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    USDA Home Loan in Colorado: A Complete Guide to What You Need to Know

    Are you looking to own a home in Colorado? If you choose a property in one of the more rural parts of the state and have a moderate or lower income, then the U.S. Department of Agriculture (USDA) might have a loan for you. Learn more about qualifying for the main home loan program offered by the USDA, the Single Family Housing Guaranteed Loan Program.

    Purpose of USDA Home Loan Program

    The USDA’s home loans intend to stimulate rural and non-urban economies by making homeownership in those areas more affordable to moderate and low income Americans. Because the USDA provides a loan guarantee, approved lenders are willing to finance mortgages for applicants they traditionally would find too risky.

    Features of the USDA Guaranteed Loan Program

    • No down payment: Loans are available with low or no down payment required. Conventional loans typically require you contribute 10 to 20 percent of the purchase price.
    • Reduced fees: When you get a mortgage without a down payment, lenders require mortgage insurance. With a USDA loan, the guarantee fee is only one percent of the purchase price. KYou can pay this fee upfront or fold it into the financing of your home. On an ongoing basis, an annual mortgage insurance fee of 0.35 percent of your balance will be added to your monthly payments. This is significantly lower than the minimum one percent rate with conventional loans.
    • Better-than-average rates: Because the USDA guarantees the loan, lenders are able to provide interest rates that are better than market rate. Actual rates vary according to lender and your circumstances.
    • Less stringent credit requirements: You can apply even if your credit score is less than great or if you don’t have credit history.

    Who Can Apply for the Loan Program

    USDA home loans require applicants meet certain eligibility criteria:

    • Income eligibility: You must have a reliable source of income, and that income must be below the maximum limit for your location. Check here to see if your income qualifies.
    • Residence: You must personally occupy the home as your primary residence.
    • Citizenship: You must be a U.S. citizen, U.S. non-citizen national or Qualified Alien.
    • Location: Your property must be located in an eligible area. Generally, any rural area and towns of less than 20,000 people qualify. The good news is that about 97 percent of the country falls into the eligible category. Check any address for eligibility here.
    • Credit worthiness: You need to demonstrate a wilingness to meet your debt obligations in a timely manner. This means your credit history should have no accounts put in collections within the past year, for example. If your credit score is 640 or higher, then you receive streamlined processing. Lower credit scores and nontraditional credit histories can qualify still, but more stringent underwriting standards might apply.
    • Monthly payment: Your monthly housing payment, including principal, interest, insurance, and taxes, must be 29 percent or less of your monthly income. Generally, other monthly debt you must pay should total less than 41 percent of your income. However, if your credit score is above 680 then the USDA might consider higher debt ratios.

    How Funds Can Be Used

    In addition to location requirements, your property also must meet the following:

    • Be a residential property you use as your primary home.
    • Be structurally sound and in good repair. The loan can be used also for repairs and rehabilitation costs associated with the purchase of an existing home.
    • Be functionally adequate, which means it should be easily accessible from a paved road or all-weather surface, with electricity, plumbing, and heating that works.

    Funds from the USDA home loan can be used to:

    • Refinance eligible loans.
    • Add special design features for disabled residents.
    • Pay for household equipment such as washer and dryer, oven, carpeting, etc.
    • Install energy efficient measures such as solar panels or insulation.
    • Prepare the site for occupancy, by building fences, connecting to local utilities, and more.

    How to Get Started

    You must apply through an approved local lender. Find full details about the Single Family Housing Guaranteed Loan Program here.

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