Buying a House in Colorado in 8 Easy Steps

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By Lindsay Stefan Updated October 9, 2023

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There are lots of houses currently for sale in Colorado, but they are selling quickly. Here’s what you need to do to buy a house in the Centennial State’s competitive market.

This guide breaks down the home buying process into eight steps, with insights and practical tips.

Key steps to buying a house in Colorado

  • Step 1. Save for a down payment.»  Wait until you have saved a down payment of 20% to avoid private mortgage insurance and save money over the life of your loan. 
  • Step 2. Find an agent.» Interview a few experienced local agents. Pick someone familiar with the Florida housing market and the neighborhoods you're considering.
  • Step 3. Get preapproved.» Preapproval can give you an advantage over other competing offers by showing Florida homeowners that you're a serious buyer. 
  • Step 4. Find a location.» Look for neighborhoods with home prices in your range, access to amenities that fit your lifestyle, and rising home values.
  • Step 5. Go house hunting.» Work with your agent to find listings for homes that meet your requirements and budget.
  • Step 6. Make an offer.» Consult with your agent to write a strong offer that gets a seller’s attention and fits your budget.
  • Step 7. Get an inspection/appraisal.» Coordinate with a licensed professional to find potential issues with the property. Your lender will get an appraiser to determine its worth and finalize the loan amount.
  • Step 8. Close.» Complete a final walk-through of the property to ensure it’s in the expected condition. Then review and sign necessary paperwork, and pay your closing costs.

👋 If you're weighing your options to buy a house, Clever's fully licensed Concierge Team is standing by to answer questions and provide free, objective advice on how to get the best outcome. Get free advice from a licensed expert today — no obligations!

Step 1: Save for a down payment

Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender pays the remaining balance.

A down payment can be up to 20% of the home's final purchase price. In Colorado, that could mean paying up to $105,356 for a $526,779 home (the median sale price of homes).

How much you save for a down payment on a house in Colorado depends on how much you're willing to pay up front versus over time.

If you put less money down, your lender will typically require you to get private mortgage insurance (PMI) on the loan. That can save you money up front but increase your monthly payment and total interest costs over the life of the loan.

However, if you can't afford to put that much down at closing, or want to hold onto more of your cash to cover other home-buying expenses, some government-backed loans have lower down payment mortgage options.

Minimum down payment on a house in Colorado

Mortgage typeMinimum down payment (%)Down payment ($)
Conventional20%, or <20% + PMI$15,803
Federal Housing Administration loan3.5%$18,437
Veterans Affairs loan0%$0
Source: Zillow

Colorado down payment assistance programs

Colorado offers numerous down payment assistance programs for first-time and low-income homebuyers. Here are a few great resources that may help you out:

CHAC Down Payment Assistance Program

Colorado Housing Assistance Corporation’s (CHAC) Down Payment Assistance Program is designed for first-time homebuyers with low to moderate income. The program offers financial assistance for a down payment in the form of a loan. That loan becomes a second monthly mortgage.

To be eligible for this program you must contribute $1,000 to your down payment. If you're part of Colorado's disability program, this amount is only $750. But all participants must complete a homebuyer class approved by the CHAC.

The home has to be the borrower's primary residence or the full outstanding balance of the loan will be due.

CHFA FirstStep Plus

The Colorado Housing and Finance Authority (CHFA) offers the FirstStep Plus program for participants with a CHFA FirstStep home loan. FirstStep Plus provides down payment assistance for up to 4% of the initial mortgage loan amount. The assistance is a second mortgage with no interest or monthly payments until the borrower pays off or refinances the home.

Applicants must have a minimum credit score of 620, and income limits apply. You can check if you qualify for the program here.

CHFA SmartStep Plus

The CHFA also offers the SmartStep Plus Program for participants with a SmartStep home loan. Down payment assistance will either be a grant up to 3% of the total loan amount or a second mortgage up to 4% of the loan.

You don't need to be a first-time homebuyer to get this assistance, but you do have to meet the CHFA's income limits. You can check if you're eligible here.

U.S. Department of Housing and Urban Development

HUD has a list of alternative programs for Colorado homebuyers here.

More about low down payment home loans

Government-backed loans, like FHA loans, allow a minimum down payment of 3.5% toward your home's purchase. Even conventional loans allow for down payments as low as 3–5%, though the minimum varies by lender.

But making a down payment of less than 20% comes with some risks:

  1. Because you're borrowing more money, you'll have higher monthly payments and pay more in interest over the life of your loan.
  2. Putting less than 20% down means you'll pay additional PMI, which protects the lender from potential losses.

Down payment Monthly payment Total interest Total cost
5% $3,340 $701,790 $1,228,569
20% $2,812 $590,981 $1,117,760
Show more

Based on a 7.03%% interest rate for a 30-year loan on a median $526,779 home.


Mortgage insurance costs around 1% of your annual mortgage balance and is added to your mortgage payment each month. However, rates vary based on your down payment, credit score, and loan type: 

  • Conventional loans require PMI until you've built up 20% equity in the home (for example, until you owe $400,000 on a $500,000 home). Some lenders require proof that your home has increased in value enough to cancel the PMI.
  • FHA loans require a mortgage insurance premium (MIP) for the life of your loans, regardless of your home equity.
  • VA loans don't charge mortgage insurance. Instead, you'll pay a one-time VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price. VA loans are available only to veterans, active service members, and eligible surviving spouses.

» LEARN MORE: Everything You Need to Know About Low-Income Home Loans

Step 2: Find a great Colorado real estate agent

Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great Colorado realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.

In addition to finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers (like title companies and inspectors) to help you buy your home in Colorado — just remember you can always shop around!

Best of all, hiring a good real estate agent comes at no extra cost to you — sellers typically pay all realtor fees from the home sale — and can get you the best price on a home.

We recommend picking a realtor based on how well they know the neighborhoods you're interested in.

For example, an agent could have intimate knowledge of Aurora but not Lakewood. If you don't know where you're moving to yet, you can reach out to agents who specialize in the broader Denver Area.

You can start your search by looking up a brokerage or realty, but don't stop there. Take the time to research and interview multiple real estate agents, paying attention to their:

Step 3: Get preapproved for a mortgage

Mortgage preapproval is a lender's conditional offer to lend you a maximum amount of money to buy a home.

Most sellers in Colorado will ask for a mortgage preapproval letter before showing you their home. It demonstrates that you're financially qualified to make an offer and can give you an advantage over buyers who don't have one.

Pre-approval can be as simple as a 40-minute phone call with your lender, a credit check, and sending them your proof of funds. Once you make an offer on a house, you'll start the initial mortgage application.

Preapproval vs. prequalification

Preapproval is a more in-depth analysis of your finances than a prequalification and serves as a more formal commitment from a lender. It usually requires a hard credit check and supporting documentation, such as paycheck stubs and W-2s.

Prequalification gives you a basic idea of what you might be able to borrow based on a quick look at your finances.

Does preapproval hurt my credit score?

Preapproval typically results in a hard credit inquiry, which may reduce your credit score by up to 5 points — that's a minimal effect. 

✍️ Tip: If you get preapproved with multiple lenders within a 45-day window, it will only count as one credit inquiry, minimizing the impact on your score. 

The savings you'll gain from shopping around for a mortgage preapproval will likely far outweigh any minor, short-term impacts to your credit.

What do lenders review?

Mortgage lenders will check your credit score, payment history, income, employment, and debts to determine approval and how much they are willing to lend to you. (Note: These are the same factors that determine the loan's interest rate.)

You're evaluating lenders, too

Consider each lender's quoted mortgage rate, estimated closing costs and fees, reputation and online reviews, customer service quality, and responsiveness to your questions.

Although you don't have to decide on a lender now, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best rate and terms when you buy your Colorado home.

A local lender:

  • Might provide you with more market-specific information, such as typical home values in your desired area
  • Likely has a better understanding of lending regulations in the state
  • Can connect with you other real estate professionals (realtors, contractors, inspectors, etc.)

You don't necessarily need to use a Colorado-based lender when buying a home in the state. Many national and online lenders are licensed to provide mortgage loans in Colorado and may provide better rates and terms.

Step 4: Choose the right location

Start zooming in on the best neighborhoods where home prices fall within your budget, and consider what you want out of your home.

If home equity is most important to you, search where home values are rising the most. But don't forget about local culture and amenities that fit your lifestyle.

Colorado home prices

Currently, the typical home value in Colorado is $526,779, but prices vary dramatically from city to city and even from neighborhood to neighborhood!

Lifestyle

Finding an area where you’ll enjoy living can be fun and challenging, especially if you’re from out of state. An experienced local agent can help you find locations that fit your interests and needs.

An agent can recommend neighborhoods based on things like schools, amenities, or traffic patterns. They’ll also know which neighborhoods are on the rise and worth putting down roots in.

Step 5: Start house hunting in Colorado

📊 Key local data:

  • Median mortgage interest rate: 7.03%
  • Median home value: $526,779
  • Best month for house hunting (highest inventory): June
  • Vail is the fastest-growing metro area in Colorado
  • Average lot size: 10,019 square feet

Searching for homes in Colorado is the fun part of the home buying process! You'll get to look at a variety of available listings and discover what you really want in a home.

Make a list of everything you want in a home and prioritize them by must-haves (such as proximity to work or your children's school) versus your nice-to-haves (like a spacious garage or backyard). 

Consider the full costs of owning a home, not just the mortgage payment. Other potential costs of owning the home include maintenance and repairs, property taxes, homeowner's insurance, and HOA fees.

Your realtor can help you understand which of your needs and wants fit your budget and favorite neighborhoods and adjust where possible.

You should also decide whether you'll only visit homes in person or if you trust your agent to visit the properties on your behalf. This can be useful if you work demanding hours and can't always be available to see a house.

Next, your agent will search for homes on your local MLS and bring you top picks, and you'll schedule viewings and tours.

Step 6: Make an offer

Once you find a Colorado house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.

Talk to your real estate agent to work out all your contingencies and concessions so you can act quickly and make a strong offer that gives you a good chance of winning the home.

Part of your offer could include an earnest money deposit, which may be 1–2% of the purchase price. It's an incentive for the sellers to take the home off the market until closing. If the sale goes through, the earnest money goes toward your down payment, so you won't be anything additional out of pocket.

Note: When housing inventory is high, so is demand. So if you're house-hunting in June, you may have less time to make an offer than in December.

Average time homes spend on market in Colorado

Annual average61
January88
February76
March53
April45
May42
June39
July43
August48
September55
October59
November69
December82
Source: Realtor.com

Step 7: Inspections, appraisals, and financing

Once the seller accepts your initial offer, you have to do due diligence before officially purchasing the home. Inspections let you better evaluate the home's condition, and lenders use appraisals to determine value and decide how much your final loan amount will be.

If something unexpected pops up or if the home's appraisal comes in below the purchase price, you could have an opportunity to renegotiate the terms of your contract.

Underwriting

This is also the period that your lender will verify that you can afford your mortgage. They may ask for proof of income, pay stubs, and letters of explanation for income that doesn't come from wages, and other loan statements (like for student debt).

Delays could lead to postponed closing, so start collecting this information early so that you can be ready to submit documents when your lender asks.

Home inspections in Colorado

Having your Colorado home inspected by a licensed inspector gives you peace of mind about the property's condition before you commit thousands of dollars to purchase it. A licensed professional checks the house for any unseen, unexpected, or potential issues.

Your inspector should check out the following parts of the property:

  • Roof
  • Foundation
  • Electrical system
  • HVAC system
  • Plumbing

A home inspection costs around $300 to $600, depending on factors like the home's location, condition, and age.

If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.

Colorado-specific inspections

Colorado law requires sellers to disclose almost every problematic condition in a house. But it's still a good idea to do additional inspections to check for any other underlying issues. Here are some recommended tests to consider before closing on a house in Colorado:

  • Radon testing: If the seller hasn't done a radon test recently, try to get one done as soon as possible. Radon is highly toxic and can easily enter a home undetected. You can order a free radon test kit from the Colorado state government here.
  • Mold inspection: Moisture and drainage problems are some of the most common in Colorado homes. Inspecting for mold can ensure that there are no hidden health hazards in the house you’re buying.

Appraisals

Home appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.

» LEARN: 3 options for buyers after a low appraisal

Step 8: Close on your new home

Final walk-through

Before you close on your new home, you and your agent will do a final walk-through of the property to ensure that it's still in the expected condition. You'll want to check to make sure: 

  1. The appliances are in working order.
  2. Any agreed-upon repairs were handled by the seller. 
  3. There was no damage to the home when the seller moved out.

Closing day

On the closing date, you’ll meet at the title company to review lots of important paperwork. You'll need to read and sign several documents, including:

  • The final loan application
  • The deed transfer
  • Various disclosures

Before signing anything, ask your agent or closing attorney about any questions you have to make sure you fully understand each document.

After completing the paperwork, you'll have to pay for closing costs. The title company will collect the total amount you owe for various services and pay each party on your behalf.

Typically, a buyer's closing costs can be separated into four categories:

  • Prepaid costs: Ongoing costs of homeownership, such as property taxes and homeowners insurance. Mortgage lenders often require buyers to pay these monthly fees up front.
  • Title and escrow charges: Charges for the title company's services, such as title searches and title insurance.
  • Lender fees: Fees for the mortgage company to originate and underwrite your loan. Lender fees might include other expenses associated with your loan, such as appraisal fees or mortgage points.
  • Other closing costs: Miscellaneous costs unique to each buyer. Other closing costs can include pest inspection fees, natural disaster certification fees, and other variable expenses.

Buyers in Colorado typically pay 3%–5% of the purchase price in closing costs. For a $526,779 home — the typical home value in Colorado — that's between $15,804 and 5%!

After signing all of the paperwork, you'll get the keys and can move into your new home. Congrats!

Start of mortgage payments

If you took out a mortgage to purchase the home, your first loan payment is likely due within a month after closing. 

Ask your lender for more specific details about the payment schedule, how to make the first payment, and how to set up automatic payments (if desired).

Why trust us?

Clever Real Estate is a free agent-matching service that has helped more than 82,000 people buy and sell homes. We partner with over 2,700 top-performing agents nationwide at national brokers including Keller Williams, RE/MAX, Century 21, and more. We also help buyers save money with cash back after closing — no strings attached.

We’ve earned buyers’ trust with a rating of 4.9 out of 5 stars on Trustpilot and over 1,800 customer reviews.

Our team of industry-leading researchers is committed to making homeownership more accessible by educating buyers through guides like this one. We've spent thousands of hours analyzing publicly available data, surveying consumers, and interviewing industry experts. Our research has been featured in The New York Times, Business Insider, Inman, Housing Wire, and many more.

Learn more about Clever.

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