Best First-Time Home Buyer Guide for Colorado CHFA Borrowers

If you are using CHFA down payment assistance to buy your first home in Colorado, the CHFA website tells you what programs exist and what the eligibility rules are. What it does not tell you is which program gives you the best financial outcome for your situation, what the hidden long-term costs are, and what else in Colorado's market will affect your carrying cost after you close.

For CHFA borrowers specifically, the most useful resource is one that does three things the CHFA website and most national guides cannot: compares all five CHFA programs in financial terms, explains the refinancing trap embedded in the deferred second mortgage structure, and maps the Colorado-specific carrying costs (metro district overlays, school mill levy corrections, insurance) that will determine whether your purchase stays affordable.

The Colorado First-Time Home Buyer Guide is built for exactly this use case. Here is what that means in practice.

The CHFA Landscape Is More Complex Than It Appears

CHFA administers five distinct first mortgage programs, each with its own eligible loan types, PMI rules, income limits, and assistance structures. Your lender will typically recommend the program they process most often, not necessarily the one that costs you the least over time.

The Five CHFA Programs

CHFA FirstStep and FirstStep Plus Uses FHA-insured loans. Requires a minimum 620 credit score. The "Plus" option adds a deferred second mortgage of up to 4% of the first mortgage amount. The second mortgage carries 0% interest and no monthly payments, but it becomes due in full when you refinance, sell, or pay off the first mortgage.

FHA loans carry mortgage insurance for the life of the loan (unless you refinance into a conventional). This is a material cost: FHA MIP adds approximately 0.85% of the loan balance annually, which on a $400,000 loan is $3,400 per year or $283 per month that does not go away when you hit 80% LTV.

CHFA Preferred and Preferred Plus Uses conventional loans (Fannie Mae HFA Preferred or Freddie Mac HFA Advantage). The Preferred Plus option adds a 4% deferred second mortgage. Minimum credit score of 620, minimum borrower contribution of $1,000 (can be gifted).

The key advantage over FHA: conventional PMI cancels when you reach 80% LTV. On a $400,000 home, reaching 80% LTV might take five to seven years depending on your down payment and appreciation rate. Once PMI cancels, your monthly cost drops meaningfully.

For borrowers with scores above 660 and stable income, Preferred or Preferred Plus almost always produces better long-term economics than FirstStep, even with the same down payment assistance amount.

CHFA HomeAccess and HomeAccess Plus Specifically designed for first-time buyers who have a permanent disability, or who are the custodial parents of a child with a permanent disability. Uses FHA 203(b) or USDA-RD loans. Provides up to $25,000 in deferred payment assistance. Properties with existing Accessory Dwelling Units are not eligible.

CHFA SmartStep and SmartStep Plus Broad program using FHA, VA, or USDA-RD government-insured loans. Minimum 620 credit score. Allows debt-to-income ratios up to 50% for scores 620 to 659, and up to 55% for scores 660 and above. The high DTI ceiling is intentional for borrowers carrying student loan debt. Assistance cap of $25,000 for the Plus version.

CHFA FirstGeneration and FirstGeneration Plus Targets buyers whose parents or guardians have never owned a home, or buyers who have lived in foster care. Provides up to $25,000 in deferred assistance. Requires a 620 credit score and uses exclusively 30-year FHA 203(b) first mortgages. Both borrowers must be first-time buyers.

The Income Limit Structure

SmartStep and SmartStep Plus use a flat statewide income limit of $174,440 regardless of county or household size. This limit is applied to qualifying income on the loan note, not total household income.

Preferred and Preferred Plus use county-specific area median income limits, typically ranging from $120,000 to $160,000 gross annual income depending on the county. Boulder County buyers, where incomes frequently exceed standard CHFA limits, often need to look at local alternatives like Boulder County Down Payment Assistance or metroDPA instead.

CHFA releases annual program allocations in January. The high-tier $25,000 programs historically deplete funding by April or May. If you are targeting CHFA assistance for a spring purchase, complete homebuyer education by December and engage a CHFA-approved lender in January to lock in a fund reservation before allocation runs out.

The Refinancing Trap: What Your Lender May Not Tell You

CHFA's deferred second mortgages carry 0% interest and no monthly payments, which makes them look like pure upside. They are not. They carry a specific structure that creates a significant long-term constraint.

The second mortgage becomes due in full the moment you refinance your primary loan. Not "due when convenient" — due before the refinance can proceed. If you used a $15,000 CHFA second mortgage to buy at 6.5% and mortgage rates subsequently drop to 4.5%, you cannot refinance without repaying the entire $15,000 first.

The break-even question: has your home appreciated enough that you have sufficient equity to cover the second mortgage payoff and the refinance closing costs while still maintaining an acceptable LTV on the new loan? In many cases, especially during the first two to three years of ownership in a flat market, the answer is no.

CHFA primary mortgages also carry interest rates 0.50% to 1.00% above standard conventional loans. Lenders charge this premium to offset the cost of providing the down payment assistance subsidy. Over a 30-year loan, 0.75% above market rate on a $400,000 mortgage adds approximately $60,000 in additional interest if you carry the loan to term.

MetroDPA: The Alternative Worth Comparing

Before committing to CHFA, CHFA borrowers in Front Range counties should evaluate metroDPA.

metroDPA provides down payment assistance across approved Front Range cities and counties (Castle Rock to Wellington, covering the major suburban markets). Key structural differences from CHFA:

• Assistance is structured as a 30-year deferred second mortgage at 0% interest
• Does not impose a first-time homebuyer requirement
• Income limit of approximately $210,150 (or $216,000 in select counties), significantly higher than most CHFA conventional program limits
• Minimum credit score of 640 (620 in select cases)
• No purchase price cap

The critical difference: metroDPA grants do not trigger repayment upon refinancing in the same way CHFA second mortgages do, which means they carry substantially less long-term refinancing risk for buyers who expect to refinance within a few years of closing.

Boulder County Down Payment Assistance provides up to 10% of the purchase price, capped at $40,000, for purchases outside Boulder city limits. This is one of the most generous local programs in the state for buyers who qualify geographically.

CHFA and metroDPA can be paired in some circumstances. Your CHFA-approved lender should be evaluating both and explaining why one produces a better outcome for your specific income, purchase price, and county.

What the CHFA Website Leaves Out

The CHFA website gives you eligibility rules and program descriptions. It does not give you:

Program comparison in financial terms. The site does not provide a side-by-side analysis showing how FirstStep's lifetime FHA MIP compares to Preferred's cancellable PMI for your specific income and purchase price. That calculation can save thousands of dollars annually for buyers who qualify for the conventional program but default to FHA because their lender primarily processes FHA.

The refinancing trap analysis. The CHFA site describes the deferred second mortgage. It does not show you the dollar cost of the refinancing constraint or the break-even timeline showing when your equity will be sufficient to refinance without paying back the DPA first.

MetroDPA comparison. The CHFA site does not compare its programs to competing regional options or explain when MetroDPA produces better financial outcomes.

Colorado carrying cost risk. The CHFA site focuses on the down payment and first mortgage. It does not explain metro district overlays, the HB 21-1164 school mill levy correction, Colorado's insurance crisis, or radon mitigation costs. These factors can add $2,000 to $6,000 per year or more to your carrying cost on certain properties, and they are entirely separate from your mortgage and down payment assistance structure.

Colorado's Carrying Costs That Apply to Every CHFA Borrower

Regardless of which CHFA program you use, every Colorado buyer faces the same state-specific cost structure:

Title 32 Metropolitan District overlays. New-build subdivisions in Aurora, Thornton, Douglas County, Broomfield, and Colorado Springs frequently sit inside metro districts that add 40 to 60 mills to your property tax. On a $485,000 home with a 7.15% assessment rate, 50 additional mills adds $1,600 to $2,500 per year. This amount does not appear in the CHFA income and payment calculations. It appears for the first time on your first real property tax bill.

School mill levy corrections under HB 21-1164. 118 of Colorado's 178 school districts are under a mandatory mill levy correction that automatically increases school property taxes by up to one mill per year. This affects 81% of Colorado's population. Even if your assessed value stays flat, your school taxes will rise annually until the correction completes.

Homeowners insurance premiums. Colorado premiums doubled between 2018 and 2024. The national-average figure used in mortgage calculators is not your Colorado number. Average Front Range premiums run $2,500 to $3,500 per year. Foothill and mountain ZIP codes frequently exceed $5,000. Get actual quotes before making an offer.

Radon testing and mitigation. Colorado has elevated radon in every county. Testing costs $150 to $200 during the inspection window. If levels exceed the EPA action threshold of 4.0 pCi/L, mitigation runs $800 to $2,500. This is often covered through an inspection objection negotiation with the seller.

Program Comparison Table

Who This Guide Is For

• First-time buyers in Colorado who qualify for CHFA assistance but want to understand which of the five programs produces the best financial outcome for their specific credit score, income, and property type before committing to a lender
• Buyers who have heard about the CHFA refinancing trap and want the full analysis showing when the constraint matters and when it does not
• Buyers trying to determine whether metroDPA, Boulder County DPA, CHAC, or CHFA produces better total financial outcomes for their situation
• Buyers purchasing new-build homes in metro district communities who need to understand what the CHFA pre-approval process does not capture in their monthly payment estimate

Who This Is NOT For

• Buyers purchasing outside Colorado, where CHFA does not apply
• Buyers with household incomes well above CHFA limits who do not qualify for any state assistance program
• Buyers who have already closed and are now managing their first home, past the program selection decision point

Frequently Asked Questions

Can I stack metroDPA on top of a CHFA first mortgage? In some cases, yes. metroDPA is designed to pair with certain first mortgage products. Your CHFA-approved lender should be able to tell you whether your specific program and income qualify for stacking, and whether the combined assistance produces better economics than CHFA assistance alone.

How do I know if a property sits inside a Title 32 Metropolitan District? As of August 2025, sellers must provide a metro district disclosure packet for any home within a qualifying district. You can also check the county assessor's property tax records, which show all taxing entities levying against the property. The mill levy total you see there tells you whether a metro district overlay exists.

Does CHFA's income limit apply to everyone in my household or just the borrowers on the loan? CHFA calculates income limits based on the qualifying gross income of the borrowers on the loan note, not total household income. If your household has a non-borrowing earner, their income may not count against the limit depending on the program.

When do CHFA assistance funds run out each year? The $25,000 high-tier programs historically exhaust allocation by April or May. Standard assistance programs run longer. Completing homebuyer education by December and engaging a CHFA-approved lender in January to lock a fund reservation is the best strategy for spring buyers.

Is the 8-hour homebuyer education course required for all CHFA programs? Yes. All CHFA programs require completion of an approved homebuyer education course prior to closing. eHome America and Framework are among the approved online providers. The course must be completed before you apply to reserve funds.

The Colorado First-Time Home Buyer Guide includes a full CHFA program comparison, the MetroDPA stacking analysis, the refinancing trap break-even calculations, and the complete Colorado carrying cost framework. Available at firsthomestartguide.com/us/colorado/first-home/. A free Colorado Quick-Start Checklist is available as a no-cost download on the same page.

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