CHFA loans: what down payment help really costs

CHFA, the Colorado Housing and Finance Authority, is the state’s housing finance agency. Its SmartStep loans pair a 30-year fixed FHA, VA or USDA mortgage with down payment assistance. For buyers with limited cash, that can sound like the answer. Sometimes it is, but often it is not. The only way to know is to compare total cost, and not only cash to close.

How CHFA’s assistance works

CHFA offers two kinds of help with SmartStep:

• A grant: up to 3% of the loan amount, capped at $25,000. You do not repay it.
• A 0% second mortgage: up to 4% of the loan amount, capped at $25,000. There is no monthly payment and no interest, but it is a lien on your home. It comes due in full when you sell, refinance or stop living in the home.

Under the current program, borrowers need a 620 minimum credit score, income under a statewide limit of $178,920 and a homebuyer education course. The lender can charge an origination fee of up to 1%, and CHFA pays the lender a servicing release premium when it buys the loan.

Assistance has a price

Down payment help has to be funded somewhere. With grant and second-mortgage programs, the question to ask is what the first mortgage costs compared with the best loan you could get without the help.

A simple example shows how this works. Suppose the assistance gives you $9,000 at closing. If the loan that comes with it costs even $60 a month more than your best alternative, you will have paid back that $9,000 in about 12 years. The extra cost then continues for as long as you keep the loan.

The second mortgage adds one more drawback. It is due when you refinance, so any future refinance has to pay it off too. You will need the cash or the equity to cover it.

What federal watchdogs found

This is more than a broker’s opinion. In 2017, HUD’s Office of Inspector General reviewed FHA loans made through down payment programs run by housing finance agencies. It found that in some programs, borrowers effectively financed their own “assistance” by taking a higher interest rate and higher fees. It found that HUD had not protected borrowers from those higher payments, and that this added risk of default. The report covered more than $16 billion in FHA loans.

FHA’s 2018 report to Congress found that loans with down payment assistance default more often than loans without it, and that assistance from government programs had a higher default rate than help from family.

When CHFA can make sense

CHFA can be the right choice in these situations:

• You have steady income but little cash, and waiting to save would cost you more than the assistance does.
• You plan to stay in the home a long time and do not expect to refinance soon.
• You have compared CHFA’s offer against FHA, VA, USDA and conventional options side by side, and CHFA wins on your numbers.

A VA loan needs no down payment, so eligible veterans can often buy without assistance at all.

How to compare before you choose

Ask for a Loan Estimate on the CHFA loan and on at least one alternative. Then compare:

1. Monthly payment, including mortgage insurance.
2. Cash to close, after the assistance.
3. Total cost over 5 and 10 years: interest, mortgage insurance and fees.
4. What happens if you refinance or sell, including any second mortgage you will owe.

A Mortgage Plan does exactly this. It puts each option side by side with your real numbers, so you can see what the help costs before you sign. For more on assistance and low down payment options, see Your first home.

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Sources: CHFA SmartStep and SmartStep Plus program matrix (effective August 3, 2026). CHFA down payment assistance options. HUD OIG Audit 2017-LA-0003 (March 2017). FHA 2018 Report to Congress, as summarized by NCSHA.