FHA Loans: Repayable Second Mortgages Down Payments

In Colorado, if you are looking to buy a home with an FHA loan, a repayable second mortgage can be a practical way to cover your down payment and closing costs. These programs provide funds at closing that you repay over time, making homeownership more accessible, especially for first-time buyers. Simply Approved Mortgages can help you understand and access these options in Colorado.

Understanding FHA loans in Colorado

FHA loans, insured by the Federal Housing Administration, are popular in Colorado because they offer more flexible qualification requirements compared to conventional loans. This often includes lower minimum credit scores and a smaller down payment requirement. Specifically, FHA loans require a minimum down payment of 3.5% of the purchase price for borrowers with a credit score of 580 or higher (HUD Mortgagee Letter 2010-29).

For example, on a hypothetical $500,000 Denver home, a 3.5% down payment would be $17,500 (illustrative example only). Repayable second mortgages can bridge this gap.

How a repayable second mortgage works

A repayable second mortgage is a separate loan that is secured by your home, just like your primary mortgage. However, it takes a "second" lien position behind your FHA first mortgage. This means that if you were to sell your home or refinance, the primary FHA loan would be paid off first.

These second mortgages are not grants; they must be repaid. The repayment terms vary by program, but they often come with fixed interest rates and specific repayment periods. The funds from a repayable second mortgage are typically used to cover the FHA loan's down payment requirement and sometimes a portion of your closing costs.

Who is a repayable second mortgage for?

Repayable second mortgages are designed for homebuyers who meet specific criteria, often including income limits and purchase price caps. They are particularly helpful for first-time homebuyers who haven't owned a home in the past three years. This definition is common across many assistance programs (HUD Handbook 4000.1).

These programs benefit buyers who have a stable income and good credit but lack the upfront cash for a down payment. If you're buying in areas like Denver County, El Paso County, or Arapahoe County, understanding these income and price limits is crucial.

Colorado down payment assistance programs with repayable options

Colorado offers several down payment assistance (DPA) programs that can be combined with FHA loans, often structured as repayable second mortgages. Many of these are administered through the Colorado Housing and Finance Authority (CHFA).

CHFA down payment assistance programs

CHFA offers various programs that provide down payment and closing cost assistance, often in the form of a second mortgage. These programs have specific eligibility requirements, which can include minimum credit scores, debt-to-income (DTI) ratios, and participation in a homebuyer education course. The education course helps prepare you for the responsibilities of homeownership.

One common CHFA option is a second mortgage with a low interest rate that you repay monthly, similar to your first mortgage. The amount of assistance can vary, but it's typically a percentage of the first mortgage loan amount.

Eligibility for CHFA programs

To qualify for CHFA programs, you generally need to meet income limits based on the Area Median Income (AMI) for your county and household size. These limits are updated annually. Purchase price limits also apply, varying by county.

It's important to remember that these programs are subject to funding availability and can change. Simply Approved Mortgages works with these programs and can help you determine your eligibility for CHFA and other options. You can explore more about home loan programs, including DPA, on our programs page.

Simply Approved Mortgages' wholesale-lender DPA

Beyond state-specific programs, Simply Approved Mortgages offers a unique wholesale-lender DPA program. This option is a repayable fixed-rate second mortgage (terms, rates and APR vary by lender and program) that can be combined with an FHA first mortgage. It's designed to help cover your down payment and, in some cases, a portion of your closing costs.

This program has distinct advantages, such as potentially broader eligibility than some state-specific programs and competitive terms. We can help you understand how this assistance can work for your FHA loan in Colorado.

How repayable second mortgages impact your mortgage payments

When you take on a repayable second mortgage, it adds another monthly payment to your financial obligations. You will have a payment for your FHA first mortgage and a separate payment for the second mortgage. This means your overall monthly housing expenses will be higher than if you only had the FHA first mortgage.

It's crucial to assess your budget carefully. You can use our affordability calculator to estimate what you can comfortably afford, considering both mortgage payments and other homeownership costs like property taxes and homeowners insurance. In Colorado, property taxes can vary significantly by county. Property tax bills vary by county and local mill levy; the Colorado Division of Property Taxation and your county assessor publish current figures.

Homebuyer education requirements

Many DPA programs, especially those from CHFA, require you to complete a homebuyer education course. These courses are typically offered online or in person by HUD-approved counseling agencies. They cover important topics like understanding credit, budgeting for homeownership, the loan process, and maintaining your home. This education helps ensure you are prepared for the financial commitments of owning a home.

Expert insight from Simply Approved Mortgages

Many first-time homebuyers in Colorado come to us with a steady income but limited savings for a down payment. They often don't realize that DPA programs, especially those structured as repayable second mortgages, can make homeownership a reality. We've seen firsthand how these options open doors for buyers in competitive markets like Boulder and Fort Collins, allowing them to purchase a home sooner than they thought possible.

Applying for DPA in Colorado

The process of applying for down payment assistance alongside your FHA loan involves several steps:

1. Determine eligibility: We'll help you review your income, credit score, and other qualifications against specific program requirements.
2. Complete homebuyer education: If required, you'll need to complete a certified homebuyer education course.
3. Find a home: Your chosen home must meet program purchase price limits and FHA appraisal standards.
4. Loan application: We'll guide you through the application for both your FHA first mortgage and the DPA second mortgage.

Because program terms and funding rounds can change, starting early and working with an experienced mortgage broker like Simply Approved Mortgages can streamline the process. You can learn more about how DPA works and how to get started on our how DPA works page or our how to apply page.

Navigating FHA loan limits in Colorado

FHA loans have specific loan limits that vary by county. These limits dictate the maximum amount you can borrow for an FHA-insured mortgage. In Colorado, these limits are generally higher in more expensive counties.

When combining an FHA loan with a repayable second mortgage for down payment assistance, the total principal of your FHA first mortgage must remain within these limits.

Next steps for your Colorado FHA home purchase

If you're considering an FHA loan in Colorado and think a repayable second mortgage might be right for you, Simply Approved Mortgages is here to help. We are licensed in Florida and Colorado and specialize in connecting homebuyers with effective down payment assistance solutions. Our team can help you understand the nuances of repayable second mortgages, assess your eligibility for various programs, and navigate the application process.

We encourage you to explore our down payment assistance resources or contact us directly to discuss your specific situation.

FAQ

What is an FHA loan?

An FHA loan is a first mortgage insured by the Federal Housing Administration, part of HUD. It requires a minimum down payment of 3.5% for borrowers with a credit score of 580 or higher (HUD Handbook 4000.1), and it can often be paired with a down payment assistance program.

Who qualifies for down payment assistance?

Eligibility usually depends on household income measured against the program's published limit for your county and household size, the purchase price, your credit score, occupying the home as your primary residence, and in many cases meeting the program's first-time buyer definition. Always confirm the current published figures on the administering agency's page.

Do I have to pay the assistance back?

It depends on the structure. Grants are not repaid. Forgivable (forgiven only if the program's occupancy and time requirements are met) assistance is forgiven only after you meet the required occupancy period and other conditions, and can be recaptured if you sell or refinance early. Deferred assistance is repaid when you sell, refinance, or pay off the first mortgage. Repayable assistance is a second mortgage with monthly payments.

Do I need to be a first-time buyer?

Many programs require it, defined in most cases as having had no ownership interest in a primary residence for the past three years, but not all programs do. Some target specific occupations, veterans, or designated areas instead.

Is Simply Approved Mortgages a lender?

No. Simply Approved Mortgages is a mortgage brokerage, NMLS #2620881. It is not HUD, FHA, or a government agency. Residential mortgages are originated in Florida and Colorado only, and program availability depends on lender, investor, agency, state, and federal requirements.

Last updated: 2026

Related reading

• First-Time Homebuyer Eligibility For FHA: Complete Colorado
• FHA Loans: CHFA vs. Lender
• Essential Colorado FHA Down Payment Assistance Programs

Sources

• HUD Handbook 4000.1
• HUD homebuyer assistance guidance
• CFPB Owning a Home buyer guide

These government publications are cited for general consumer education and for FHA/agency program background only. The repayable second mortgage available through Simply Approved Mortgages is a wholesale lender's product, brokered by Simply Approved Mortgages — it is not a grant, it is not the brokerage's own program, and it is not governed by HUD, FHA, or state housing finance agency rules; its terms are set by the wholesale lender. Simply Approved Mortgages (NMLS #2620881) is a mortgage broker and is not HUD, FHA, Florida Housing Finance Corporation, CHFA, or the CFPB, and is not affiliated with or endorsed by any government agency.