Down Payment Options
What's Available in Colorado
The number one question from people exploring their down payment options is some version of: "How much do I actually need to put down?"
And the number one problem with most answers is that they either oversimplify ("Just put 3% down!") or overcomplicate things with jargon and fine print that leaves you more confused than when you started.
This guide takes a different approach. We're going to walk through the real down payment options available in Colorado, show you how different amounts change your monthly payment and total cost, and break down the assistance programs that might help. No pressure, no application required. Just the information you need to figure out where you stand.
The 20% Down Myth
If you think you need 20% down to buy a home, you're not alone. A lot of people believe this, and it keeps them renting longer than they need to.
Here's the truth: 20% down has not been the standard for a long time. According to the National Association of Realtors, the median down payment for first-time buyers has hovered around 6–8% for years. For repeat buyers, it's higher, but still well below 20% in most cases.
You can put 20% down, and there are good reasons to do it (we'll cover those below). But it's not required for most loan programs, and waiting years to save that much could mean missing out on building equity while home values continue to change.
The real question isn't "Do I have 20%?" It's "Which down payment option makes the most sense for my situation right now?"
Down Payment Options by Loan Type
Different loan programs carry different minimums. Here's a plain-language overview of the down payment options available:
Minimum Down Payments at a Glance
| Loan Type | Minimum Down | Key Detail |
|---|---|---|
| Conventional | 3% | Requires PMI below 20%; good credit needed for 3% |
| FHA | 3.5% | More flexible credit requirements; MIP for life of loan if under 10% down |
| VA | 0% | Eligible veterans and active military only; no monthly mortgage insurance |
| USDA | 0% | Rural and some suburban areas; income limits apply |
A few things worth knowing about this chart:
- Conventional at 3% typically requires a credit score of 620 or higher, and some lenders want 680+ for their lowest down payment options. The lower your score, the more you may need to put down.
- FHA at 3.5% works for credit scores as low as 580 (per FHA rules), though many lenders want 620+. If your score is between 500–579, you'll need 10% down.
- VA at 0% is one of the best loan programs available, period. If you're eligible, it's worth serious consideration. There's a funding fee, but no monthly mortgage insurance.
- USDA at 0% is limited by geography and income. More areas in Colorado qualify than people expect, but you can't use it in Denver, Colorado Springs, or most urban areas.
How Each Down Payment Option Changes Your Cost
Putting less money down gets you into a home sooner. But it also increases your monthly payment, adds mortgage insurance costs, and means you're borrowing more. The trade-offs between down payment options are real, and they add up over time.
Here's what the math looks like on a $425,000 home with a conventional loan at a 6.75% interest rate:
Same Home, Different Down Payments
| 3% Down | 5% Down | 10% Down | 20% Down | |
|---|---|---|---|---|
| Down Payment | $12,750 | $21,250 | $42,500 | $85,000 |
| Loan Amount | $412,250 | $403,750 | $382,500 | $340,000 |
| Monthly P&I | $2,674 | $2,618 | $2,481 | $2,205 |
| Est. Monthly PMI | ~$220 | ~$175 | ~$115 | $0 |
| Total Monthly (P&I + PMI) | ~$2,894 | ~$2,793 | ~$2,596 | $2,205 |
| Cash Needed at Closing* | ~$23,000 | ~$31,500 | ~$52,750 | ~$95,250 |
*Includes estimated closing costs of ~$10,250. Property taxes and homeowner's insurance not included in monthly figures. PMI estimates based on good credit; your actual PMI will vary based on credit score and lender. These are illustrations, not quotes.
Look at the difference between the 3% and 20% down payment options: you save about $689/month, but you need an extra $72,250 in cash upfront. For most people, that's years of additional saving.
The middle ground is where most buyers land. Putting down 5–10% keeps the monthly payment manageable, reduces mortgage insurance costs compared to 3%, and doesn't require you to drain your entire savings.
Something people forget: Your down payment isn't the only cash you need at closing. Budget for closing costs (typically 2–4% of the purchase price), plus you'll want some money left over after closing. Wiping out your savings to hit a higher down payment can backfire if your furnace breaks in month two.
Try Your Own Numbers
The table above uses one price point and one rate. Your situation is different. Use this tool to see how different down payment options affect the numbers on the home price you're actually considering.
Down Payment Comparison Tool
| 3% Down | 5% Down | 10% Down | 20% Down |
|---|
These are estimates for comparison only, not a loan offer or quote. Actual PMI, rates, and closing costs vary by lender, credit profile, and loan program. Property taxes and insurance are not included.
Down Payment Assistance Options in Colorado
If coming up with the full down payment on your own feels like a stretch, Colorado has several programs that can help. These aren't gimmicks. They're real programs backed by state and local agencies, and thousands of Colorado buyers use them every year.
Here's what's available:
CHFA Down Payment Assistance
What it is: The Colorado Housing and Finance Authority offers down payment assistance as a second mortgage, either as a grant (doesn't need to be repaid) or as a second loan with low or no interest. You can review current income limits and program details directly on CHFA's website.
How much: Typically covers 3–4% of the purchase price. On a $400,000 home, that's $12,000–$16,000 toward your down payment.
Who qualifies:
- Income limits vary by county and household size (check CHFA's website for current limits)
- Purchase price limits apply and vary by county
- Must complete a homebuyer education course (usually a few hours online, around $75)
- Must occupy the home as your primary residence
- Works with both FHA and conventional first mortgages
The catch: CHFA loans sometimes come with a slightly higher interest rate on your first mortgage compared to what you'd get without assistance. The math still works out for many buyers, but it's worth comparing both down payment options before deciding.
CHFA Grant Programs
What it is: CHFA periodically offers grant-based assistance that doesn't need to be repaid at all. These tend to have more limited funding and can run out.
How much: Varies, but often in the $10,000–$25,000 range.
Who qualifies: Similar requirements to standard CHFA programs, sometimes with tighter income limits.
The catch: Availability depends on funding. These programs can open and close throughout the year. Timing matters.
Metro-Level and City Programs
Several Colorado cities and counties run their own assistance programs. A few examples:
- Denver: Has offered programs through the Denver Housing Authority and other agencies, often targeting specific neighborhoods or income levels
- Aurora: Has had down payment assistance programs for buyers within city limits
- Adams County, Arapahoe County: Have offered county-specific programs through local housing authorities
The reality: Local programs change frequently. They get funded, run out of money, get refunded, and change their rules. What was available six months ago may not exist today, and something new may have launched last month. This is one area where working with a lender who stays current on Colorado programs makes a real difference.
Gift Funds from Family
What it is: Most loan programs allow part or all of your down payment to come as a gift from a family member (and some allow gifts from other sources too).
The rules:
- The gift must be documented with a signed gift letter
- The person giving the gift usually needs to show they had the funds (bank statement)
- It must be a true gift with no expectation of repayment
- FHA, VA, and conventional all allow gift funds, but the specifics vary slightly
Common mistake: A family member transfers money into your account right before you apply, with no documentation. This creates a red flag for underwriters. If you're going to use gift funds, plan ahead and have the paperwork ready.
What Most People Get Wrong About Down Payment Options
After years of working with Colorado buyers, here are the patterns we see over and over again:
"I should put down as much as possible"
Not always. If putting 15% down means you close on the house with $800 in your bank account, you've created a different problem. A roof repair, a broken appliance, or a job disruption in those first few months can become a real crisis.
A general guideline: after your down payment and closing costs, you should have at least 2–3 months of mortgage payments in reserve. Some people are comfortable with less, some want more. But zero is risky.
"A bigger down payment always saves me money"
Usually, but not in every scenario. If you're choosing between putting 10% down on a conventional loan or 3.5% down on an FHA loan, the conventional option might cost more per month (higher payment on the loan itself) but less over time (because PMI drops off and FHA's MIP doesn't).
And if you have higher-interest debt like credit cards, sometimes putting less down on the house and paying off that debt results in a better overall financial position. The math depends on your full picture, not just the mortgage in isolation.
"I need to have the down payment in savings right now"
Not necessarily. Some buyers are 6–12 months away from being ready, and that's fine. Knowing your target number now gives you a real savings goal instead of a vague "I need to save more." There's a big difference between "I need to save money" and "I need $14,000 in the next 10 months, which is $1,400/month."
"Down payment assistance options are too good to be true"
They're not. They're real, they're legitimate, and they have trade-offs like everything else. The interest rate might be slightly higher. There might be a second lien on your property. There might be a requirement to stay in the home for a certain period. But they're not a scam, and they've helped a lot of Colorado buyers get into homes they wouldn't have been able to afford otherwise.
Real Scenarios: How This Plays Out for Colorado Buyers
Scenario 1: The Careful Saver
Profile: 720 credit score, $35,000 saved, looking at $450,000 homes in Longmont, no other debts.
Options: She could put 5% down ($22,500) on a conventional loan, keep $12,500 as reserves after closing costs. PMI would run about $150/month and drop off once she hits 80% loan-to-value. Or she could stretch to 10% down ($45,000), but that would leave her with almost nothing in savings after closing costs.
Best path: 5% down conventional. Solid reserves, manageable PMI, and she keeps a financial cushion.
Scenario 2: The First-Timer With Limited Savings
Profile: 640 credit score, $8,000 saved, looking at $375,000 homes in Colorado Springs, has student loans and a car payment.
Options: FHA at 3.5% down ($13,125) is more than he has. But with CHFA down payment assistance covering 4% ($15,000), his out-of-pocket down payment drops to nearly zero. He'd still need to cover some closing costs, but the seller could contribute up to 6% on FHA, and CHFA can sometimes help with closing costs too.
Best path: FHA + CHFA assistance. This down payment option gets him into a home with the cash he has. The trade-off is lifetime MIP and a potentially slightly higher rate, but he's building equity instead of paying rent.
Scenario 3: The Veteran
Profile: 690 credit score, $12,000 saved, looking at $500,000 homes in Arvada, eligible for VA loan.
Options: VA loan at 0% down. No monthly mortgage insurance. There's a VA funding fee (2.15% for first use, which can be rolled into the loan), but the monthly savings from no PMI/MIP are significant. Her $12,000 covers closing costs with money left over.
Best path: VA loan, hands down. It's hard to beat 0% down with no monthly mortgage insurance.
A Simple Framework for Choosing Your Down Payment Option
Rather than following a universal rule, ask yourself these four questions:
1. What loan programs am I eligible for?
This narrows your down payment options immediately. VA eligibility changes everything. Credit score determines whether FHA or conventional makes more sense. Income and location affect USDA eligibility.
2. How much cash do I have, and how much do I need to keep?
Add up your savings. Subtract what you need for closing costs (estimate 2–4% of the home price). Subtract a reserve fund you're comfortable with (2–3 months of housing payments is a reasonable starting point). What's left is what you can realistically put toward a down payment.
3. How does the down payment option I choose change my monthly cost?
Use the comparison tool above to see the actual difference. Sometimes the gap between 3% and 5% down is only $50–75/month, which might be worth it for the lower PMI. Sometimes stretching from 5% to 10% barely moves the needle on monthly cost but wipes out your reserves.
4. How long do I plan to stay in this home?
If you're buying a starter home and plan to move in 3–5 years, lifetime FHA mortgage insurance matters less because you'll sell or refinance before the long-term cost adds up. If you're buying your forever home, the difference between a loan with PMI that drops off and one with MIP that doesn't could be tens of thousands of dollars.
Frequently Asked Questions
What's the minimum down payment to buy a home in Colorado?
It depends on the loan type. VA and USDA loans allow 0% down. Conventional loans start at 3% down. FHA loans require 3.5% down (or 10% if your credit score is below 580). Most Colorado buyers put somewhere between 3–10% down.
Can I buy a home with no money out of pocket?
It's possible in some situations. VA-eligible buyers can put 0% down, and if the seller contributes toward closing costs, out-of-pocket costs can be very low. FHA and conventional buyers can layer down payment assistance options with seller concessions to reduce cash needed. But "no money out of pocket" is rare in practice. Most buyers need at least some cash for things like earnest money, inspections, and incidental costs that come up during the process.
Do I have to pay PMI if I put less than 20% down?
On conventional loans, yes. PMI is required below 20% down but can be removed once you reach 20% equity (and automatically drops at 22%). On FHA loans, mortgage insurance works differently and stays for the life of the loan if you put down less than 10%. VA loans don't have monthly mortgage insurance at all.
How do Colorado down payment assistance programs work?
Most programs provide a second loan or grant that covers part or all of your down payment. CHFA is the largest program in Colorado. You apply through a participating lender (not directly through CHFA), and the assistance is layered on top of your first mortgage. There are income limits, purchase price limits, and education requirements. Some programs need to be repaid when you sell or refinance; others are forgiven over time or structured as grants.
Where can I learn more about the homebuying process?
The CFPB's homebuying resources are a solid starting point for understanding mortgages, costs, and your rights as a borrower. For Colorado-specific down payment options and assistance programs, CHFA's website is the most current source for income limits and availability.
Is it better to put more money down or keep cash in savings?
There's no single right answer. A larger down payment reduces your monthly cost and may eliminate mortgage insurance. But draining your savings creates risk. Most financial advisors suggest keeping an emergency fund separate from your home purchase money. The sweet spot is different for everyone, and it depends on your income stability, other debts, and comfort level with financial risk.
Can I use money from retirement accounts for a down payment?
You can, but proceed with caution. First-time homebuyers can withdraw up to $10,000 from a traditional IRA without the 10% early withdrawal penalty (though you'll still owe income tax on it). Roth IRA contributions (not earnings) can be withdrawn anytime without penalty. 401(k) loans are another option, but they come with repayment requirements and risks if you leave your job. Pulling from retirement is a last resort for most people, not a first choice.
Get Honest Answers From Someone Who Knows
Down payment decisions depend on your credit, your savings, the programs you qualify for, and the home you're buying. Everyone's math is a little different — and at some point, more reading stops being useful.
A real conversation with a loan officer is faster than another calculator. We'll look at your actual situation, show you which down payment options you qualify for, and run the comparison so you can see exactly what each one costs. No pressure, no application required to talk.
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Illustrative Examples and Advertising Disclosure. The payment comparisons, down payment figures, and cost estimates on this page are for educational and illustrative purposes only. They are not a commitment to lend, a loan approval, a pre-qualification, or an advertisement of specific loan terms. Actual loan amounts, interest rates, annual percentage rates (APR), monthly payments, and total costs will vary based on your credit profile, loan-to-value ratio, property type, occupancy, loan program, and market conditions at the time of application.
Annual Percentage Rate (APR).Interest rates referenced on this page are used solely for illustrative comparison and do not represent an offer or guarantee of any specific rate. The Annual Percentage Rate (APR) — which reflects the full cost of borrowing, including applicable fees and charges — will differ from the interest rate shown and is available upon request based on your individual loan scenario. Contact our team for a personalized rate and APR quote.
Private Mortgage Insurance (PMI) estimates shown are approximations based on assumed credit scores and loan-to-value ratios. Actual PMI premiums vary by lender, insurer, credit score, loan program, and loan amount, and are subject to cancellation under the Homeowners Protection Act once sufficient equity is reached. FHA Mortgage Insurance Premiums (MIP) are set by HUD and subject to change. VA loans do not require monthly mortgage insurance but may include a VA Funding Fee, which varies based on service type, down payment amount, and prior use of the VA loan benefit.
Down Payment Assistance Programs Information regarding CHFA, city, county, and other down payment assistance programs is provided for general informational purposes only and reflects program guidelines as understood at the time of publication. Program availability, income limits, purchase price limits, assistance amounts, and terms are subject to change without notice and may vary by county and funding availability. Not all borrowers will qualify. Elevation Mortgage does not administer these programs and cannot guarantee current program availability or terms. Visit chfainfo.com for the most current CHFA program information.
Calculator Results generated by the Down Payment Comparison Tool on this page are estimates only, based on the inputs you provide and assumed closing costs of approximately 2.5% of the purchase price. Results do not constitute a loan offer, pre-approval, or pre-qualification. Property taxes, homeowner's insurance, HOA fees, and other costs are not reflected in the monthly figures shown. Actual payments and total costs will vary.
Not Legal, Financial, or Tax Advice.The content on this page is intended for general informational purposes only and does not constitute legal, financial, or tax advice. Consult a qualified financial advisor, tax professional, or attorney regarding your specific circumstances before making financial decisions related to a home purchase.