Durango, CO USDA Guaranteed Program Guidelines
Below you will find detailed USDA underwriting guidelines for the residential guaranteed single family program in Durango, Colorado. This USDA program is a no money down 100% mortgage. Borrowers who are interested in USDA financing must apply with a USDA lender. The United States Department of Agriculture does not originate loans, they only provide the program guidelines and insure the USDA loan once it has been originated by the lender.
Automated Underwriting (GUS)
When a borrower applies for a USDA loan, their loan application will be run through a program called GUS. This is a system that has been set up by USDA to establish eligibility for each applicant. Credit score, income and assets will all play a roll in the GUS underwriting system. When a loan application is run through GUS, it will give us feedback of either an APPROVAL or REFER. If a loan is not approved through GUS, this doesn’t mean the applicant can’t qualify for a USDA loan. A REFER result means that the borrower will most likely qualify for a lower loan amount. With a REFER, it is underwriters discretion as to how much the borrower is eligible for. We will discuss the GUS system periodically as we go through the rest of the guidelines.
Credit Requirements
Minimum Credit Score of 620+. USDA underwriter will use the middle score of the 3 major bureaus. Many lenders will cutoff credit scores at 620+ but we have the ability to originate USDA loans down to a 580 score. Credit scores below 620 will most likely come back as a GUS REFER which means we will need to submit the loan for review before someone can make an offer on a home.
» 3 year waiting period after a foreclosure
» 3 years waiting period after a Ch 7 Bankruptcy
» Ch 13 Bankruptcy that is still in repayment must have on time payments for 12+ months.
» Must have a minimum of 2 credit scores or no scores. If borrower doesn’t have any credit scores, alternative credit can be used such as cell phone payments, rent, auto insurance, etc. Must document on time payments for 12 months.
Maximum and Minimum Income Limits
Maximum Income Limits (Household income)
USDA guarantee loans have maximum household income limits. These limits are established based on County. Since Durango, CO is located in La Plata County, household incomes are limited to:
$112,850 Maximum Yearly Income for one to four person household (2023)
$148,950 Maximum Yearly Income for five+ person household (2023)
Income limits apply to all people who will be occupying the home so even if someone will not be on a loan, their income must be counted if they plan on living in the home. Income will be verified through W2s, pay stubs and/or tax transcripts.
In addition to the maximum income limits, borrowers must show enough income to qualify for a particular loan amount. Even though a person who is not on the mortgage is still counted in the maximum income guidelines, they cannot be used to help qualify for a higher loan amount.
Income from children under the age of 18 is not counted towards household income.
The income of a full-time student 18 years old or older who is not the borrower
or Spouse, is excluded after it exceeds $480.
Minimum Debt to income ratios (Borrower income)
» GUS Approved – Up to 44% Debt to Income – Applicants applying for a mortgage(not household income) must keep their debts including the mortgage under 44% of their pretax income. This includes debts that are on the borrowers credit report such as auto loans, credit cards and student loans.
» GUS REFER – 29% Housing / 41% – This means the borrowers mortgage expenses including taxes/insurance must stay under 29% of their pretax income. All of their debts combined(mtg+all other monthly debt) must stay under 41% of pretax income.
Loan Limits
» None. This works well in Durango due to traditionally higher purchases prices.
Eligible Properties
» Single Family Homes
» New construction
» Duplex
» HUD approved Condominiums
» Town homes / PUDs
» HUD approved Manufactured homes / Must be on a permanent foundation
» Storage buildings/workshops are acceptable
» There is no maximum acreage limit. Property must be typical for the area AND the value of the land should not exceed 30 percent of the property value.
» No income producing properties. Home based businesses are okay.
» No Farms but animals are allowed as long as its not for income producing purpose
» The guaranteed USDA program is not intended to purchase land on its own.
Occupancy
» Must live in the home / Owner occupied / No investment or 2nd homes. Can currently own a home but must vacate.
Mortgage Insurance
» Monthly MI = .35% of the loan amount per year. EX: on a $100,000 purchase, $350 per year/12 months = $29 per month. This would be added to your monthly mortgage payment.
» Upfront MI – 1% of the loan amount. EX: on a $100,000 purchase, $1,000 will be charged upfront. This fee can be added to the loan amount and does not need to be paid out of pocket.
Purchase Important Guidelines
Seller can pay for closing costs up to 6% of the borrowers Loan Amount, NOT the purchase price. This is a common misunderstanding.
Refinance Important Guidelines
Streamlined Refinance
• Eligible for guaranteed loans and direct loans that have never received any subsidy
payments
• No new appraisal is required
• The loan amount is limited the current loan balance (including accrued interest) and the
upfront guarantee fee
Non‐Streamlined refinance
• Direct and Guaranteed loans are eligible
• New appraisal is required to determine new maximum loan amount
• The new loan amount may include the current loan balance including accrued interest,
eligible loan closing costs, the upfront guarantee fee, etc.
• If a direct loan qualifies for subsidy recapture, the amount due may be included in the
new loan if the appraised value supports the inclusion. If the subsidy amount cannot be
included in the new loan it may be subordinated or paid in full.
Streamlined‐Assist refinance
• Direct and Guaranteed loans are eligible
• No new appraisal is required
• The loan amount may include the current balance of the existing loan (including accrued
interest), eligible loan closing costs, upfront guarantee fee, etc.
• Subsidy recapture due for a direct loan borrower may not be included in the new loan
