CHFA Schools To Home Program

The CHFA Schools To Home Program is a new Colorado homebuying program designed to help full-time public school employees with the down payment when buying a home.

Qualifying school employees can receive assistance with down payment costs up to as much as 25% of their first mortgage amount. The important thing to know about this program is that this money is not referred to as a grant or FREE money. This is a deferred second mortgage with a shared appreciation requirement.

What's that mean and how do you qualify?

To qualify at least one borrower must be classified by their employer as a full-time employee of an eligible Colorado PreK - 12 public education organization. Eligible Employers Include: Public Schools, Public School Districts, Charter Schools, Institute Charter Schools, Boards of Cooperative Educational Services (BOCES), and Innovation Zones.

The Employee does not necessarily have to be a classroom teacher. The qualification is based on being a full-time employee of an eligible public education organization. This includes but not limited to teachers, administrators, paraprofessionals, counselors, custodians, support staff and other full-time employees. This is subject to the lenders verification.

When two people purchase together only one of the borrowers must meet the public school employment requirement. The public-school employee must still be considered full-time when applying and when the loan closes. CHFA does not have a tenure requirement to qualify for this program. This program is also not restricted to first-time homebuyers. Someone who currently owns a home or previously owned a home may potentially still qualify.

The buyer taking advantage of this second mortgage program can receive up to 25% of the first mortgage amount to use towards their down payment, closing costs, prepaid expenses (homeowners insurance and property tax escrows), or a principal reduction on the first mortgage. The borrower make choose to take a smaller amount based on what they actually need and what makes since financially.

This funding is a "silent" or deferred second mortgage. It sits behind the first mortgage and normally does not require payments while the borrower is living in the property, and while the first mortgage is in place. The second mortgage qualifies for 0% interest, has no monthly payments, doesn't accrue interest, and has no early payment penalty.

For example:

Suppose an educator purchased a $500,000 home.

They could obtain a first mortgage at $400,000

twenty-five percent of that $400,000 first mortgage is $100,000

The program could therefore provide as much as $100,000 through the CHFA second mortgage.

This program is a down payment assistance program and the second mortgage must be repaid. It becomes due when either, the home is sold, the first mortgage is refinanced, the first mortgage is paid off, the second mortgage is voluntary paid off, if the home is no longer the borrowers primary residence, or if the loan reaches the end of it's term or another maturity event occurs.

The program does not require the repayment simply because the employee switches schools, retires, or even leave the education field. The same obligation terms would still apply. Borrowers should still verify terms with their lender and confirm with CHFA documents.

Here's the most important catch and why the program should never be described simply as a 25% down payment assistance. It should be described as shared appreciation second mortgage.

In addition to paying the 0% interest second mortgage, the homeowner must give The Public School Permanent Fund a percentage of the homes appreciation. The percentage of appreciation owned is calculated by the original CHFA second mortgage divided by original purchase price that percentage is then multiplied by the increase in the home value.

CHFA official example:

Purchase price $437,500

First Mortgage $350,000

Second Mortgage $87,500 (25% of the $350,000 first mortgage)

Future home value $480,000

The home appreciated by:

$480,000 - $437,500 =$42,500

The Shared appreciation payment would be:

$42,500 x 20% = $8,500

At repayment the homeowner would owe:

Original second mortgage $87,500

Shared appreciation $8,500

Total owed to CHFA $96,000

The homeowner gets to keep the remaining appreciation, subject to outstanding first mortgage balance and/or selling expenses. Note that negative appreciation is treated the same as 0 appreciation. Therefore, in that case the homeowner would not owe any appreciation fees. The original second mortgage would still need to be paid even if there was no appreciation.

Want to see if you qualify or do you need more info? Click HERE

Disclaimer: Program guidelines, income limits, interest rates, and eligibility requirements are subject to change. Always verify current information with CHFA and a participating lender before making financial decisions.