Everything You Need to Know About USDA Home Loans in Colorado

Buying a home is an exciting milestone, but it can also be challenging, especially when it comes to financing. That’s where USDA home loans can help for homebuyers in rural Colorado. These government-backed mortgages offer affordable financing and flexible credit requirements to help rural residents achieve the dream of homeownership.

What Are USDA Home Loans?

USDA home loans, also known as Section 502 loans, are mortgages insured by the United States Department of Agriculture (USDA). They are available to low- and moderate-income homebuyers in designated rural and suburban areas. Some key features include:

• No Down Payment Required: USDA loans do not require any down payment, which removes a major hurdle for first-time homebuyers or those with limited savings.

• Low Interest Rates Interest rates on USDA loans are competitive with conventional mortgages and lower than many other government-backed loans Rates are generally between 1-3% lower

• Fixed Interest Rates: USDA home loans offer fixed rates, meaning your monthly mortgage payment will remain the same over the life of your loan, providing stability.

• Low Mortgage Insurance USDA loans require an upfront guarantee fee of 1% and an annual fee of 0.35% – much lower than FHA or conventional loans

• Flexible Credit Guidelines USDA has more flexible credit standards than conventional loans, making them accessible to those with poorer credit or unique income situations

• No Maximum Income Limits: Unlike some government programs, USDA does not set maximum income limits. However, eligibility is based on meeting property location and repayment ability requirements.

Overall, USDA mortgages provide an affordable home financing option for credit-challenged or low-to-moderate income borrowers in rural locales. They can be a great program for first-time homebuyers.

USDA Loan Requirements

While USDA loans offer flexibility, borrowers must meet certain eligibility standards to qualify:

Borrower Requirements:

• Credit score of 640+

• Stable income to cover mortgage payments and other debts

• Cannot exceed USDA income limits based on family size and location

Property Requirements:

• Located in an eligible rural or suburban area

• Single family home, condo, townhome, or manufactured home

• Primary residence for borrower

• Appraised value does not exceed area loan limits

Meeting these requirements is essential. That said, the program offers more leniency than conventional mortgages. Income limits are generous and designed to serve low-to-moderate income borrowers. Credit standards are also more relaxed.

USDA Loan Income Limits in Colorado

USDA ties income limits to the median income in each county, adjusted for family size. Here are the income thresholds for select Colorado counties in 2023:

• Adams County: $99,200 (family of 4)
• Arapahoe County: $103,400 (family of 4)
• Boulder County: $120,800 (family of 4)
• Denver County: $103,400 (family of 4)
• Douglas County: $120,800 (family of 4)
• Jefferson County: $103,400 (family of 4)
• Larimer County: $89,600 (family of 4)
• Weld County: $89,600 (family of 4)

These figures are well above the median household income in Colorado, which is around $83,000. So most borrowers should fall under the limits. You can check income limits in any county using USDA’s eligibility website.

How Much Can You Borrow with a USDA Loan in Colorado?

In addition to meeting income requirements, borrowers must demonstrate repayment ability based on their debts, assets, and the new mortgage payment. Maximum loan limits also apply.

For 2023, here are the USDA loan limits for Colorado counties:

• Metro Counties: $647,200
• Non-Metro Counties: $456,750

So you may qualify for up to $647,200 in most major counties and up to $456,750 in rural counties. The precise amount will depend on your income, debts, and the appraised value of the property. USDA loans can cover up to 100% of the appraised property value plus closing costs.

Finding USDA Loan Lenders in Colorado

USDA does not directly issue mortgages. You must go through approved lenders. We recommend getting quotes from multiple lenders. Here are some top options for USDA loans in Colorado:

• Guild Mortgage
• Fairway Independent Mortgage Corp.
• Megastar Financial Corp.
• Churchill Mortgage
• Caliber Home Loans

Reach out to multiple lenders to compare rates and fees. A mortgage broker can also help you shop for the best USDA loan option.

Be sure to ask lenders about their experience with USDA loans. More experienced lenders will know how to navigate the process smoothly.

The USDA Loan Process

If USDA financing sounds right for you, here is an overview of what to expect:

1. Check Eligibility

• Verify income limits for your county using the USDA Income & Property Eligibility tool.

• Check that the home is in a rural or suburban designated area.

2. Submit a Loan Application

• Find a USDA approved lender and complete their application.

• Provide documents verifying your income, assets, debts, and identity.

3. Home Appraisal

• The lender will order an appraisal to confirm the property’s value.

4. Underwriting & Approval

• The lender will underwrite the loan and submit it to USDA for approval if you meet requirements.

• This process typically takes 2-4 weeks.

5. Closing & Move-in

• Once approved, proceed to closing, then move into your new home!

Getting pre-approved can help start the process so you are ready to make an offer when you find the right home.

Pros & Cons of USDA Loans in Colorado

Pros

• No downpayment or minimum cash investment required
• Below market interest rates
• Fixed rates provide consistency
• Low mortgage insurance costs
• More flexible credit standards
• No maximum income limits

Potential Cons

• Must meet income and property eligibility requirements
• Upfront guarantee fee of 1% of loan amount
• Annual fee of 0.35% of balance
• Potential for higher upfront costs due to guarantee and appraisal fees
• Limited to rural or suburban designated areas

The pros often outweigh the cons, making USDA loans an excellent option for eligible Colorado homebuyers.

Is a USDA Home Loan Right for You?

USDA mortgages can be a great way for rural Colorado residents to finance a home – especially first-time buyers, those with limited funds, or borrowers who don’t meet conventional underwriting standards.

The key is making sure you meet location and eligibility requirements. Use USDA’s online tools to check your status. Then connect with experienced lenders to go over your options.

With low rates, no downpayment, and flexible criteria, a USDA loan may just be your ticket to affordable homeownership.