USDA Loans in Colorado
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When buying a home, it's important to choose the right loan for your needs. Your loan will determine how much you pay for your home over time, how long it takes to pay off your loan, and even how much you pay each month. Is a USDA loan in Colorado the right choice for you? Make sure you fully understand your options and the loan's appearance before you take the leap.
What is a USDA Loan?
A USDA home loan is a specific type of mortgage intended for lower to moderate income home buyers. It is geared toward homes in rural areas, including many of the areas in Colorado. With a USDA loan, you can often purchase a home with no down payment, putting home ownership within reach for many buyers.
How Does a USDA Loan Work?
A USDA loan is backed by the US Department of Agriculture, which makes it more desirable for many banks. Instead of simply relying on buyers to make payments on time, banks can trust that the Department of Agriculture will step in if needed. That means buyers can often secure lower interest rates or worry less about how much they can put down on the house. USDA loans may also be available to buyers who would be turned down for a traditional mortgage based on credit scores or other factors.
You will need an appraisal to verify that the home is:
- Valued reasonably based on the purchase price and the amount of the loan
- Meets USDA standards
- Is liveable
- Has no significant damage that will make the home uninhabitable in the near future
If you have a USDA loan, you will need to pay an annual guarantee fee, a program similar to mortgage insurance. These fees are usually based on a percentage of the loan's value. They help fund the USDA loan program and provide insurance against missed payments or defaulting on the loan, which helps protect both the lender and the USDA.
The Benefits of USDA Loans
Selecting a USDA loan for your home offers a number of potential benefits.
- There is no down payment requirement, so you may not have to worry about saving up before applying for the loan.
- You can often qualify for a USDA loan with a lower credit score than individuals applying for a standard loan.
- You often receive lower interest rates on a USDA loan than a traditional mortgage.
Many homebuyers find that a USDA loan is the best choice for their needs if they meet the requirements.
How to Qualify for a USDA Loan
To qualify for a USDA loan, you must:
- Be a resident of the United States or a noncitizen national
- Live in a rural area covered by the USDA's eligibility map
- Have no more than 115% of the median income for your area
- Have a low debt-to-income ratio
- Show stable income that indicates you can afford to keep up with mortgage payments
- Have a reasonable credit score
You may not qualify for a USDA loan if you do not meet those criteria. However, always talk to your lender to learn whether you will qualify and what factors could prevent you from obtaining your loan.
Apply for a USDA Home Loan in Colorado Today
If you live in a rural area of Colorado and need a loan to purchase a home, a USDA loan could be the right choice for your needs. Contact us to loan more about these loans and how they can impact your ability to own your own home.
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Home Buyer FAQs
- How do I know if I qualify to buy a home
- How long does it take to refinance my mortgage?
- Am I required to refinance with my current mortgage lender?
- Why should I choose a cash out refinance instead of home equity loan (HELOC)?
- How can I lower my monthly mortgage payment by refinancing?
- How can I pay off my mortgage faster?
- What are the benefits of a 15 year mortgage?
- Why would I want to pay off my mortgage faster?
- What debt should I consolidate with a mortgage refinance?
- Is a cash-out mortgage refinance the best option for paying off high interest debt?
- Can I deduct the mortgage interest paid from a refinance from my taxes?
- How does a cash-out refinance work?
- Is an appraisal required for a cash-out mortgage refinance?
- How much cash can I take out when I refinance?
- Can I do a cash-out refinance when an FHA or VA loan?
- What is the loan-to-value (LTV) requirement for financing investment property?
- What are the income requirements for financing an investment property?
- How long do I need to wait to refinance an investment property before I can take cash out?
How do I know if I qualify to buy a home
To know which loan option is better for you, a fixed rate or an adjustable rate mortgage is a subjective question and really depends on your personal preference and tolerance for risk. The difference between a fixed rate and an adjustable rate mortgage is quite simple. With a fixed-rate mortgage the interest rate is set for the life of the loan and will never change. With an adjustable rate mortgage, the interest rate may be lower initially but may go up or down depending on what the index that the interest rate is tied to and where the market is at the end of the initial fixed term and beyond.
How long does it take to refinance my mortgage?
A typical refinance transactions can be completed from application to close in less than 21 days and some refinances can even close in as little as 10 days. This depends on your participation and the deliverry of the required qualification documents to the lender. It may also depend on the availabilty and schedule of a licensed real estate appraisor in your area. Sometimes USDA (rural) and VA loans may take longer for this reason.
Am I required to refinance with my current mortgage lender?
Absolutely not. You are under no obligation to refinance your current home loan with your current mortgage lender. The decision to refinance your home is very important and you should never assume that your original lender is the best mortgage company for your refinance. Do your homework. You should carefully weigh your available options and work with a lender that answers all of your questions, puts your needs first, and is the best fit to help you achieve your financial goals.
Why should I choose a cash out refinance instead of home equity loan (HELOC)?
A home equity loan may seem like the less expensive alternative at first glance since it doesn’t have closing costs but in the long run, it can cost you much more since the interest rate is uncapped and the rate can rise without notice. Most borrowers tend to use the higher interest HELOC option like a credit card, paying it down and drawing more out for an endless cycle of high-interest monthly repayment costs. A cash-out refinance might be your safest and most predictable course of action, since all closing costs are included in the loan. Additionally, the interest paid on a cash out refinance is tax deductible which may result in additional annual savings.
How can I lower my monthly mortgage payment by refinancing?
One of the most popular reasons for refinancing a mortgage is simply to lower your rate. There are several different approaches to lowering your current mortgage payment including but not limited to refinancing to a lower interest rate. However, just having a lower mortgage payment is like treating the symptoms and not the cause. Typically, homeowners have other monthly debt that they service like credit cards, car loans, student loans, and even HELOCs. If you have equity in your home you may consider a cash-out refinance to pay off the other high-interest debt and lower your overall monthly payments.
How can I pay off my mortgage faster?
If you're looking to accelerate the repayment of your mortgage and potentially save thousands of dollars in interest, here are four simple tips to help you can pay your mortgage off faster:
- Make biweekly payments – Rather than making one monthly payment, you can make half the payment every two weeks. If your mortgage payment is $2,000 a month, you would pay $1,000 every other week. Because there are 52 weeks in a year, a biweekly payment schedule will result in the equivalent of 13 full monthly payments per year. On a 30-year fixed rate mortgage, the extra payment equivalent each year can help you pay your mortgage off 5 years sooner and eliminate 5 years of interest as well.
- Make additional principal payments – Most mortgage lenders allow you to make an extra payment every month and mark it “principal only”. This payment will go specifically to pay down the principal balance of the loan. This will also help you save thousands long-term in interest payments.
- Refinance into a shorter-term loan – If you currently have a 30-year mortgage, consider refinancing it as a 15-year loan if you can afford the higher payment, This will help you pay it off in half the time, usually at a lower interest rate and you could save tens of thousands of dollars in interest payments.
- Put the unexpected money you receive into your mortgage payments – If you put the proceeds of tax refunds and annual bonuses towards the principal of the loan, you’d be pleasantly surprised at how quickly you can pay off your mortgage.
What are the benefits of a 15 year mortgage?
There are two major benefits to a 15-year fixed rate mortgage over a 30-year fixed rate mortgage. A 15-year mortgagetypically comes with a lower interest rate, which means that the overall interest you’ll pay on the principal balance of the mortgage is lower. The second benefit is that you’ll pay off your mortgage in half the time of the traditional 30-year option. By paying interest for only half the amount of time, you’ll end up paying significantly less to own your home free and clear.
Why would I want to pay off my mortgage faster?
Paying off your mortgage earlier is a personal decision based on your financial goals. The good news is, most lenders will let you pay off your loan faster without pre-payment penalties. here are just a few reasons you might consider accelerating your repayment:
- Retirement– Your monthly mortgage payment usually takes a large percentage of your income to pay. However, when you retire, your income commonly drops by up to 66%. By eliminating your mortgage payments prior to retirement you'll eliminate the additional financial stress and enjoy your retirement more.
- Interest Savings – To put it in simple terms, the shorter the repayment term of your home loan, the less you'll interest you’ll actually pay over the life of the loan.
- Enjoy peace of mind –Paying off your home and debt-free as early as possible opens up the possibilities from doing want to do versus doing you have to do.
What debt should I consolidate with a mortgage refinance?
You can look at prioritizing your debt in two ways. First by looking at which debt actually will cost you the most over time. You may want to pay off debt that has a considerably higher interest rate than your mortgage. You might also look at the debt that's costing you the most every month. If you find your month to month cash flow is tight, you may consider eliminating some of the larger payments like cars, appliances, and even home equity lines of credit.
Is a cash-out mortgage refinance the best option for paying off high interest debt?
A cash-out refinance to pay off high-interest credit card debt makes great financial sense, as long as you have the discipline not to run up your credit card balances after they've been paid off. If you can maintain the discipline to never use more than 30% of your available consumer credit at any given time, you'll probably see a significant increase in your FICO scores.
Can I deduct the mortgage interest paid from a refinance from my taxes?
While the interest you pay on consumer debt like credit cards is not tax deductible from your annual federal income taxes, your mortgage interest is deductible. That translates into greater savings over time. Be sure to consult your tax advisor or accountant for more information regarding the details.
How does a cash-out refinance work?
A cash-out refinance allows you to unlock the equity in your home. The amount of cash you can receive is based on the difference between the current value of your home minus the remaining balance on the loan. You basically refinance the mortgage for more than the current balance and less than the current value. While having the equity in your home may seem appealling, something to consider is that as long as you still owe money on your home, the house and the equity belongs to the bank as collateral against the mortgage.
Is an appraisal required for a cash-out mortgage refinance?
Most cash-out refinances will normally require a home appraisal. The appraiser will establish the value of your home by inspecting the condition of your property and comparing it to "comps" in your neighborhood. The estimated value of your home minus the amount you still owe on the mortgage determines your equity. Quite often, you may find your home may be actually worth more than you think, so having a home appraisal. If your a previous customer of US Mortgages your appraisal costs will be reimbursed at closing thanks to our Lifetime Origination Guarantee™.
How much cash can I take out when I refinance?
Depending on your loan type, you can take out the difference up to 80% of the home’s current value versus the remaining balance or the entire difference between your home’s current value versus the remaining balance. If you're a veteran you may even be eligible to take out up to 100% of the home’s current value versus the remaining balance. To get a better idea of your available equity, schedule a no cost, no obligation consultation with a Personal Mortgage Advisor.
Can I do a cash-out refinance when an FHA or VA loan?
Absolutely. FHA loans normally will allow you to cash out up to 85% of the property’s current value and require less documentation than a conventional cash-out refinance mortgage. A VA loan process is similar to the FHA in that it is backed by the federal government, however, with a cash-out VA refinance you can cash-out up to 100% of your home’s current value. If you or your spouse is either a veteran, active in the military or a surviving spouse, a VA loan may be a great option.
What is the loan-to-value (LTV) requirement for financing investment property?
For a single-unit investment property purchase, a 15% down payment is normally required with an LTV of 85%. 2-4 unit investment property purchases with an LTV of 75% may require a 25% down payment to finance the property.
What are the income requirements for financing an investment property?
Required income for financing your investment property varies depending on the estimated amount of the monthly mortgage payment along with other debt considerations. The total debt-to-income ratio (including the mortgage payment) generally should not exceed 45%. For more information, we recommend a no cost, no obligation consultation with one of our Personal Mortgage Advisors.
How long do I need to wait to refinance an investment property before I can take cash out?
Usually, you have to wait through a six (6) month seasoning period prior to using a cash-out refinance to take equity out of your investment property. However, there are programs, like as US Mortgages Investors Edge Financing™, that may allow you to cash out immediately after your purchase. Contact one of our Personal Mortgage Advisors to get more information on specific programs and the corresponding guidelines.
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