CHFA FirstStep is the Colorado Housing and Finance Authority's FHA-only program aimed at first-time buyers. In Brian's breakdown of CHFA's matrix, it also opens to veterans and to buyers in CHFA's targeted areas, and it uses lower income limits than SmartStep or Preferred. It matters most when you put it next to HUD homes, because a HUD home with the right code can take an FHA loan, CHFA help and HUD's own incentives at the same time. Here's how I teach agents to put that stack together without blowing up the file.
The short answer
FirstStep is a CHFA first mortgage written as a standard FHA purchase loan. The "Plus" version adds CHFA down payment help. The buyer must meet CHFA's rules (credit floor, income limit, homebuyer class, a small contribution of their own money) and FHA's rules (the home must pass an FHA appraisal). On a HUD home, the listing's financing code decides whether FHA can work at all. If it can, CHFA help can cover down payment or closing costs, and HUD's $100 down incentive may apply on listings that carry it.
Step by step
- Confirm first-time status. "First-time" usually means no ownership in the last three years. If the buyer doesn't fit, look at CHFA SmartStep, which uses FHA too and allows repeat buyers.
- Check the income limit. FirstStep has used lower limits that change by county and household size. Look them up on CHFA's income limits page. Never quote them from memory.
- Qualify the buyer. CHFA's credit floor applies even though FHA alone may allow lower scores. See how to qualify a buyer before the lender.
- Read the HUD listing code. IN (insured) works with FHA. IE (insured with escrow) can work with a repair escrow. UI (uninsured) usually won't close with a standard FHA loan. See HUD financing codes.
- Look for the $100 down flag. On eligible HUD homes, an owner-occupant with FHA may put $100 down. See the HUD $100 down incentive.
- Stack in order. First the FHA loan. Then CHFA help. Then HUD closing cost help in the bid, if the bid can carry it.
- Use a lender who closes HUD files. HUD deadlines are tight. A lender who has never done a CHFA loan on a HUD home can cost you the house.
- Get the class done before you bid. Every borrower needs a CHFA-approved class before closing. On a HUD timeline, there's no time to do it later.
The HUD stack (illustration only)
| Layer | What it does | Who confirms |
|---|---|---|
| FHA first mortgage (CHFA program) | The main loan | CHFA participating lender |
| HUD $100 down | Cuts the FHA down payment on flagged listings | The listing on HUDHomeStore.gov |
| CHFA grant or second | Helps with closing costs and prepaids | Lender, under CHFA rules |
| HUD closing cost help | Asked for in the bid; lowers HUD's net | Your bid and HUD's acceptance |
A buyer on a $300,000 HUD home with code IN and the $100 down flag might put $100 down on the FHA loan. CHFA help could then go toward closing costs and prepaids. The buyer still brings CHFA's minimum contribution, and their earnest money may count toward it.
Illustration only. A lender sets the real terms. FHA loans carry upfront and annual mortgage insurance, plus taxes, homeowners insurance and closing costs. CHFA assistance has its own repayment rules and may raise the first mortgage rate. The annual percentage rate (APR) would differ from any note rate. This is not an offer of credit. Program rules change. Check current rules at chfainfo.com, HUDHomeStore.gov and HUD Handbook 4000.1.
How to explain it to your client
"Since you haven't owned a home in a while, you may fit a state program called CHFA FirstStep. It's an FHA loan with help for your down payment or closing costs. On this HUD house, the listing shows a $100 down option, so the FHA down payment could be tiny, and the state help can go toward closing costs. You'll take a short homebuyer class and bring a little of your own money. A lender who does HUD homes every week will show you the exact numbers."
Watch-outs
- Two second liens don't stack. Pick one second mortgage program. A grant is different, but the lender decides what can be combined.
- UI homes and standard FHA don't mix. Look at a 203(k) or a different loan.
- HUD deadlines are strict. Line up the lender, CHFA reservation and class before you bid.
- Asking HUD for closing cost help lowers your net. In a busy bid window, it can cost you the house.
- Refinancing later. If the owner refinances, a CHFA second can come due or need approval to stay behind the new loan. Have them ask the servicer and lender first. FHA has a streamline refinance, and CHFA lists an FHA streamline option for existing customers; check what's current.
- Don't quote payments. Get the lender's worksheet.
Further reading
- Using CHFA & FHA Together to Finance HUD Homes on denver-hudhomes.com
- Down Payment Assistance for HUD Homes in Colorado on denver-hudhomes.com
This is training for real estate agents. It isn't legal, tax or lending advice. A licensed loan officer sets loan terms. Check with your managing broker.
Questions
Is CHFA FirstStep only for first-time buyers?
Mostly. Brian's breakdown says it also opens to veterans and buyers in CHFA targeted areas. Confirm with a lender.
What loan does FirstStep use?
A standard FHA purchase loan.
Can I use CHFA help on a HUD home?
Yes, if the listing code allows the loan and the lender is set up for it. HUD doesn't care where the down payment comes from as long as the lender documents it.
Does HUD's $100 down stack with CHFA?
It can, on flagged listings with an FHA loan. The lender confirms the final structure.
Does CHFA allow lower credit scores than FHA?
No. CHFA's floor is usually higher than FHA's minimum, and the buyer must meet both.
Can a CHFA owner refinance with no appraisal?
An FHA streamline may skip the appraisal. Any CHFA second has to be dealt with first. Ask the lender.
Brian Lee Burke is the founder of PadLeaders, a Colorado real estate broker licensed since 2003, team leader of The Kenna Group at Keller Williams DTC (formerly Kenna Real Estate Group) and the author of Mastering Real Estate and The Real Estate Playbook. More about Brian.