A Step-by-Step Guide to Buying a Home in Colorado

• In Colorado, a closing agent is required for all real estate transactions. This person can be an escrow agent or a representative from a title company. Their job will be to complete the transaction and prepare the proper closing documents.
• When buying a home in Colorado, the buyer and seller will usually complete the transaction at the same table.
• Colorado has a few unique features to its home-buying contracts. These peculiarities are described in the Dates and Deadlines section, so Colorado buyers are encouraged to pay close attention to this area.

The Step-by-Step Process for Buying a Home in Colorado

Phase 1: Colorado’s Disclosure, Inspection, and Title Process

When you are on contract with a seller, these are the steps that you will need to complete. In most cases, you can start Phase 2 steps at the same time.

1. To start the process, an offer will be accepted by the seller and a contract will be signed.
2. A deposit will then be paid to an escrow agent, a broker, or an attorney.
3. Once the contract is signed, it will be sent to a title company and the title search will begin. All of the work related to the transfer of the title and changes in information will occur during this step. Title commitment and title insurance will also occur. This should be done as soon as possible so the appraisal can be completed and any defects that impact the value of the property can be identified and addressed.
4. The buyer now has the chance to review and sign off on any disclosures related to the property. The disclosures will vary, but they often include known flaws with the house, as well as previous repairs and improvements. It can also include environmental hazards. A seller’s property disclosure is often completed by the seller and given to the buyer before the contract is signed. Buyers are usually expected to work these disclosures into the initial contract price, so sellers may see them as a benefit. Because flaw were disclosed previously, sellers may be less likely to provide credits or reductions further in the process.
5. An EPA-mandated lead disclosure will be required if the house was built before 1978. This document essentially says whether or not the seller has any knowledge of lead paint in the home. The property owners may also be required to disclose any known drug labs that were present at any time in the past.
6. Water rights are an important issue in Colorado, and these will be disclosed by the seller.
7. A change-of-ownership form must be completed if the property has a water well. If the well was never registered with Colorado officials, the buyer may have to pay for this service in the future.
8. The buyer now has the chance to perform an inspection on the property, and may report any findings if certain flaws are discovered. They will have to complete this step before the inspection completion deadline, which is usually described in the contract. There are many types of inspections that a buyer can choose, but they commonly include an inspection by a licensed home inspector, which will be a general review of the home. Other inspections and testing can be requested if the initial inspection reveals any issues. If a buyer does not complete this step before the end of the inspection completion deadline, they have essentially waived the right to inspections and repair requests. Before the deadline, buyers can also request a radon inspection or a property inspection, which can both be useful in certain areas.
9. The buyer can report issues discovered during the inspections using an inspection objection, which is found on a standard form. If flaws are discovered, the buyer and seller can negotiate a solution. This solution can include credits for repairs or closing costs. They also have the option at this point to walk away from the contract and recover their money, which is still being held in escrow.
10. The buyer may end up with a list of due-diligence documents, which are specific to buying a home in Colorado. If there is any standard leasing or obligations on the seller, the buyer has until the end of a specifically-agreed deadline to break off the deal. If any flows or problems are found, the buyer may be able to stop the deal.
11. The buyer can also negotiate a home warranty, which is also known as a home protection plan. This covers the major appliances from failure for a certain period after the sale; usually about 12 months.

Phase 2: Getting a Mortgage in Colorado

Most people will need to borrow money for the purchase of a home, and this can be one of the most stressful and uncomfortable times through the entire process. However, when you follow these steps, which can usually be completed at the same time as Phase 1, buying a home in Colorado is much easier.

1. First, you will have to submit a loan application to the lender, which you can do directly or through a mortgage broker. This assumes that you have already completed the pre-qualification and pre-approval steps, which are most often completed before you begin looking for a home.
2. Within three days of your application, the lender will submit a document called a good faith estimate, which is also called a “GFE.” This is submitted to you (the buyer) as a description of the estimated costs. Be aware that the final costs tend to differ slightly, as this is just an estimate.
3. It’s now your turn to act. As the buyer, you’ll have to send a wide range of information related to your finances to the lender. Some unique information may be required, but you can generally expect to send the following items:
   – Information related to the bank accounts that you hold. This should include several months’ worth of information.
   – Information on your debt load, which can include documents related to outstanding debts, lines of credit, and any financial obligations and liabilities such as rent payments.
   – Pay stubs and contact information related to your employment.
   – If there is any other information related to your finances, it should be included. For example, you may need to bring information on divorce settlements, child support that you receive or pay, liens, bankruptcies, and even court judgements. Basically, if there is something that affects your monthly income, it must be included at this point.
   – Information related to credit inquiries, which will impact your credit score. (Lots of credit inquiries can create risk for lenders.)
   – If you have any large deposits or cash gifts in any of your accounts, you’ll likely have to provide information. Large gifts are especially important to lenders, and they will usually require a document from the donor called a “gift letter.” This letter should state that the money is a gift and not a loan, and will therefore not require repayment. Not all gifts require a gift letter, and it’s usually determined by the amount of the gift compared to your annual income. For example, a $4,000 gift may require a letter if the buyer earns $40,00 a year, but probably won’t be required if they earn $200,000 annually. Talk with your lender to see if a gift will require explanation.
   – The lender may finally ask for repeat information or verification of certain documents. As far as lenders see it, anything can happen, and lenders who have been in the business for a while have likely seen a borrower’s situation change rapidly during the escrow process. Because of this uncertainty, you may have to provide multiple documents that further verify financial information. For example, they may ask for pay stubs to verify bank deposits, or rent receipts to verify payments. If there are any misalignments between documents, you may have to start the entire process from the beginning. This is just another reason to start Phase 2 as soon as possible.
4. The lender will now deliver an approval decision. Assuming they provide the loan, they will issue a loan-commitment letter, which basically verifies their willingness to provide the loan provided certain provisions are met, which usually includes an appraisal or references to changes in your situation or the property.
5. At this point, the financing loan contingency is removed by the buyer before the deadline, which will be defined in the contract. This date is the official endpoint for buyers to object to the loan details. If the buyer would like to end the deal and recover their money because of an issue with the loan, these objections must be communicated in writing to the seller.
6. The lender or mortgage broker will now order an appraisal, which is done through an appraisal management company. This will need to happen before the appraisal deadline, which is also described in the contract. The lender or broker can request a different appraiser if they see fit, but they are not able to request an appraiser of their own choosing. In Colorado, there is an appraisal objection deadline; before this date the buyer must act on any appraisal that comes in under the sale price. They must inform the seller and they now have the option to walk away from the deal if they wish.
7. Homeowner’s insurance will also need to be purchased at this point. If the property being purchased has insurance already, such as through a homeowner’s association, there will be no need to purchase insurance. Proof of insurance will need to be submitted to the lender. Almost all Colorado contracts will have a contingency that requires insurance, and if the buyer is unable to get insurance, they can discontinue the deal. This must all be completed before the deadline for purchasing or proving property insurance.
8. Hazard insurance may also need to be purchased, which will protect the investment from fire or storms. If the Colorado home is in a flood plain, flood insurance will also be required.

No matter where you live, the mortgage process can be long and frustrating, and in many cases you’ll feel it is unnecessarily detailed. However, the process is critical to securing a mortgage loan, so you should start as early as possible and secure the documents immediately. It also helps to avoid switching jobs or creating new lines of credit, as this can cause the entire process to restart.

Phase 3: Closing the Deal in Colorado

Before finally buying a home in Colorado, you will have to go through the closing phase. This will happen at one table, either at the office of the title company official or the lender. When everyone meets, the buyer and seller will sign the documents related to the loan and the transaction. Once the documents are signed, the deed is recorded, and payments have been exchanged, buyers will take possession of the keys, unless there is some type of agreement that allows the seller to stay in the property for a certain period.

1. In preparation for the closing, the title company will perform a title search to find out if any liens or other financial obligations are standing against the property. If the title is “clear,” the closing procedures can then commence. All of the paperwork will be completed and title insurance will be prepared, and a final closing date is determined.
2. A final amount for the buyer’s total will be determined. The buyer will need to bring this amount in the form of a cashier’s check. This will be based on mortgage closing costs, property taxes, and utilities.
3. A final walkthrough will then be scheduled and performed. This is to verify the condition of the property.
4. At the closing table, the buyer and seller will sign all the documents required, including the final loan documents.
5. The buyer now pays the remaining funds in their downpayment to the attorney or a title-company representative who is acting as the settlement agent.
6. The representative or attorney will record the transaction and deed with the specific municipality.
7. Congratulations! You will now receive the keys and officially take control of your Colorado home!

Downpayment Assistance Programs in Colorado

Homebuyers all across the nation face one of the largest hurdles in the purchase process: the downpayment. To help buyers overcome this barrier and enjoy the benefits of homeownership, the state of Colorado, as well as city and county governments, have created a variety of downpayment assistance programs.

Colorado’s Statewide Downpayment Programs

While there are other organizations and non-profit groups that provide support in Colorado, a large portion of the downpayment assistance comes from the Colorado Housing and Finance Authority (CHFA). This agency provides both downpayment grants and loans to qualifying homebuyers.

CHAC’s Downpayment Grants

The most attractive option from the CHFA is their downpayment grants, which do not need to be repaid. Eligible buyers can receive up to 3% of the first mortgage, which equals $3,000 for every $100,000 borrowed. A mortgage of $250,000, for example, could qualify for $7,500 in support.

CHAC’s Downpayment Loans

If you are not able to secure a grant, the CHFA may provide a second loan that can be used for downpayment purposes. This option provides up to 4% of the mortgage, and repayment is deferred until the first loan is paid off, the home is sold, or you move out but keep ownership of the property.

Major Local Programs in Colorado Cities and Counties

Buyers in certain areas will have access to downpayment support from county and city governments. These can be useful, but the property being purchased needs to be within the city or county limits.

Denver’s metroDPA

Buyers in the Denver area can take advantage of the metroDPA program, which is available (as of writing this article) to buyers earning up to $176,700 annually. With this program, Denver buyers can receive up to 5% of the mortgage amount for a downpayment. The support is a loan that is forgiven if you stay in the home for at least three years.

El Paso County’s “Turnkey Plus” Program

In the county of El Paso, eligible buyers can get a partially-forgivable loan that helps cover the downpayment and closing costs. The loan comes with a 0% interest rate and half of the loan can be forgiven under certain conditions.

Common Requirements for Colorado Downpayment Assistance

Each program has its own unique requirements. Most programs are only available to low- and moderate-income earners, so verification of your income will be requested. They may also require that you live in the home for a certain period and that you meet credit standards.

Some programs will also request that you complete buyer education, that you are a first-time buyer, or that you purchase only a single-family home.

Requirements change from program to program, so if you are interested in downpayment assistance in the state of Colorado, contact our team for more information.

Always consult with a qualified professional before making any decisions on a mortgage or buying a home in Colorado. This article is for general information only, and because laws change, some information could be out-of-date.

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