A USDA Home Loan from the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan offered to rural property owners by the United States Department of Agriculture.

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What are USDA Loans?

The USDA offers a great loan program for low to moderate-income families. This 0 percent down payment program makes it easy for first-time homebuyers or subsequent buyers without a current home to buy a house.

The USDA has specific eligibility requirements and it’s not for everyone. If you’re eligible for any other loan program, the USDA loan won’t be an option.

If you’re not eligible for any other program, though, the USDA is a great solution for homeownership in Colorado.

How do they Work?

Like all other government-backed loans including the FHA and VA loans, the USDA doesn’t underwrite your loans. You secure the loan from a USDA-approved lender. The USDA has the final say in whether or not you get approved, though, as you must meet the USDA requirements.

Lenders are able to provide the 100 percent financing because of the USDA guarantee. If a borrower defaults, the USDA pays the lender back a portion of the lost funds.

The USDA charges mortgage insurance both upfront (at the closing) and monthly over the life of the loan, but the rates are lower than any other loan program. Borrowers pay 1.0 percent of the loan amount upfront and 0.35 percent of the outstanding balance annually (split into monthly payments).

Who Qualifies for a USDA Loan?

USDA loan qualification starts with eligibility for the program. The USDA started the program for families that couldn’t secure funding any other way. Today USDA loans are for:

  • Individuals or families without decent, sanitary, or safe housing
  • Anyone unable to secure financing from any other program
  • Households with income below the USDA threshold for the area

In addition, the home you purchase must be located in a rural area according to the USDA guidelines. Looking at the USDA map, though, you may see other areas that aren’t necessarily rural and are even considered suburban, giving you a chance to secure 100 percent financing on the home.

What are the Benefits?

Besides the 100 percent financing, USDA loans offer some of the lowest interest rates available today. To get the lowest rates, you’ll need to meet the USDA qualifying requirements, but like all government-backed loans, they are flexible enough for most people to reach them.

USDA loans are only available as a fixed-rate option, which is great for homebuyers on a fixed income because you don’t have to worry about fluctuating payments.

Are you a Good Candidate for a USDA Loan?

Let me help you determine if you’re a good candidate for a USDA loan. If you can’t secure financing in any other program, you meet the qualifying requirements, and will buy a home in a rural area of Colorado, you may be a great candidate for the loan.

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