in Colorado. Everyone deserves a wonderful home loan experience, helping them immediately get into their dream property. That is why we offer a seamless, stress-reducing FHA loan process that will get you approved faster than you could have imagined.

In addition to our Colorado FHA loans, we also offer conventional, jumbo, and VA loans, ensuring you have numerous options. We’ll help you decide whether an FHA loan in Colorado is the right choice and guide you through every step so that you always feel confident about your decision. If you’re ready to refinance your FHA loan, we have you covered for that, too!

Check out some of our useful tools, such as our mortgage calculator. When you’re ready, you can get a free quote for your FHA loan with no cost and no obligation. District Lending is your friendly local FHA loan lender, ready to help!

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Buy
Home Purchase
Why District
Read about all the benefits
Process overview
Simplified and easy to understand
Apply now
Start your application
Get a quote
See your rate with no commitment
Perks
Free refinance for 3 years
Refinance with no closing costs
No closing costs
Zero costs options, what it means
Realtor credits
Get .5% towards your closing costs
18 Day closing
2X more likely to get your offer accepted
Price match guarantee
We beat competitors’ rates by .125% or more
Rate defense
Never miss out on rates dropping
Refinance
Rates
About
Reviews
Hear from our customers
Contact
Answers within 2 business hours
Meet the crew
Our experts, mission, and values
Careers
Join us in making a difference
Learn
Blog
Our knowledge at your convenience
Mortgage secrets
Short videos with tips&tricks
Video library
A short description can be here
Calculator
Calculate your mortgage payment
Apply nowGet a quote