Woodland Park cashing in on USDA loans

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While many homebuyers in Colorado aren’t aware that they might be eligible for a little-known federal loan from the U.S. Department of Agriculture, Woodland Park has quietly become a major beneficiary of the program.

The Department of Agriculture allocated roughly $150 million this year to a rural development loan program in Colorado that caters to low- and moderate-income families by offering 100 percent financing to potential homebuyers.

The catch? It’s only for those looking to buy in rural areas of the state, although the department’s loose interpretation of the term “rural” might be surprising.

An area is typically considered rural if it has fewer than 10,000 people, and despite seeming like a close suburb of Colorado Springs, Woodland Park has only 7,200 residents according to the 2010 census.

“We loan directly to families looking to purchase or build a home in rural areas,” said Charles Thompson, head of the Office of Rural Development in Alamosa. “So we wouldn’t be able to finance a purchase inside Colorado Springs or Denver, but pretty much the rest of the state is eligible.”

Woodland Park is a growing city with high-tech companies and ambitious expansion plans.

“Usually when you think of rural you think of a farmer with his pick-up truck,” Thompson said. “But sometimes you have these outlying subdivisions that will be eligible for the program. Of course, it works the other way too — Grand Junction and Durango might lose eligibility this year because of the new census numbers.”

Loan Officer Rebekah Radice of Colorado Springs-based Benchmark Mortgage said the USDA loans have helped buoy the Woodland Park housing market through the downturn.

“In our Woodland Park office, next to (Federal Housing Administration) loans, this is probably one of the top loans in the area,” she said. “You put these side by side with an FHA loan and a lot of times this one makes more sense. People just don’t know a lot about it so we’re trying to get the word out.”

Coldwell Banker Real Estate Agent Shawn Keehn of Colorado Springs concurs.

“We’ve had tremendous success because of this loan program,” he said. “Most people don’t know about it, but we’ve closed five deals in Woodland Park, Florissant and Divide over the last six to eight months alone.”

Eligibility for a direct USDA rural development loan is determined by the median income for a specific area — candidates have to earn a percentage below that median in order to qualify. For those that do qualify, the financing will come straight from the USDA and is typically for 100 percent the cost of the home, with no closing costs or mortgage insurance and competitive interest rates.

According to the Colorado Rural Development Association, direct loans have gone to 41 low-income buyers since the beginning of its fiscal year on Oct. 1, 2010. The loan amounts totaled $5,442, 598, meaning the average price of a home purchased with the USDA direct loan was $132,746.

The specificity of the income requirements disqualifies quite a few borrowers, and is reminiscent of the difficulties posed by the Home Affordable Modification Program, where candidates have to make just enough money, but not too much.

“The only thing keeping a flood of buyers from taking advantage of this are the income requirements,” said Coldwell Banker Real Estate Agent Keli Konczak. “It’s geared toward those with less income, but you still have to have good credit, a good debt to income ratio, and you obviously have to have enough income to cover the mortgage. All of those pieces of the puzzle have to fit into place, and since it’s geared toward those who might not qualify for a traditional loan, it can be a tough fit sometimes.”

But those with moderate levels of income are likely having just as difficult a time getting financing in today’s strict lending environment, so here too the USDA is helping out. Those who don’t fall into the low-income category might qualify for a USDA-backed loan guarantee.

The guarantee is similar to FHA guaranteed loans that target metro areas, and can sometimes be the final push a lender needs to extend financing to a borrower. The ACDA has issued 471 guarantees in the 2011 fiscal year, securing loans totaling $82, 347, 558.

“We’re starting to do the guarantees quite a bit more,” Thompson said. “A couple of years ago we didn’t do a single guarantee, but last year, out of this office alone, we did almost 100.”

Still, like any government program, there are hurdles for potential borrowers.

“You have to get through a pretty rigorous inspection process,” Konczak said. “One of my clients had to get through a septic system inspection and an inspection for termites — and it was a brand new house.

That might cost them a little more money, but in the end they were able to get the 100 percent financing.”

To many in Colorado, that would likely seem like a small inconvenience in exchange for an increasingly rare deal.

USDA loans in Colo.

Fiscal Year 2010

(Oct. 1, 2009 — Sept. 30, 2010)

Statewide Direct Loans —

249 loans — $34,254,433

Alamosa* Direct Loans —

56 loans — $7,495,679

Statewide Guaranteed Loans — 1,165 loans — $200,378,246

Alamosa* Office Guaranteed Loans — 108 loans — $14,657,580

Fiscal Year 2011 to date

(October 1, 2010 to present)

Statewide Direct Loans —

41 loans — $5,442,598

Alamosa* Office Direct Loans —

11 loans for $1,341,000

Statewide Guaranteed Loans — 471 loans — $82,347,558

Alamosa* Office Guaranteed Loans — 44 loans — $6,733,178

* Alamosa office handles loans processed for Woodland Park.