A Path to Homeownership
Colorado’s housing market presents challenges for many prospective buyers, especially in areas with sustained rental demand and rising prices.
FHA loans offer homebuyers a very accessible entry point through government-backed insurance that allows retail and wholesale lenders to approve borrowers who may not qualify under conventional standards.
You may even qualify with a low down payment and low credit scores.
FHA programs support primary residence purchases for both single family homes and multi-unit properties. These loans reduce upfront barriers through lower down payment requirements and more accommodating credit guidelines.
Most lenders require a minimum credit score of 580 for a 3.5 percent down payment. Credit scores between 500 and 579 may qualify with a 10-percent down payment. Debt to income ratios often max out at 43 percent on the front-end and may exceed 50 percent on the back-end through automated underwriting approval.
Employment history typically follows a two-year standard. Recent job changes, self-employment, or prior gaps may qualify when current income proves to be stable and proper documentation is provided.
FHA loans include both upfront and annual mortgage insurance premiums. The upfront premium equals 1.75 percent of the base loan amount and is commonly financed into the loan balance. A $350,000 loan results in a $6,125 upfront charge.
Annual mortgage insurance ranges from 0.50 to 0.75 percent and is included in the monthly payment. Coverage remains in place for at least 11 years when the down payment equals 10-percent or more and for the full loan term when the down payment is below that threshold.
FHA loans allow purchases of duplexes, triplexes, and fourplexes when the borrower occupies one unit as a primary residence. This loan actually helps buyers offset housing expenses through rental income from the remaining units to qualify.
Many Colorado neighborhoods still contain eligible multi-unit housing. These include West Colfax, Barnum, Athmar Park, Five Points, Globeville, and Capitol Hill in the Denver metro area, as well as Old Colorado City, central Aurora, and established sections of Lakewood, Westminster, Fort Collins, and Colorado Springs. These communities meet FHA property standards and support consistent rental demand.
Triplex and fourplex purchases must satisfy FHA’s self sufficiency requirement.
An appraiser determines the market rent for all units, then applies a 25-percent vacancy factor.
The adjusted rental income must exceed the projected monthly housing payment which includes principal, interest, taxes, insurance, and mortgage insurance.
Example: A triplex appraises at $2,000 per unit in monthly rent. Total market rent equals $6,000. After applying the 25-percent factor, the usable income equals $4,500. A projected housing payment of $4,200 meets the self-sufficiency requirement.
FHA borrowers may access several refinance options, including rate and term refinances and the FHA Streamline program. Streamline refinances remove appraisal and income verification requirements when the new loan reduces the monthly payment.
Occupancy rules: Original owner occupancy satisfies streamline eligibility even after relocation. Borrowers who initially occupied one unit of a duplex or fourplex and later rent all units may still qualify, provided the loan remains FHA insurable.
Rate and term refinances support improved credit profiles or adjusted loan terms, while cash out refinances allow equity access subject to an 80 percent maximum loan to value limit.
Preparing documentation in advance supports an efficient FHA approval process.
We serve borrowers throughout the state of Colorado which includes these cities:
Disclosure: Minimum loan amount is $200,000 for residential. Loan programs are subject to change per lender at any time until the loan is approved and the rate is locked. Borrowers must be approved by underwriting. Not all applicants will qualify.