CHFA SmartStep vs. CHFA Preferred: Which Program Is Right for You

If you're buying a home in Denver and you've started looking into down payment assistance, you've probably run into two CHFA program names: SmartStep and Preferred. They sound similar, and they both help with the down payment. But they work differently in ways that can change your monthly payment and your long-run cost — and picking the wrong one can mean a higher monthly bill than you needed, or a program you don't actually qualify for.

Here are the questions most Denver buyers are asking when they land on this topic:

• What's the actual difference between SmartStep and Preferred?
• Which one gives me more money toward my down payment?
• Does my credit score determine which one I can use?
• Will one of these cost me more per month than just saving up?

This guide answers all four. It covers how CHFA works, what each program offers, who qualifies for which, a Denver-specific look at where the purchase-price cap matters, a side-by-side illustrative example, and a four-question framework to help you decide. One honest caveat up front: CHFA income and purchase-price limits update every year [1]. The mechanics in this guide are durable — the specific dollar thresholds are not. Confirm current figures with a CHFA-approved lender before you apply.

---

How CHFA Works: Lender Network, Income Limits, and the First-Time Buyer Rule

CHFA — the Colorado Housing and Finance Authority — is a state housing finance agency. You don't apply to CHFA directly — you go through a CHFA-approved lender who originates your loan under CHFA's program terms. The lender does the underwriting; CHFA sets the rules and funds the assistance.

Two things determine whether you're eligible for any CHFA program. Your household income has to fall at or below CHFA's limit for your county, and the purchase price has to come in at or below their county-level cap. Both limits are published annually — Denver, Adams, Arapahoe, Jefferson, and Douglas each have their own thresholds [1]. This guide doesn't pin a dollar figure for either because those numbers update and go stale fast. The current tables live at chfainfo.com.

Who counts as a first-time buyer? CHFA's definition is broader than most people expect [2]. You qualify if you haven't owned a primary residence in the past three years — so if you owned a home before and sold it more than three years ago, you still qualify. There's also a targeted-area exception — in qualifying census tracts, the first-time buyer requirement is waived entirely, and the purchase price cap is higher. More on that in the Denver-specific section below.

The homebuyer education requirement is one step most buyers don't know about until they're already in the process [2]. Every borrower and co-borrower on a CHFA loan has to complete a CHFA-approved homebuyer education course — online or in a classroom — before closing. The certificate is valid for 12 months, and your purchase contract has to be executed before it expires. You can knock it out online in a few hours. It's required regardless of which CHFA program you use.

---

CHFA SmartStep: Government-Backed Loan, Down Payment Assistance, and Cost

SmartStep is CHFA's program for buyers who need a government-backed loan — most commonly FHA, but also VA or USDA-RD [3]. It pairs that 30-year fixed mortgage with a CHFA down payment assistance layer on top.

What the assistance covers. You have two options for the DPA layer [4] [4]:

• A 0%-interest deferred second mortgage of up to 4% of your first mortgage loan amount or $25,000, whichever is less. This loan is repayable when you sell, refinance, or pay off the first mortgage.
• A non-repayable grant of up to 3% of your first mortgage loan amount or $25,000, whichever is less. No repayment, ever.

The choice is straightforward: the second mortgage gives you more money upfront but you'll owe it back eventually. The grant gives you slightly less but you never have to repay it. Which one makes sense depends on how much cash you need and how long you plan to stay.

What SmartStep costs — mortgage insurance. Because SmartStep pairs with an FHA loan, you're taking on FHA mortgage insurance. That means two things [5] [5]:

• An upfront mortgage insurance premium (UFMIP) of 1.75% of the base loan amount. You can finance this into the loan rather than paying it at closing, but it adds to your loan balance.
• An annual MIP for the life of the loan when your down payment is below 10%. For a 30-year loan with a base loan amount at or below $726,200 and an LTV above 95%, the annual MIP rate is 0.55%.

That last point is the one that matters most: on most SmartStep loans, the FHA annual MIP never goes away. It stays on your monthly payment for as long as you hold the loan — that's the main cost difference between SmartStep and a conventional loan.

The rate trade-off. CHFA SmartStep loans carry a rate above the standard market rate — that's how CHFA funds the assistance. You're not getting free money; you're trading a slightly higher rate for the upfront cash. That's a reasonable trade for many buyers, but it's worth knowing so you're not surprised when your lender quotes a rate higher than what you saw advertised.

When SmartStep makes sense. If you need maximum upfront cash and your credit score is at or near the FHA floor, SmartStep is likely your path. If you have stronger credit and some savings, Preferred may cost you less over time — which we'll cover next.

---

CHFA Preferred: Conventional Loan, PMI That Cancels, and the Credit Score Threshold

CHFA Preferred pairs a conventional loan — specifically Fannie Mae HFA Preferred — with the same CHFA down payment assistance layer. No FHA required, and that changes the mortgage insurance picture entirely.

What the assistance covers. The DPA options are the same two structures available under SmartStep [4] [4]:

• A 0%-interest deferred second mortgage of up to 4% of your first mortgage loan amount or $25,000, whichever is less, repayable on sale, refinance, or maturity.
• A non-repayable grant of up to 3% of your first mortgage loan amount or $25,000, whichever is less.

Same amounts, same structure — but paired with a conventional loan instead of FHA.

What CHFA Preferred costs — PMI vs. FHA MIP. Conventional loans carry private mortgage insurance (PMI) when your down payment is below 20%. Under the HFA Preferred program, that PMI rate is reduced compared to standard PMI. More importantly, PMI on a conventional loan cancels once you reach 20% equity. That's the key difference from FHA MIP, which stays for the life of the loan on most SmartStep borrowers.

If you plan to stay long enough to build equity past 20% — through appreciation, principal paydown, or both — Preferred's cancellable PMI becomes increasingly valuable. The longer you stay, the more that difference adds up.

The credit score dividing line. CHFA Preferred's conventional underwriting requires a higher minimum credit score than SmartStep's FHA pairing — this is the sharpest dividing line between the two programs. If your score falls below the Preferred floor, you're SmartStep-only. If you clear it, you can run both scenarios and compare the monthly cost. The specific floors are set by CHFA and your lender — ask your CHFA-approved lender what threshold applies to your situation.

When CHFA Preferred makes sense. If your credit score clears the conventional underwriting floor and you plan to stay long enough for PMI cancellation to matter, Preferred will likely cost you less over time. If your score falls below that floor, or if you need the maximum upfront assistance, SmartStep is the right starting point.

---

Who Qualifies for Which Program: Credit Score, Income, and First-Time Buyer Status

The three things that actually determine which program you can use are your credit score, your household income, and your first-time buyer status. Here's how each one works.

Credit score is the sharpest dividing line. SmartStep's FHA pairing allows a lower minimum score. Preferred's conventional underwriting requires a higher one. If your score is below the Preferred threshold, you're SmartStep-only. If it clears the floor, you can run both scenarios and compare. Don't assume you know which side you're on — get your score pulled by a CHFA-approved lender and find out exactly where you stand.

Income limits are county-specific and published annually [1]. Both SmartStep and Preferred have income limits, and they may differ between programs. I'll point you to chfainfo.com for the current figures — the tables are there, broken out by county and program. If you're buying in Denver County, Adams, Arapahoe, Jefferson, or Douglas, each has its own threshold.

First-time buyer status is more flexible than most people assume [2]. CHFA's three-year rule means if you sold a home more than three years ago, you still qualify. And in CHFA-designated targeted areas — census tracts where the first-time buyer requirement is waived — repeat buyers can use CHFA programs too, often with a higher purchase price cap. If you've owned before and assumed you're locked out, check whether your target neighborhood falls in a targeted area before you write off CHFA entirely.

Debt-to-income ratio applies to both programs. Both SmartStep and Preferred have a DTI limit, and if you're near the edge you should run your numbers with a lender before assuming you qualify. The specific limit depends on the loan type and your lender's underwriting — don't guess at this one.

---

Denver Purchase Price Limits and Where You're Actually Competing

CHFA purchase price caps are county-specific and updated annually [1]. Denver County, Adams, Arapahoe, Jefferson, and Douglas each have their own ceiling. The current figures live at chfainfo.com — this guide doesn't pin a dollar amount that will be wrong by next program year.

Where the cap actually bites. In Denver's entry-level price ranges — the neighborhoods where first-time buyers are realistically competing — the CHFA cap is often a comfortable ceiling. There's real inventory in those price ranges, and you can be competitive there. In higher-priced neighborhoods, the cap becomes a real constraint. If your heart is set on a neighborhood where single-family homes regularly sell well above the cap, CHFA may not be an option for that purchase. That's worth knowing before you fall in love with a listing.

The targeted-area advantage. In CHFA-designated census tracts, two things change: the purchase price cap is higher, and the first-time buyer requirement is waived. That's a meaningful benefit for repeat buyers who'd otherwise be locked out, and for buyers targeting neighborhoods where the standard cap is tight. The practical way to check: ask your CHFA-approved lender whether your target address falls in a targeted area, or look it up on the CHFA website. It's a quick check that can open up options you didn't know you had.

Where you're realistically competing in Denver. The neighborhoods where CHFA programs are most useful tend to be where entry-level inventory still exists — places where you can find a single-family home or a townhome within the program's price range. Those pockets exist in Denver, but they're not evenly distributed. A CHFA-approved lender who works in Denver regularly will know which neighborhoods are realistic at your price point and which ones will push you past the cap.

---

Worked Example: Running Both Programs Side by Side

Here's how this typically plays out. Say you're looking at a home priced within CHFA's county limit and you've completed your homebuyer education course [2].

The first question: does your credit score clear the Preferred floor?

If your score falls below the conventional underwriting minimum, the decision is made — SmartStep is the path. You pair an FHA loan with CHFA's DPA layer. You choose between the deferred second mortgage (up to 4% of the loan amount or $25,000, whichever is less) and the non-repayable grant (up to 3% or $25,000) [3] [4] [4]. The second mortgage gives you more cash upfront; the grant gives you less but nothing to repay. Say you take the second mortgage because you need every dollar you can get toward closing.

Your monthly payment includes FHA mortgage insurance: an upfront MIP of 1.75% of the base loan amount, financed into the loan [5], plus an annual MIP of 0.55% for the life of the loan [5]. That annual MIP doesn't go away — it's on your statement every month for as long as you hold the loan.

Now run yourself through Preferred — assuming your score clears the floor.

Same purchase price. Same DPA options — up to 4% deferred or up to 3% grant [4] [4]. But now you're on a conventional loan with HFA Preferred PMI instead of FHA MIP. The PMI rate is lower than standard PMI, and — critically — it cancels once you reach 20% equity. No FHA upfront premium financed into the loan. No lifetime MIP.

The question that tips the decision: how long do you plan to stay?

If you expect to build equity past 20% within a few years — through appreciation, principal paydown, or both — Preferred's cancellable PMI wins on long-run cost. The monthly payment may be similar early on, but the PMI eventually disappears. FHA MIP doesn't.

If you need maximum cash now and your credit score is at the lower end, SmartStep is the right path. The FHA pairing is more forgiving on credit, and the upfront assistance is real money that gets you into the home.

---

How to Choose: A Four-Question Decision Framework

These aren't a summary of what you just read — they're four questions that point to a decision.

Q1: Does your credit score clear the CHFA Preferred floor?

If yes, you can run both scenarios. If no, SmartStep is your path. Start here, because everything else depends on the answer.

Q2: Do you need maximum upfront assistance, or can you bring some savings?

If you need every dollar you can get toward the down payment and closing costs, SmartStep's higher DPA ceiling (up to 4% via the deferred second mortgage) is the right choice [4]. If you have some flexibility on upfront cash, Preferred may cost you less over time.

Q3: How long do you plan to stay — long enough for PMI cancellation to matter?

If you're only staying a few years, the gap between Preferred's cancellable PMI and SmartStep's lifetime FHA MIP [5] is smaller. If you're planning to stay five or more years and expect to build equity, that gap adds up — and Preferred's PMI cancellation is a real benefit.

Q4: Is your target neighborhood in a CHFA targeted area?

If yes, the eligibility math changes — higher purchase price cap, no first-time buyer requirement [2]. Check before you assume you don't qualify.

Before you choose, run both scenarios with a CHFA-approved lender using your actual numbers — your credit score, your income, your target price range. The mechanics in this guide tell you how the programs work. Your lender tells you which one you actually qualify for and what each one costs.

---

Ready to Find Out Which Program Fits?

Here's what you now know that most buyers don't going into their first lender conversation: SmartStep and Preferred are not interchangeable. The right choice turns on three things — your credit score, how much cash you need upfront, and how long you plan to stay. Walking in knowing which questions to ask makes that conversation a lot more productive.

I'm happy to help you figure out which program fits and connect you with a CHFA-approved lender who works in Denver regularly. If you want to explore your loan options as a Denver buyer or walk through the full Denver mortgage pre-approval process first, those guides are a good next step. When you're ready to talk through your specific numbers, book a consultation here and we'll work through it together — your credit profile, your target neighborhoods, and which CHFA path actually makes sense for you.

Sources

1. CHFA — Income and Purchase Price Limits: https://www.chfainfo.com/homeownership/income-and-purchase-price-limits
2. CHFA Seller's Guide (Sept 2025, v37) — First-time Homebuyer Programs: https://www.chfainfo.com/getattachment/75c6b7ac-958f-438e-b4e4-649391c92a49/CHFASellersGuide.pdf
3. CHFA SmartStep & SmartStep Plus program matrix (eff. Jan 5 2026, 01/26.v52); DPA amounts from chfa-dpa-options.pdf: https://www.chfainfo.com/getattachment/3ae13693-82ec-498d-8d22-72987ad3f3ac/CHFA-SmartStep-Plus-matrix.pdf
4. Colorado Housing and Finance Authority — Down Payment Assistance program page: https://www.chfainfo.com/homeownership/down-payment-assistance
5. HUD Mortgagee Letter 2023-05 (FHA MIP rates, PDF): https://www.hud.gov/sites/dfiles/OCHCO/documents/2023-05hsgml.pdf

---

Paul McCoy, Realtor | Fathom Realty | License #: FA.100105533 | (319) 325-0668 | pmccoy626@gmail.com

Paul McCoy is a licensed real estate professional in Colorado. Equal Housing Opportunity.