4 Ways to Finance Your Dream Colorado Home

Buying a house is one of the most exciting moments in your life, but it takes a lot of research and preparation – especially in a place like Colorado where the prices are steep and the market is competitive. However, now might be the best time to seriously consider buying a home in Colorado as experts are expecting prices to continue appreciating. This year properties in the Front Range have appreciated by 17%, while Boulder went up by 25%.

Before jumping on board to buy a house, you have to prepare a solid financial plan to let you know what you can afford. In today’s market, most financial managers would suggest assessing all your finances and investments. Having that would allow you to look into your insurance, savings, tuition, retirement plans, and more to help you make the best financial and purchasing decisions in real estate. Since putting down an offer on a house is a long-term commitment, it's important to have your finances in order and ensure that you can sustain your payments and mortgage through the following financing options:

Conventional Loans

Getting a conventional loan makes buying a home in Colorado uncomplicated. In fact, it is one of the most popular programs to make that happen. These go-to home financing tools are mortgages that are not issued nor guaranteed by the government.

However, these types of mortgages are also the hardest to apply for because of their difficult requirements. Conventional loans require a range of 3% to 15% down payment, at least a 620 credit score, 50% or lower debt-to-income ratios, and a private mortgage insurance requirement. But in the long run, they are less costly than FHA loans.


This might not be the most perfect scenario for a potential homebuyer, but this might get you one step closer to your dream Colorado home. Depending on your arrangement with the seller, you can live in the property as a tenant while you build your savings and credit. After an agreed amount of time, you can buy the property yourself.

With this type of deal, you might still need to pay option money of about 2% to 7% of the home value. Although it might get harder to find Colorado properties with this type of deal, rest assured that sellers are willing to negotiate for this.

Federal Housing Administration (FHA) Loans

The Federal Housing Administration (FHA) provides various mortgage plans as a part of the government’s loan projects. An FHA loan is easier to qualify for and has easier requirements. You only need a 3.5% to 10% down payment with a debt-to-income ratio of 43%. They are perfect for first-time homebuyers due to the low down payments.

But the downside with FHA loans is that you must pay a mortgage insurance premium. However, if you pay at least 10% of your down payment, you can drop the mortgage insurance after 11 years of payments. To add, there are also FHA mortgage limits in Colorado depending on the house and the cost of local housing.

Retirement Savings

Yes, you are allowed to use your retirement savings to help you buy your dream Colorado house. Is it a good idea? Probably not, or at least not in all cases. Experts will tell you that the funds you took from your retirement plan are hard to build up again. But once you get that house, you don't have to worry because Colorado is a tax-friendly place for retirees.

Depending on your plan, you can borrow up to $10,000 to finance your home or to use for your down payment. You are also likely to incur a penalty on the amount you withdraw from your 401(k).

How can Code of the West Real Estate help?

One of the first steps on your way to owning the perfect Southern Colorado Real Estate is hiring the perfect Realtor®. Code of the West Real Estate is your local expert and one-stop shop when you’re looking for a trusted Realtor® to help you find the perfect Colorado mountain home for sale

Thinking about investing in Walsenburg, La Veta, Westcliffe, Durango, or Trinidad Real Estate? Or any of the surrounding areas? Contact us today to speak with one of our agents!

And while you’re here, take a look at our blogs What to Know About Owning a Mountain Home and How I Can Make My Offer Competitive Enough In Today’s Market.


Article written by Reanne Judson

Exclusively for Code of the West Real Estate

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