CHFA SmartStep is the Colorado Housing and Finance Authority's first mortgage program built on government loans: FHA, VA and USDA. The big thing agents miss is that it isn't only for first-time buyers. A renter who owned a house ten years ago, a buyer who just went through a divorce, a family moving up from a condo: all of them may fit. Here's how I teach it to my agents, and how to explain it to a buyer in two minutes.
The short answer
SmartStep is a CHFA first mortgage. CHFA doesn't lend the money itself. A CHFA participating lender writes the loan under CHFA's rules. The buyer can pair it with CHFA down payment help, either a grant or a deferred second mortgage. The version with help attached is usually called SmartStep Plus. The buyer still needs a credit score that meets CHFA's floor, income under CHFA's limit, a CHFA-approved homebuyer class, and a small amount of their own money. Then the normal FHA, VA or USDA rules apply on top.
Step by step
- Qualify the buyer first. Real credit score, job, income, debts, cash on hand. Do this before you send anyone to a lender. See how to qualify a buyer before the lender.
- Ask about past ownership, but don't rule them out. Owned before? That's fine for SmartStep. Just know they can't keep a pile of other homes. CHFA limits how many other homes a buyer can own at closing.
- Match the loan type. FHA for most buyers with modest savings and okay credit. VA for eligible veterans. USDA for addresses in eligible rural areas. The lender decides which one fits. See FHA vs conventional for the basics.
- Decide on help. Grant or second mortgage? Each one costs something different. See CHFA grant vs second mortgage.
- Check the limits. Income limits and any loan caps live on CHFA's income limits page. Never quote them from memory. They change, and they're tied to the date the loan is locked. See CHFA income and price limits.
- Get the class done now. Every borrower takes a CHFA-approved homebuyer class before closing. Have them start the week they get pre-approved.
- Send them to a participating lender. Use CHFA's lender finder. Give the buyer two or three names and tell them they can pick any lender.
- Write the offer for the loan. FHA and VA appraisals look at condition. Peeling paint, a bad roof or missing handrails can stall the loan. Ask for seller-paid closing costs when the market allows. See seller concessions.
SmartStep next to the other CHFA programs
| Program | Loan type | First-time buyer required? |
|---|---|---|
| CHFA SmartStep | FHA, VA, USDA | No |
| CHFA Preferred | Conventional | No, per CHFA's current matrix; confirm |
| CHFA FirstStep | FHA | Yes, or other CHFA rules (confirm) |
Program names, versions and rules change. Check the current program matrix with a CHFA participating lender and at chfainfo.com.
A worked example (illustration only)
A buyer looking at a $350,000 home with an FHA loan through SmartStep. FHA's minimum down payment is 3.5%, which is $12,250. If the buyer uses CHFA's second mortgage help and it's sized at a few percent of the first mortgage, it could cover most or all of that down payment. The seller could cover part of the closing costs through a negotiated credit. The buyer still brings CHFA's required minimum contribution and pays for the inspection.
Illustration only. A lender sets the real terms. FHA loans carry upfront and annual mortgage insurance, plus taxes, homeowners insurance and closing costs. CHFA's assistance options carry their own rates and repayment rules, and taking assistance can mean a higher 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.
How to explain it to your client
"There's a state program called CHFA SmartStep. It works with FHA, VA and USDA loans, and you don't have to be a first-time buyer to use it. It can come with help for your down payment, either money you never pay back or a second loan with no monthly payment that you pay back when you sell or refinance. You'll take a short homebuyer class, and you'll need a little of your own money. A CHFA lender will show you both versions side by side so you can pick."
Watch-outs
- Don't say "first-time buyers only." You'll lose buyers who qualify.
- Don't quote limits. Send them to the lender and CHFA's site. Limits change with the lock date.
- No cosigners. Everyone on the loan lives in the home. A parent can give a gift, not a signature. Confirm current rules with the lender.
- Help isn't free. The grant often comes with a higher rate. The second has to be repaid. Say "help," not "free money."
- Condition matters. FHA, VA and USDA appraisals can flag repairs. Look at the house with that in mind.
- Lender referrals. The buyer can use any lender. Follow your brokerage's rules. Never take anything for a referral (RESPA).
Further reading
- CHFA Down Payment Assistance in Colorado on kennarealestate.com
- $1,000 Cash to Close on kennarealestate.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 SmartStep only for first-time buyers?
No. Repeat buyers can use it if they meet CHFA's other rules. Confirm with a participating lender.
What loans does SmartStep use?
Government loans: FHA, VA and USDA. Conventional buyers look at CHFA Preferred instead.
Does SmartStep come with down payment help?
It can. CHFA's grant or second mortgage pairs with it. The lender shows the cost of each.
Can a veteran use it?
Yes, with a VA loan. A veteran with zero down may use the help for closing costs instead.
Who checks if the buyer qualifies?
A CHFA participating lender. CHFA doesn't qualify buyers directly.
Where are the current limits?
On CHFA's income limits page.
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.