FHA Loans in Colorado

FHA loans in Colorado offer first time homebuyers loans that they may not otherwise be able to obtain with lower credit scores. If you are a wondering how to get an FHA loan, you can find a basic over view in this article. Download our comprehensive guide to HUD in Colorado to discover the many resources available for housing. Another advantage of an FHA loan is that homebuyers are often required to provide a much lower down payment amount. This is possible due to the fact that the Federal Housing Administration (FHA) insures the loan amount, enticing the lender to offer you a better deal on your home loan. In the sections below, you will learn more about FHA loan eligibility and how to apply for an FHA loan in Colorado including requirements you must meet.

The Advantages of FHA Loan in Colorado

In order to understand the advantages of FHA loan applications in Colorado, it is important to understand what FHA loans are and who administers them. The Federal Housing Administration (FHA), a part of the United States Department of Housing and Urban Development (HUD), has been helping individuals become homeowners since 1934. HUD also offers an HUD housing application process for interested and eligible buyers. Advantages of an FHA loan generally include:

  • Approval for individuals with low credit scores with far lower requirements in comparison to most conventional loans
  • Lower closing costs
  • Lower down payment requirements
  • Higher allowed debt-to-income ratios
  • A wide variety of FHA approved lenders to choose from

Therefore, an FHA loan may be the best option for first-time buyers who have a lower income, a lower credit score or do not have the down payment amount that most conventional loans require. However, it is important to understand that individuals with a good credit score, higher income and a higher available down payment will not benefit as much from FHA loans and may end up paying an overall higher cost than what they may pay with a conventional loan. FHA home loans provide housing assistance for potential buyers in need of support financially to make their purchase.

FHA Loans in Colorado have loan limits that are based on the county you live in. That means that your county will determine the maximum loan amount that you are able to apply for. This can aid you when shopping around for a home and negotiating with sellers.

Colorado FHA Loan Eligibility

In order to apply for FHA loans in Colorado, you must first meet eligibility requirements determined by HUD as well as the Federal Housing Administration. FHA loan eligibility criteria include Minimum credit score requirements, minimum debt-to-income ratio requirements and No previous home ownership. The rule about no previous homeownership does not apply to U.S. veterans. Additional requirements for FHA loans in CO are:

  • Down payment requirements
  • An appraisal of the home must be done by an FHA approved appraiser
  • Steady employment and are able to provide proof of income
  • You are at least 18 years of age
  • You will occupy the home as a primary residence

Therefore, an FHA loan is generally easier to obtain than most conventional loans as there are fewer requirements and the eligibility requirements that this type of loan does have are often far lower, such as a lower credit score requirement. Veterans not interested in FHA loans may wish to learn about HUD-VASH assistance, or aid from other federal programs.

Mortgage Insurance Requirements on a Colorado FHA Loan

FHA loans in Colorado will also require mortgage insurance, but if you are not familiar with this form of insurance finding appropriate insurance can be difficult. Mortgage insurance will essentially protect the lender of the loan. If you fall behind in payments, not only will your credit score suffer, but you could also lose the home through foreclosure. Mortgage insurance will provide a slight increase to the overall cost of your loan as you will be required to pay for it as part of your total monthly home payment. However, an additional advantages of FHA loan is that this amount will not increase based upon your credit score.

How to Apply for an FHA Loan in Colorado

Now that you understand more about FHA loans in Colorado, it is important to understand how you can apply for one of these loans. If you are wondering how to get an FHA loan, you can contact FHA approved lenders to determine which lender will work best for you before you submit an application for a loan. Additionally, loan terms, such as your repayment amounts, are something you must negotiate with the lender. Due to the fact that FHA loans in Colorado are offered through a variety of lenders, this gives you an advantage as you can shop around for the lender that will provide you with the best deal. Getting information about a housing counselor and home-buying options before applying for FHA loans can help you decide on the best housing options for you.

Fortunately, HUD provides homebuyers with a lender list search that will allow you to find a comprehensive list of lenders in your area. You can narrow your search not only by the state of Colorado, but also by city, county, zip code and home type such as single family or multifamily homes.

For more information about FHA loans in Colorado, including the pros and cons of obtaining this type of loan, eligibility requirements, mortgage insurance requirements and how to apply, download our comprehensive guide.