How to finance a HUD home in Colorado

Start with a lender who knows HUD homes

Mike at Rate

Meet Mike Oswald

Vice President of Mortgage Lending at Rate · NMLS 261003 · Lending to Colorado families since 2001

Mike has guided thousands of Colorado buyers through purchases and refinances over 25 years, and HUD homes are a specialty: he reads the IN, IE and UI codes before you send the listing, knows what an FHA appraiser will flag, and turns real pre-approvals fast enough to make a 15-day bid window. He is a Colorado native based in Parker, married with three daughters, a Broncos fan who hikes, fly fishes and golfs. His philosophy, in his words, is to be the gift and bring encouragement to every client. Office: 1221 S Clarkson St, Suite 301, Denver.

Call or text (303) 917-6737Get pre-approved with MikeWhy we trust Mike

Rate, Inc. NMLS 2611. Equal Housing Lender. You may use any lender you choose; the Kenna Real Estate Group is not a lender and receives nothing for this introduction.

Start with the listing code, not the lender

Every HUD listing carries a financing code, and it is the most important thing on the page.

• IN, insured. HUD’s appraiser found the home meets FHA minimum property standards as it sits. A standard FHA loan works. So does conventional, VA or cash.
• IE, insured with escrow. The home needs a short list of repairs to meet FHA standards. HUD sets an escrow amount, the lender holds it, and the work is done after closing. Standard FHA still works, with the escrow added.
• UI, uninsured. The repairs exceed what an escrow can cover. A standard FHA loan will not work. Your options are FHA 203(k), a conventional renovation loan, or cash.

If you bid on a UI home with a standard FHA pre-approval, you will win the bid and lose the house at the appraisal. It happens every month. Match the loan to the code before you bid.

FHA: the default loan for Colorado HUD home buyers

FHA loans require 3.5% down, allow lower credit scores than conventional, and are what most owner-occupant HUD buyers in Colorado use. Because HUD is the agency behind FHA, an insured HUD home is already known to meet FHA standards, which removes the biggest risk in the appraisal. What an FHA loan is and how it works in Denver covers the details, and FHA versus conventional helps you decide if you qualify for both.

203(k): when the house needs work

The FHA 203(k) loan lets you borrow the purchase price plus the cost of repairs in one mortgage, based on what the home will be worth after the work. On an uninsured HUD home, or an older home in Englewood or Littleton that needs a roof and a sewer line, this is usually the only financed path. It takes longer, needs a contractor bid before closing, and the lender has to offer it. Turning a HUD fixer into a livable home walks through the whole thing.

CHFA and down payment assistance

The Colorado Housing and Finance Authority runs down payment assistance that can be layered on top of an FHA loan. Income limits and a homebuyer class apply, but for a lot of first-time buyers CHFA is the difference between bidding and watching. CHFA down payment assistance explained and using CHFA and FHA together on a HUD home cover it from both sides. Denver and several counties also run their own programs; local down payment help that pairs with a HUD purchase lists them.

The $100 down incentive

On some FHA-financed, owner-occupant purchases HUD offers a $100 down payment instead of the usual 3.5%. It is not on every listing and it comes and goes by region. Ask whether the home you are looking at carries it; if it does, it changes the whole budget.

$1,000 cash to close: how Colorado buyers actually do it

Cash to close is everything you bring to the closing table: down payment plus closing costs. On a $350,000 HUD home with FHA that is normally about $12,000 down plus $8,000 to $10,000 in costs. The way Colorado buyers get that number down to about $1,000 is by stacking three things.

• CHFA covers most of the down payment. Colorado’s housing finance authority offers down payment assistance as a grant or a silent second loan for buyers under its income limits with a 620 or better score. How CHFA down payment assistance works.
• HUD pays closing costs. You can ask HUD for up to 3% of the price toward closing costs, written into the bid. It lowers HUD’s net, so use it on a home that has sat rather than a brand-new listing.
• The $100 down incentive, when it exists. On some FHA-financed owner-occupant HUD purchases the down payment drops to $100. Ask about the specific home.

Put those together on the right listing and a first-time buyer walks in with about $1,000 and walks out with keys. It is not every home and not every buyer, but it is real, and we have done it. Call or text 303-955-4220 and we will run your numbers before you bid, not after.

VA, conventional and cash on a HUD home

• VA. Zero down for eligible veterans and service members. Works on insured HUD homes; the VA appraisal has its own standards. Colorado VA loans has more.
• Conventional. Usually 5% down and a higher credit bar. Works on insured homes and, with a renovation product, on some uninsured ones.
• Cash. Works on everything and closes fastest. HUD still runs the same bid window, so cash does not let you skip the line during the owner-occupant period.

Get pre-approved before the window opens

A HUD bid window on an insured home is 15 days for owner-occupants. You cannot start a loan application on day 12 and expect a pre-approval letter by day 15. Get it done first. Why pre-approval matters, and run the payment so your bid is a number you can live with.

Where to go next

• How to buy a HUD home
• Buying a HUD home on a budget
• How to find and finance a HUD home in Denver
• First-time buyer guide to HUD homes
• Financing resources on our main site
• Find a HUD-registered agent
• Good Neighbor Next Door

Ready to talk to someone?

Call or text 303-955-4220. A live person answers. Tell us what you are working with and we will tell you honestly whether a HUD home is the way to get there.