For many people, a USDA loan is the way to go when they’re buying a home in Colorado. But what is it, and how do you qualify for this type of financing?
What is a USDA Loan?
A USDA loan, backed by the U.S. Department of Agriculture, helps low- and moderate-income people buy, renovate, or repair a home that’s located in a rural area. They can even provide 100 percent financing; that means you don’t have to come up with a down payment if you qualify.
There are four types of USDA loans:
- Single-family direct homeownership USDA loan
- Single-family guaranteed housing USDA loan
- Rural repair and rehabilitation USDA loan or grant
- Mutual self-help USDA loans
Single-Family Direct Homeownership USDA Loan
This is the most common type of USDA loan. It allows you to borrow for up to 38 years. To qualify, you must have a household income below 80 percent of the median income for the area, not have adequate housing, be able to afford mortgage payments, taxes and insurance, and be unable to get credit through another lender.
Single-Family Guaranteed Housing USDA Loan
In order to qualify for a single-family guaranteed housing USDA loan, your income can’t be more than 115 percent of the median income for the area. You have to be able to afford mortgage payments, taxes, and insurance for the property, and you must have a “reasonable” credit history.
Rural Repair and Rehabilitation USDA Loans and Grants
You can repair or improve your home to make it more habitable or sanitary using a rural repair and rehabilitation USDA loan or grant. You must make below 50 percent of the area’s median income, and you must be unable to get affordable credit from another lender. To qualify for a grant, you must be 62 years old or older, and be unable to repay a rural repair and rehabilitation loan.
Mutual Self-Help USDA Loans
If you can’t buy or build your own home and you have an income that’s below 80 percent of the area’s median income, you’re without adequate housing, and you can’t get credit elsewhere, you can borrow with a mutual self-help USDA loan for up to 38 years.
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