USDA Loans and Rural Colorado: Are You Eligible?

USDA loans are one of the best-kept secrets in rural real estate financing. They offer zero-down payment options for eligible buyers purchasing in eligible rural areas — and many parts of Southern Colorado, including much of Custer County, qualify.

Here is what you need to know about USDA loans and whether they might work for your purchase.

What is a USDA loan? The USDA Rural Development program offers two types of home loans: the Single Family Housing Guaranteed Loan Program, which is offered through approved private lenders with a USDA guarantee, and the Single Family Housing Direct Loan Program, which is funded directly by USDA and targets very low to low income borrowers.

The Guaranteed Loan Program is the most commonly used. It allows eligible buyers to purchase a home with no down payment, competitive interest rates, and lower mortgage insurance costs than FHA loans. The loan is made by a private lender and guaranteed by USDA, which reduces the lender's risk.

Who is eligible? USDA loans have income limits — your household income cannot exceed 115% of the median income for your area. For Custer County, this limit is relatively generous given the area's income levels. You also need a credit score of at least 640 for most lenders, though some will work with lower scores.

What properties qualify? The property must be in an eligible rural area — and most of Custer County qualifies. The property must be a primary residence (not a vacation home or investment property), must be in good condition, and must meet USDA's property standards. Raw land does not qualify; there must be an existing home.

How to find out if you qualify. The USDA has an online eligibility map where you can check whether a specific property address is in an eligible area. For income eligibility, you can check the income limits for your county on the USDA website. A lender approved for USDA loans can walk you through the full qualification process.

USDA loans take a bit longer to close than conventional loans — typically 30–45 days — because the loan requires USDA approval in addition to lender approval. Plan accordingly if you are in a competitive offer situation.