The most common question I get from first-time buyers in Colorado isn't about interest rates. It's this: "I keep hearing about CHFA, FHA, and USDA — are these different loans or the same thing? Which one do I need?"
They're not the same thing, and the right answer depends on where you're buying, what you earn, and how much you've saved. After 30 years of sitting across the table from buyers in Colorado Springs, Denver, Pueblo, and everywhere in between, here's how I actually explain it.
The Short Version
CHFA is a Colorado state program that pairs with FHA, VA, or conventional loans to add down payment assistance on top. It's not a separate loan type — it's a layer of help you can add.
FHA is a federal loan type with a 3.5% minimum down payment and flexible credit requirements. CHFA can be layered on top of FHA to cover that 3.5%.
USDA is a federal zero-down loan for properties in eligible rural and semi-rural areas of Colorado. No down payment required. Income limits apply.
So when someone asks me "should I do CHFA or FHA," my answer is usually: those aren't opposites. Most CHFA loans are FHA loans with a CHFA assistance layer added. The better question is whether you need down payment assistance and whether your property qualifies for USDA.
How FHA Loans Work in Colorado
FHA loans are backed by the Federal Housing Administration and are available statewide, for any eligible property type, regardless of location. The main appeal is the low barrier to entry:
Minimum down payment: 3.5% with a 580+ credit score, 10% with a 500–579 score
Debt-to-income flexibility: FHA allows higher DTI ratios than most conventional loans
Property requirements: The home has to meet FHA's minimum property standards — basically livable and structurally sound
The downside is mortgage insurance. FHA charges a 1.75% upfront premium (rolled into the loan) and an annual premium that runs about 0.55% of the loan balance. On a $400,000 purchase, that's roughly $7,000 upfront and around $183/month ongoing until you refinance or pay down to 20% equity.
FHA works best when the property doesn't qualify for USDA, you need credit flexibility, and you're planning to layer CHFA down payment assistance on top to cover the 3.5%.
How CHFA Works in Colorado
CHFA — the Colorado Housing and Finance Authority — doesn't originate loans. What CHFA does is offer down payment assistance to Colorado buyers who use a CHFA-approved lender and meet CHFA's income and credit requirements.
The assistance comes in two forms:
CHFA Down Payment Assistance Grant: Up to $25,000 or 3% of the total loan amount, whichever is less. No repayment required.
CHFA Down Payment Assistance Second Mortgage: Up to $25,000 or 4% of the loan amount. Repayment is deferred until you pay off the first mortgage, refinance, or sell.
CHFA's baseline requirements: mid-credit score of 620 or higher, total household income within CHFA's income limits (which vary by county and household size), and completion of a CHFA-approved homebuyer education class.
One thing buyers often miss: when you layer CHFA DPA on top of an FHA loan, the interest rate on the first mortgage is slightly higher than a non-CHFA FHA rate. That's the tradeoff — you get cash for your down payment, but the rate is adjusted upward to account for it. For most buyers who don't have $14,000+ sitting in savings, this is still the right call. The math almost always works out in favor of keeping cash and accepting a modestly higher rate.
How USDA Loans Work in Colorado
USDA loans are the zero-down option for buyers purchasing in eligible areas. The program is federally backed by the USDA's Rural Development division, and despite the "rural" label, a lot of the areas around Colorado Springs and south of Denver still qualify.
Key differences from FHA:
No down payment required at all
Mortgage insurance is cheaper — 1% upfront guarantee fee plus 0.35% annually, versus FHA's 1.75% upfront and 0.55% annually
Income limits apply based on household size and county
Property must be in a USDA-eligible area — most of Colorado Springs proper doesn't qualify, but Fountain, Pueblo, Peyton, and other surrounding areas do
If your property is USDA-eligible and your income is within limits, USDA beats FHA on almost every financial measure. The only reason to choose FHA over USDA when USDA is available is if the property doesn't qualify.
Side-by-Side Comparison
FHA | FHA + CHFA DPA | USDA | |
Minimum down payment | 3.5% | $0 (CHFA covers it) | $0 |
Location restrictions | None | None | Rural/eligible areas only |
Income limits | None | CHFA limits by county | USDA limits by household size |
Credit score minimum | 580 | 620 | 640 |
Mortgage insurance | Higher | Higher | Lower |
Upfront fee | 1.75% MIP | 1.75% MIP | 1% guarantee fee |
Annual MI rate | ~0.55% | ~0.55% | 0.35% |
Repayment on assistance | N/A | Grant: no. 2nd mortgage: deferred | N/A |
Best for | Property not USDA-eligible, needs flexibility | First-time buyer needing down payment help | USDA-eligible area, wants lowest MI |
How to Decide
Step 1: Check the property address against the USDA eligibility map. If it's eligible and your household income is within the limit, USDA is almost always your best path. Call us to confirm — we'll know in a few minutes.
Step 2: If the property doesn't qualify for USDA, look at FHA + CHFA. Check your household income against CHFA's income limits for your county. If you qualify, layering CHFA DPA on top of an FHA loan can get you into the home with $0 down (sometimes as little as $1,000 out of pocket total).
Step 3: If your income is over CHFA's limits, we'll look at conventional options, potentially with down payment assistance from other programs we work with.
The scenario that trips buyers up most often is this: they assume they make too much for down payment assistance and give up before asking. CHFA income limits for a family of four in El Paso County are around $180,000 for certain loan types. A lot of households that think they're "too well-off" for help actually qualify.
What About Colorado's First-Generation Buyer Program?
Worth mentioning here: CHFA has a First Generation Program specifically for buyers whose parents have never owned a home. The grant under this program is $25,000, which is the maximum CHFA DPA amount. It's stackable with an FHA loan and has the same income and credit requirements as standard CHFA. If you're the first person in your family to buy a home in the U.S., this program is worth a specific conversation with our team.
One More Thing: Don't Let the Complexity Stop You
I've talked to buyers who spent three months reading forum posts trying to figure out which loan they should use before ever calling a lender. That's three months of rent paid while home prices moved. The programs themselves aren't complicated once someone walks you through them — and a 15-minute conversation will tell you exactly which path makes sense for your income, your credit, and where you want to buy.
Call (303) 709-9625, or start the process at apply-nickbarta.com. We'll tell you which program fits before you spend another weekend wondering.
Nick Barta is a Division President and Loan Originator at Security First Financial, NMLS #25540. He has been originating mortgages in Colorado for over 30 years. This post is for educational purposes only and does not constitute a loan commitment.
