Compare Current Mortgage Rates in Colorado

Colorado mortgage lenders use the same factors to determine interest rates as other lenders use across the U.S. However, the state you live in can affect the mortgage rate you receive.

Mortgage rates also heavily depend on the borrower’s financial standing along with a combination of economic factors. Here’s a breakdown of how mortgage rates are determined:

Economic trends and monetary policies

Rates tend to increase when the economy is strong and job growth is high. Conversely, mortgage rates drop during economic downturns. 

The Federal Reserve, which is the nation’s central bank, also influences mortgage rates through its monetary policies. Rates generally climb higher when the Fed raises the federal funds rate, and vice versa. 

Inflation

Mortgage rates also tend to follow inflation, so when prices of consumer goods get higher, so do rates. That’s because mortgage investors want their returns to outpace inflation.

Government policies

Government policies can also affect rates. For instance, buyer demand might increase when the federal government provides tax credits or local governments offer down payment assistance to promote homeownership. The higher demand could lead to higher rates.

Because global markets influence each other, foreign government policies may come into play, too. For example, a financial crisis in another country could push investors toward safer U.S. bonds, which could put downward pressure on mortgage rates.

Borrower profile

A borrower’s financial profile also plays a major role in the rate they receive. Having strong credit, a low debt-to-income ratio (DTI), a larger down payment, and funds in your savings account may help you qualify for a lower rate. These factors increase the likelihood that the home is affordable to you, which creates less risk for the lender.

There are many homebuyer assistance programs in Colorado, and some are statewide while others are geared toward counties, cities like Aurora and Colorado Springs, or towns like Castle Rock and Grand Junction. To apply, you'll need to first find a mortgage lender that accepts down payment assistance. A loan officer can help you figure out which program best fits your needs.

Below are some of the major initiatives: 

• Metro Down Payment Assistance: This program offers a no-interest, no-payment second mortgage to homebuyers in the Denver area. The loan is forgiven after the borrower has lived in the home for three years. To qualify, borrowers need a credit score of at least 640 and an income of $188,250 or less. 
• Colorado Housing and Finance Authority: This statewide agency provides a grant you can use toward a down payment and closing costs, and it doesn’t need to be repaid. The agency also offers a second mortgage loan with a delayed repayment schedule. To qualify, you’ll need a credit score of 620 or higher and an income that meets limits, and you’ll need to contribute at least $1,000 toward the purchase of the home. 
• Colorado Housing Assistance Corporation: This statewide agency provides low-cost, flexible loans to borrowers who meet income limits. The loan is recorded as a second mortgage on the property and offers a delayed repayment schedule.

When you’re looking to buy a home in Colorado, here are steps you can take to find the best mortgage rate:

• Check your credit: Borrowers with higher credit scores generally receive lower interest rates, which translates to lower monthly mortgage payments. Consider taking steps to improve your credit score, and check your credit reports for potential errors that may affect your credit.
• Determine your budget: Lenders may offer a competitive rate when they know you’re borrowing what you can afford. One rule of thumb says you should spend no more than 28% of your gross monthly income on your housing payment. So if you earn $6,000 a month, for example, then your payments wouldn’t exceed $1,680. You may decide to spend less on your home payment based on your comfort level or depending on your other expenses.
• Research and compare lenders: Getting rate quotes from multiple lenders puts you in a better bargaining position, according to a study by the CFPB. This strategy helps you identify your options and pick the lender that offers the best terms.
• Get pre-approved for a mortgage: A mortgage pre-approval is a letter that shows how much you can expect to borrow and at what terms. It’s a step further than a rate quote because a lender pulls your credit and reviews your financial documents. This is the best way to find out what you qualify for. 

Colorado lenders offer many different types of home loans, and the best one for you depends on your personal needs. The major mortgage programs include FHA loans, VA loans, and conventional loans, and lenders may also offer customized mortgages of their own. 

FHA loans

An FHA loan is a type of mortgage that’s insured by the Federal Housing Administration. These home loans are available through private lenders, such as banks and credit unions, and come with competitive terms including low interest rates, low credit scores, and down payment requirements. Lenders are willing to offer these flexible terms because of the government's backing. 

You may put down as little as 3.5% if your credit score is at least 580. With a higher down payment of at least 10%, your credit score can be as low as 500. Either way, you’ll typically pay an upfront mortgage insurance premium when taking out the loan, plus monthly mortgage insurance for at least 11 years. 

VA loans

A VA loan is another government-backed mortgage program available at private banks and credit unions. These home loans are guaranteed by the U.S. Department of Veterans Affairs, and they’re available only to eligible service members, veterans, and surviving spouses. 

Qualified borrowers can get a VA loan with no down payment, no mortgage insurance, potentially lower interest rates, and flexible loan amounts. One downside is the upfront funding fee, which ranges between 1.4% and 3.3% of the home's purchase price. Borrowers can choose to roll this fee into the loan principal. Each lender sets its credit score and DTI requirements, so you’ll need to compare your options before taking out this type of loan.

Conventional loans

Conventional home loans aren't backed by a government agency. To qualify, borrowers typically need a credit score of at least 620, a maximum DTI of 45% in most cases, and a down payment of at least 3%.

However, you’ll need to pay for private mortgage insurance if your down payment is less than 20% in most cases.