Colorado FHA Loans –  Requirements and Loan Limits for 2024 – Colorado FHA Lenders

colorado fha lenders

Colorado home buyers who need a small down payment or have poor credit scores may be able to purchase a home with an Colorado FHA loan. There are many FHA lenders in Colorado who offer FHA loans, but not all of them participate in all of the FHA loan options available.

We have decades of experience with FHA loans and will take you through the Colorado FHA loan requirements, detail what is needed to qualify, then help you to get pre-qualified. If you already know that an FHA loan is right for you, then click to connect with an Colorado FHA lender whether you live in Denver, Colorado Springs, Fort Collins, Aurora, or anywhere else.

The Unique Benefits of FHA Loans in Colorado

If you are deciding to purchase a home, the financial requirements can sometimes feel overwhelming. Saving enough for a hefty down payment and achieving an excellent credit score may seem like insurmountable challenges for many. That’s where FHA loans have something special to offer.

These are the benefits of an FHA loan versus a conventional loan:

  • Lower credit scores permitted
  • Lower down payment requirement
  • FHA interest rates are lower than conventional rates
  • Gift funds allowed
  • Seller closing cost contributions are allowed
  • FHA loans are assumable
  • Co-signers allowed
  • Higher debt to income ratios permitted

Colorado FHA Loan Requirements for 2024

These are the basic FHA loan requirements for this year. All of these must be met to be approved for an FHA loan. If you are not positive on whether you meet these standards or have questions, an FHA lender can help.

  • Down payment of 3.5% or 10% if your credit score is below 580
  • 2-year employment history with some exceptions allowed
  • Fully document your income for the past two years
  • Minimum FICO score requirement of 500 – down payment will vary
  • Mortgage Insurance Premium (MIP) is required for every FHA loan
  • Maximum debt to income ratio of 43% with exceptions up to 56%
  • The home must be your primary residence
  • No bankruptcies or foreclosures in the past two years

Low Down Payment Requirement

FHA loans typically require a down payment as low as 3.5% of the purchase price. This is often affordable for most home buyers and down payment assistance can also be used if needed.

For credit scores of 580 or higher, the down payment will be 3.5%. For credit scores of 500-579, there will be a down payment of 10%. The down payment for an FHA loan cannot be negotiated because lenders cannot deviate from the FHA requirements.

The down payment can also be a gift from a relative. That gift can cover some or all of the down payment and also the closing costs. Read more about FHA gift funds.

Lenient Credit Requirements

Another standout benefit of FHA loans is their accessibility to borrowers with lower credit scores compared to conventional loans. This means that individuals with less-than-perfect credit history are still eligible for this type of mortgage.

For instance, if someone has faced financial hardships or made mistakes in the past and now has a lower credit score, an FHA loan provides them with an opportunity where other types of loans might not. By evaluating applicants based on a wider range of factors rather than just their credit score, these loans open doors for countless individuals who may otherwise struggle to secure financing for their dream homes.

If you have poor credit, we can still help you to secure a mortgage even if you have denied by other lenders. Contact us here to discuss 

Competitive Interest Rates

One prominent advantage offered by FHA loans is the potential for competitive interest rates. This aspect can save homebuyers money over the life of the loan in comparison to other mortgage options. 

For instance, let’s say the interest rate on an FHA loan is notably lower than that of a conventional loan. Over time, this seemingly small difference can accumulate into substantial savings, making FHA loans an attractive choice for many individuals looking to purchase a home.

The interest rate offered will largely be tied to your credit score. The higher the credit score, the lower the rate will be. If you also have the ability to put more down, your rate will likely be slightly lower.

Debt-to-Income Ratio

In addition to a strong credit score, borrowers need to meet specific debt-to-income ratio requirements when applying for an FHA loan. This is an assessment used by lenders to compare an individual’s monthly income versus their recurring monthly debts. The goal is to ensure that prospective borrowers can manage mortgage payments in addition to their existing financial obligations.

Let’s look at it like this: Imagine you’re deciding if you can afford to spend money on something new after paying all your bills each month. This ratio gives lenders an idea of how well you can manage taking on a new bill—the mortgage payment—when put against your ongoing expenses. To prove that you’re in good shape, most lenders prefer a debt-to-income ratio below 43%. This signals that you have enough income each month to comfortably support your existing debts and the anticipated mortgage payment.

By understanding these core eligibility criteria such as the credit score and the debt-to-income ratio required for FHA loans, you’re equipped with knowledge crucial for navigating the home financing process and making informed decisions about homeownership.

Understanding the eligibility criteria sets us up for exploring how these loans lead to fulfilling homeownership dreams through the purchasing process.

Colorado FHA Down Payment Assistance

There are various down payment assistance programs in every state. Below is a list of just a few down payment assistance programs that may be available to you in Colorado. Home buyers will need to contact, and arrange for these programs independently. Lenders will accept the funds from these programs for your down payment but they will not arrange for the down payment assistance.

Metro Mortgage Assistance Plus Program

Turnkey Mortgage Program

These are just two examples of down payment assistance programs in Colorado. Another option if you decide to work with us is down payment assistance that is part of the loan package. This lender provided down payment assistance option may or may not be forgivable and also will have a minimum credit score requirement. Contact us for more details.

Colorado FHA Loan Limits

Every county in the United States has specific maximum loan limits that are set for single family homes, as well as 2-4 unit properties. The limits are set based upon the average home sales value in that county. The base FHA loan limit for single family residences in Colorado for most counties is $498,257. Use this FHA loan limit lookup tool to see what the FHA loan limits are in your county.

County Name Single Family 2 Units 3 Units 4 Units
ADAMS $816,500 $1,045,250 $1,263,500 $1,570,200
ALAMOSA $498,257 $637,950 $771,125 $958,350
ARAPAHOE $816,500 $1,045,250 $1,263,500 $1,570,200
ARCHULETA $498,257 $637,950 $771,125 $958,350
BACA $498,257 $637,950 $771,125 $958,350
BENT $498,257 $637,950 $771,125 $958,350
BOULDER $856,750 $1,096,800 $1,325,800 $1,647,650
BROOMFIELD $816,500 $1,045,250 $1,263,500 $1,570,200
CHAFFEE $632,500 $809,700 $978,750 $1,216,350
CHEYENNE $498,257 $637,950 $771,125 $958,350
CLEAR CREEK $816,500 $1,045,250 $1,263,500 $1,570,200
CONEJOS $498,257 $637,950 $771,125 $958,350
COSTILLA $498,257 $637,950 $771,125 $958,350
CROWLEY $498,257 $637,950 $771,125 $958,350
CUSTER $498,257 $637,950 $771,125 $958,350
DELTA $498,257 $637,950 $771,125 $958,350
DENVER $816,500 $1,045,250 $1,263,500 $1,570,200
DOLORES $498,257 $637,950 $771,125 $958,350
DOUGLAS $816,500 $1,045,250 $1,263,500 $1,570,200
EAGLE $1,149,825 $1,472,250 $1,779,525 $2,211,600
EL PASO $517,500 $662,500 $800,800 $995,200
ELBERT $816,500 $1,045,250 $1,263,500 $1,570,200
FREMONT $498,257 $637,950 $771,125 $958,350
GARFIELD $1,149,825 $1,472,250 $1,779,525 $2,211,600
GILPIN $816,500 $1,045,250 $1,263,500 $1,570,200
GRAND $747,500 $956,950 $1,156,700 $1,437,500
GUNNISON $633,650 $811,200 $980,550 $1,218,550
HINSDALE $498,257 $637,950 $771,125 $958,350
HUERFANO $498,257 $637,950 $771,125 $958,350
JACKSON $498,257 $637,950 $771,125 $958,350
JEFFERSON $816,500 $1,045,250 $1,263,500 $1,570,200
KIOWA $498,257 $637,950 $771,125 $958,350
KIT CARSON $498,257 $637,950 $771,125 $958,350
LA PLATA $655,500 $839,150 $1,014,350 $1,260,600
LAKE $498,257 $637,950 $771,125 $958,350
LARIMER $632,500 $809,700 $978,750 $1,216,350
LAS ANIMAS $498,257 $637,950 $771,125 $958,350
LINCOLN $498,257 $637,950 $771,125 $958,350
LOGAN $498,257 $637,950 $771,125 $958,350
MESA $498,257 $637,950 $771,125 $958,350
MINERAL $498,257 $637,950 $771,125 $958,350
MOFFAT $498,257 $637,950 $771,125 $958,350
MONTEZUMA $498,257 $637,950 $771,125 $958,350
MONTROSE $561,200 $718,450 $868,400 $1,079,250
MORGAN $498,257 $637,950 $771,125 $958,350
OTERO $498,257 $637,950 $771,125 $958,350
OURAY $561,200 $718,450 $868,400 $1,079,250
PARK $816,500 $1,045,250 $1,263,500 $1,570,200
PHILLIPS $498,257 $637,950 $771,125 $958,350
PITKIN $1,149,825 $1,472,250 $1,779,525 $2,211,600
PROWERS $498,257 $637,950 $771,125 $958,350
PUEBLO $498,257 $637,950 $771,125 $958,350
RIO BLANCO $498,257 $637,950 $771,125 $958,350
RIO GRANDE $498,257 $637,950 $771,125 $958,350
ROUTT $1,012,000 $1,295,550 $1,566,050 $1,946,200
SAGUACHE $498,257 $637,950 $771,125 $958,350
SAN JUAN $517,500 $662,500 $800,800 $995,200
SAN MIGUEL $1,045,350 $1,338,250 $1,617,650 $2,010,350
SEDGWICK $498,257 $637,950 $771,125 $958,350
SUMMIT $1,006,250 $1,288,200 $1,557,150 $1,935,150
TELLER $517,500 $662,500 $800,800 $995,200
WASHINGTON $498,257 $637,950 $771,125 $958,350
WELD $560,050 $716,950 $866,650 $1,077,050
YUMA $498,257 $637,950 $771,125 $958,350

 

What to Look for in an FHA Lender

We take a few things into consideration when looking at which Colorado FHA lenders we work with. Some of these also may be, or should be very important to you as you continue shopping for an FHA loan.

Consumers have many options to choose from when deciding which lender to use when applying for an FHA loan. However, we would love to be your choice and here are a few reasons for you to consider.

Although virtually every lender offers FHA loans, not all lenders offer the full program portfolio. For example, the FHA 203k rehabilitation loan is a great program which allows you to purchase and rehabilitate a home with all of the costs included in the mortgage. Not all lenders offer, or are experienced in working with that program.

Next, FHA guidelines permit recent bankruptcies but an experienced lender can find ways to secure an exception so you can get approved.

A good FHA lender will:

  • Allow for credit scores as low as 500
  • Provide FHA 203k loans
  • Offer competitive rates and fees
  • Have a great processing and underwriting team
  • Work closely with you throughout the loan process
  • Communicate well and will provide you with updates along the way

FHA 203k Loans in Colorado

FHA 203k loans are a great program which will allow you to borrow the money needed to purchase the home plus additional funds needed to rehabilitate or remodel the home. This program is also available in your state and we work with lenders that help with your FHA 203k loan.

If you would like to fully understand how this program works, we suggest reading our article on FHA 203k loans.

FHA Streamline Refinance in Colorado

The FHA streamline refinance program is available to existing homeowners who would like to refinance for a lower rate while eliminating some of the refinance costs such as an appraisal. You may also get a discount on the mortgage insurance premium which is another advantage.

For more information, please read our article on the FHA streamline refinance.

Colorado FHA Loan Pre-Approval Process

If you are looking for an FHA loan, there is an optimal process you should follow to get pre-approved.

  1. The first step is to make sure you have the minimum down payment needed to qualify
  2. check your credit and try to cleanup anything that is pulling down your scores
  3. Get a copy of your tax returns for the past two years
  4. Get copies of your pay stubs for the past month
  5. Get copies of your last two months’ bank statements
  6. Speak to an FHA lender about your loan scenario

Speak to a lender early in the process because they can identify opportunities to help with your FHA approval. This should be done months before you start looking for a home. Read more about how to get pre-approved for an FHA loan.

Colorado FHA Loan Calculator

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Frequently Asked FHA Questions

Can I get an FHA loan with a bankruptcy?
In general, you will need to wait two years before applying for an FHA loan after a bankruptcy. However, there are some exceptions which may allow you to apply sooner. Read our article on the bankruptcy waiting period.

Are all FHA lenders the same?
Not all lenders who offer FHA loans are the same. They all do not offer all of the FHA programs and their rates and fees may also vary. Most importantly, the individuals who help to process and underwrite your loan will have a huge impact on your FHA loan experience.

Can I use gift funds for an FHA loan?
FHA loans do allow for gift funds to cover your down payment as well as your closing costs. The gift funds must come from a relative or a close friend as approved by the lender. You will need to provide the lender with a gift letter that is signed by the donor.

Do I need an appraisal for an FHA loan?
The FHA does require an appraisal and inspection before your loan can be approved. The FHA inspection has clear guidelines on what needs to be repaired before your loan can close. They want to make sure home buyers are moving into a home that is safe and operational.

Can I get an FHA loan for an investment property?
FHA loans are for primary residences only and if your goal is to purchase an investment property, you cannot use FHA insured financing for that purchase. However, if you are currently living in a home that is financed with an FHA loan, you can move to a new home and keep the current home as an investment.

What are the closing costs associated with Colorado FHA loans?
The closing costs for Colorado FHA loans typically range from 2% to 5% of the loan amount. These costs include the appraisal fee, title insurance, lender fees, and prepaid expenses such as property taxes and homeowner’s insurance. On average, closing costs in Colorado can amount to around $3,700 for an FHA loan of $200,000. However, it is essential to note that closing costs can vary depending on various factors such as the loan amount, property value, and specific lender fees.

How do I qualify for a Colorado FHA loan?
To qualify for a Colorado FHA loan, you need to meet certain criteria including a minimum credit score of 580, a steady employment history, and a debt-to-income ratio of no more than 43%. Additionally, the property you want to purchase must meet certain appraisal and condition requirements set by the Federal Housing Administration (FHA). Since 2020, FHA loans have been gaining popularity in Colorado due to their lower down payment requirements and more lenient credit standards compared to conventional loans. According to the Colorado Association of Realtors, as of September 2024, FHA loans accounted for approximately 25% of all home loans in the state.

Are there any down payment assistance programs available for Colorado FHA loans?
Yes, there are down payment assistance programs available for Colorado FHA loans. One example is the Colorado Housing and Finance Authority (CHFA), which offers various down payment assistance options to help eligible borrowers purchase a home. The CHFA provides second mortgage loans that can be used toward the down payment or closing costs of an FHA loan. According to their website, in 2020 alone, CHFA assisted over 1,500 homebuyers with down payment assistance programs.