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Now that the housing market is finally calming down after the pandemic, buyers are facing a new challenge: Soaring mortgage rates.
In Colorado, the average 30-year fixed mortgage rate is 5.49% — up from 2021's historic lows. This raises the average monthly mortgage payment to $2,620 (assuming a 20% down payment at the median home value).
But buying a home in Colorado is still possible, even for first-time home buyers. Many markets are seeing frequent price drops and fewer offers, giving motivated buyers the upper hand in negotiating for the best price.
In this guide, you’ll learn how to buy a house in Colorado with confidence no matter what the market brings. Learn why you can trust our advice.
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great local realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
Best of all, hiring a real estate agent comes at no extra cost to you — since the seller typically pays both their listing agent and your buyer's agent.
Ready to find a great local realtor, but not sure where to start? The best (and easiest!) option is to try a free agent matching service like Clever Real Estate. Answer a few simple questions about your home buying goals, and Clever will match you with hand-picked agents from Keller Williams, RE/MAX, and other top brokerages in your area. Find a top local agent and make your home buying dreams a reality today!
Step 1: Save for a down payment
🔑 Key takeaway:
Your down payment can be less than 20% of the purchase price — $115,500 for the typical home in Colorado — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Colorado want you to contribute 20% of the purchase price as a down payment. That would be $115,500 for a $577,500 home — the typical home value in Colorado.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum down payment (%)
Down payment ($)
Based on typical home values from Zillow (August 2022)
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Based on home values from Zillow (August 2022) and a 5.49% interest rate for a 30-year loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
» READ MORE: Everything you need to know about low-income home loans
Colorado down payment assistance programs
Colorado offers numerous down payment assistance programs for first-time and low-income homebuyers. Here are a few great resources that may help you out:
CHAC Down Payment Assistance Program
Colorado Housing Assistance Corporation’s (CHAC) Down Payment Assistance Program is available for first-time buyers with low-to-moderate income. The assistance is given to participants as a second mortgage which needs to be paid monthly.
To be eligible for this program you must contribute $1,000 to your down payment. If you're part of Colorado's disability program, this amount is reduced to $750. However, all participants must complete a homebuyer class approved by the CHAC.
CHFA FirstStep Plus
The Colorado Housing and Finance Authority (CHFA) offers the FirstStep Plus for participants with a CHFA FirstStep home loan. This program provides down payment assistance for up to 4% of the initial mortgage loan amount. Assistance comes as a second mortgage that acquires no interest and requires no monthly payments until the borrower pays off or refinances their home.
Applicants must have a minimum credit score of 620, and income limits apply. You can check if you qualify for the program here.
CHFA SmartStep Plus
The CHFA also offers the SmartStep Plus Program for participants with a SmartStep home loan. Down payment assistance may come as a grant to cover up to 3% of the total loan amount or as a second mortgage to cover up to 4% of the loan amount.
This program is not restricted to first-time homebuyers, but you must not earn more than CHFA's annual income limits. You can check if you're eligible here.
U.S. Department of Housing and Urban Development
HUD has a list of alternative programs for Colorado homebuyers here.
Step 2: Find a great real estate agent in Colorado
🔑 Key takeaway:
Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Colorado.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Step 3: Get preapproved for a mortgage
🔑 Key takeaway:
Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.
Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:
- Avoid opening new credit accounts
- Don't close any accounts that have been open for a long time
- Make all of your credit card payments on time
» LEARN MORE: What factors do mortgage lenders consider?
A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in Colorado will require preapproval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Colorado home.
Step 4: Choose the right location
🔑 Key takeaway:
Search for neighborhoods where:
- Home prices are within your price range
- Home values are on the rise
- The local amenities support your lifestyle
Currently, the typical home value in Colorado is $577,500, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Colorado Springs:
Home value appreciation in Colorado Springs
Southeast Colorado Springs
East Colorado Springs
Northeast Colorado Springs
Step 5: Start house hunting in Colorado
🔑 Key takeaway:
Inventory in Colorado has spiked over the last year, so there will be more options for you to choose from. Even with the upward crawl of listing prices, your real estate agent can round up a list of great options that will fit your budget. However, this trend is causing demand to spike, so prepare to act quickly if the market heats up again.
Searching for homes in Colorado is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in Colorado can have a big impact on your number of options. For example, in Colorado, June has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in Colorado. Historically, there are 59.1% fewer homes for sale than during Colorado's peak season.
Housing inventory in Colorado by season
New listings per month
Based on data from Realtor.com (October 2022)
Step 6: Make an offer
🔑 Key takeaway:
The uptick in Colorado’s inventory has spurred demand considerably, and houses are flying off as soon as they are listed. With such an active market, you may have to put in an offer as soon as you view a house you like. Get advice from your realtor so you can quickly put in a strong offer that will increase your chances of having it accepted. In fact, your agent may even find a good deal given the growing number of options in the market.
Once you find a Colorado house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in Colorado, homes stay on the market for 61 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Colorado homes sell fastest in June, where the average property is only on the market for 43 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in January, you have a bit more time to search. Homes typically stay on the market 28 days longer than Colorado's annual average.
Average time homes spend on market in Colorado
Based on data from Realtor.com (October 2022)
» LEARN MORE: What should an offer include?
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
🔑 Key takeaway:
- Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
- Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.
Home inspections in Colorado
Having your Colorado home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
Disclosure laws in Colorado are pretty strict, but it's a good idea to do additional inspections to ensure that the home has no underlying issues. Here are some recommended tests to consider before closing on a house:
- Radon testing: If the seller hasn't done a radon test recently, try to get one done as soon as possible. Radon is highly toxic and can easily enter a home undetected. You can order a free radon test kit from the Colorado Department of Public Health and Environment here.
- Mold inspection: All homes are at risk of mold, so a quick inspection can ensure that there are no hidden health hazards in the house you’re buying.
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
» LEARN: 3 options for buyers after a low appraisal
Step 8: Close on your new home!
🔑 Key takeaway:
Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.
Closing in Colorado is pretty straightforward. When you meet at the title company, you'll have to review and sign several documents to complete the property transfer. After this, you'll pay the closing costs to become an official homeowner!
Before signing anything, make sure you read through and fully understand each document, including:
- The final loan application
- The mortgage promissory note
- The deed
This paperwork ensures that the property will be successfully transferred to your name. If you have any questions about this process, try to get answers from your agent before the closing date.
After completing the paperwork, you’ll pay your closing costs. For homebuyers, closing costs generally fall into four categories:
- Lender fees: Fees paid to your mortgage lender for originating and underwriting your loan.
- Title and escrow charges: Charges paid to your title company for their research and documentation services. You may also have to pay a settlement fee for conducting the closing.
- Prepaid costs: Ongoing costs of homeownership, such as property taxes and homeowners insurance. Most mortgage lenders will require you to pay some of these costs up front.
- Other costs: Miscellaneous costs that vary by homebuyer. Other costs might include pest inspection fees, real estate attorney fees, or flood insurance coverage.
The title company can collect the total amount you owe and then disburse the funds on your behalf.
Buyers in Colorado typically pay 3–5% of the purchase price in closing costs. For a $577,500 home — the typical home value in Colorado — that's between $17,325 and $28,875!
Frequently asked questions
Colorado does not require you to hire a real estate attorney to buy a home. However, depending on your circumstances, you might consider hiring one anyways. If you do, treat the process similarly to hiring an agent. Interview multiple attorneys and proceed with the one that best meets your needs.
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Colorado neighborhoods
- Partner with the right real estate agent in Colorado
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Yes, eligible first-time homebuyers can receive a home purchase loan in Colorado.
To qualify for the loan, borrowers must have a credit score of at least 620, complete a homebuyer education class, and contribute a minimum of $1,000. Additionally, the borrower's income can't exceed the CHFA’s income limits.
Some homebuyers may be eligible for down payment assistance based on their first loan type.
Why trust us?
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We’ve earned buyers’ trust with a rating of 4.9 out of 5 starts on Trustpilot and over 1,800 customer reviews.
Our team of industry-leading researchers are committed to making homeownership more accessible by educating buyers through guides like this one. We've spent thousands of hours analyzing publicly available data, surveying consumers, and interviewing industry experts. Our research has been featured in The New York Times, Business Insider, Inman, Housing Wire, and many more.
Federal Reserve. "Housing Market Tightness During COVID-19: Increased Demand or Reduced Supply?." Accessed October 11, 2022. Updated July 08, 2021.
Consumer Protection Financial Bureau. "The Fed is raising interest rates. What does that mean for borrowers and savers?." Accessed October 11, 2022. Updated March 17, 2022.