Down Payment Assistance vs. Low-Down Payment Loan Programs in Denver: What’s Right for You?

Jason Kauffman | June 24, 2024

Buying a home in Denver can be a challenge, especially when it comes to saving for a down payment. Fortunately, homebuyers have two main options to make homeownership more accessible: down payment assistance (DPA) programs and low-down payment loan programs. While both options reduce upfront costs, they serve different financial needs.

What Are Down Payment Assistance (DPA) Programs?

DPA programs are designed to help qualified homebuyers cover down payment and closing costs. These programs are typically offered by state and local housing agencies, nonprofit organizations, and employer-assisted housing initiatives.

Common Features of DPA Programs

• Grants or Forgivable Loans – Some programs offer assistance that does not need to be repaid if buyers meet certain requirements, such as staying in the home for a specific period.
• Second Mortgage Loans – Some DPA programs provide funds as a deferred-payment loan that is repaid when the home is sold, refinanced, or paid off.
• Income & Credit Considerations – Many programs have income limits and credit score requirements, but these are often more flexible than traditional loan programs.

Who Can Benefit from Down Payment Assistance?

• Lower Initial Investment: These programs require significantly lower down payments, sometimes as little as 3% of the home’s purchase price, making it easier for buyers to enter the housing market.
• Broad Accessibility: Low-down payment loans are accessible to a wide range of buyers, including those with lower credit scores or limited savings.
• Government Backing: Programs like FHA, VA, and USDA loans are backed by government agencies, providing additional security to lenders and often resulting in more favorable loan terms for buyers.

DPA programs are ideal for first-time homebuyers, moderate-income buyers, and those who need financial help covering upfront home costs. Some programs in the Denver area also support veterans, educators, healthcare workers, and other community-based professionals.

Since DPA programs can vary widely, working with a mortgage advisor can help you determine which programs you may qualify for.

Low-Down Payment Loan Programs: An Alternative Approach

If a buyer does not qualify for a DPA program—or prefers a different route—low-down payment mortgage programs offer another way to purchase a home with minimal upfront costs. These include conventional loans with as little as 3% down, as well as government-backed FHA, VA, and USDA loans.

Key Advantages of Low-Down Payment Loans

• Lower Cash Requirement – Buyers can secure a home with as little as 3% down, compared to the traditional 20%.
• Broad Eligibility – Unlike many DPA programs, income and homebuyer status restrictions are typically less strict for low-down payment loans.
• Government-Backed Security – FHA, VA, and USDA loans provide flexible credit options and may offer more favorable loan terms.

These programs are particularly useful for buyers who have stable income but haven’t saved enough for a large down payment.

Down Payment Assistance in Denver: What to Expect

Denver homebuyers have access to various DPA programs offered by local and state housing organizations. These programs typically provide assistance as either a grant or a second mortgage with deferred repayment terms.

While each program is different, common eligibility factors include:

• Income limits based on the area’s median income (AMI)
• Minimum credit score requirements (often flexible)
• First-time homebuyer status (though some programs allow repeat buyers)
• Homebuyer education course completion

Additionally, some DPA programs in the Denver metro area offer forgivable assistance over a set period, meaning buyers who stay in their home for a certain number of years may not need to repay the assistance.

Are There Any Downsides to DPA Programs?

While down payment assistance can be a great resource, it’s important to consider potential trade-offs:

• Some programs have higher interest rates than standard low-down payment loans.
• A second mortgage (even if deferred) can impact long-term home equity
• Buyers may need to live in the home for a certain period to benefit from forgivable loan programs

A mortgage advisor can compare the costs and benefits of using DPA versus other loan options to ensure you’re making the best financial decision.

Which Option Is Right for You?

Choosing between down payment assistance and a low-down payment loan depends on your personal finances, eligibility, and long-term homeownership goals. Here are some key questions to consider:

• Do you meet the income and credit score requirements for local DPA programs?
• Are you planning to stay in the home long enough to benefit from forgivable assistance?
• Would you prefer a simpler loan structure with a low down payment?

If you’re unsure, a mortgage professional can help you compare the options available in Denver and guide you through the application process.

Next Steps for Denver Homebuyers

If you’re looking to buy a home in the Denver metro area and want to explore down payment assistance or low-down payment loans, getting expert guidance is key.

At Uptown Mortgage, we specialize in helping buyers navigate local home financing options and find the best solution for their needs. Contact us today to discuss your situation and start your journey to homeownership!