Down Payment Options:
What's Actually Available in Colorado

The number one question we hear from people thinking about buying a home is some version of: "How much do I actually need for a down payment?"

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 "What down payment amount makes sense for my situation right now?"

Down Payment Minimums by Loan Type

Different loan programs have different minimum requirements. Here's what's actually available:

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 Your Down Payment Changes the Real 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 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:

Look at the difference between 3% and 20% down: 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.

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 percentages affect the numbers on the home price you're actually considering.

Down Payment Assistance Programs 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:

What Most People Get Wrong About Down Payments

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 programs 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

A Simple Framework for Deciding

Rather than following a universal rule, ask yourself these four questions:

1. What loan programs am I eligible for?
This narrows the field. 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 amount 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 programs 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.

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.