Everything You Need to Know About Texas USDA Loan Requirements

If you’re looking to buy a home in a rural area of Texas, a USDA loan can be a great option thanks to low rates, flexible credit requirements, and no down payment. But these loans do come with specific eligibility rules. In this comprehensive guide, we’ll cover all the key Texas USDA loan requirements related to income limits, location, property types, and more so you can determine if you qualify.

Overview of USDA Loans

Also called the Section 502 Direct Loan Program USDA home loans are backed by the U.S. Department of Agriculture. The goal is to help low-to-moderate income borrowers in rural locales buy decent modest homes.

Key features include:

Fixed low interest rates
100% financing available
No mortgage insurance required
Relaxed credit standards

While tempting, USDA loans aren’t for everyone. You must meet certain criteria related to your finances, the property location, and other factors. Let’s look at the specifics when it comes to Texas.

Texas USDA Income Limits

To qualify for a USDA loan in Texas your income must fall under established limits based on the area median income. The exact limits vary by county and household size. Here are some examples for a family of 4

Houston area – $97,400
Dallas area – $89,600
Austin area – $89,900
San Antonio area – $79,900
Rural Texas – around $60,000-$70,000

In general, income limits range from 80-115% of the county’s median household income depending on if you qualify as moderate, low, or very low income. You can check income caps in your county using this lookup tool.

Property Location Requirements

To qualify for a Texas USDA loan, the home you buy must be located in a rural area as designated by the USDA. What exactly does rural mean?

Population under 20,000
Not part of an urbanized area near a bigger city
May include some suburban neighborhoods and small towns

You can verify if a specific property address is eligible using the USDA Property Eligibility tool.

About 97% of Texas’ land area qualifies as rural, so you have plenty of options to find a USDA-eligible home. Just stay away from the major metro city centers.

Texas USDA Home Requirements

In addition to your finances and location, the home itself must meet certain criteria to be eligible for a USDA loan including:

Modest size and design – No luxury homes. Stick to moderate, average sized homes for the area.
Primary residence – You must make the home your principal residence. No vacation properties.
Appraisal – The purchase price must be supported by an appraisal.
Decent condition – Home should be structurally sound with no major repairs needed that make it unsafe or unsanitary.

Existing homes, new construction, and even manufactured homes can qualify as long as they meet the other criteria. You can also use USDA loans for refinancing in Texas.

Texas USDA Credit Score Requirements

USDA loans are available to borrowers with poorer credit than conventional mortgages. Here are the general credit guidelines:

Minimum 620 credit score
No foreclosures or bankruptcies in past 3 years
No major delinquencies recently
Maximum 41% debt-to-income ratio

The higher your scores, the better your chances of approval and loan terms. Aim for at least 640+ for the best offers. Your entire credit history will be reviewed, not just your scores.

How to Apply for a USDA Loan in Texas

Ready to move forward with a Texas USDA loan? Here are the steps:

Get pre-qualified to see if you meet the income limits
Check property eligibility in the location you want
Find a lender who offers USDA loans
Submit your full application along with required documents
Allow 1-2 months for underwriting and approval

Work with a reputable lender who has experience with this special loan program. They’ll guide you through the process from start to finish.

Buying a home through a Texas USDA loan has distinct advantages like low rates, no down payment, and flexible qualifying. Just be sure you fully understand and meet all the specific program requirements before applying. Reach out with any questions!

USDA Mortgages Compared to Other Mortgages

USDA mortgages usually offer the lowest rates on the market. There’s no down payment required, making them an ideal option for those who lack savings. However, rates on USDA loans will depend on your financial situation. To get the best rate, you will need ahigh credit score coupled with a sizeable down payment. The more financially strong you appear to your lender, the lower your rate will be. Also, rates may vary by lender, so don’t be shy about shopping around. While many lenders don’t advertise USDA loans, most offer them.

How Does A USDA Loan Work In Texas?

FAQ

What are the income requirements for a USDA loan in Texas?

Eligibility Requirements – Texas The average household income limits for a USDA home loan in Texas is $110,650.

What credit score do you need for a USDA loan in Texas?

Automatic GUS approval requires you to have a credit score of 640 or higher with no outstanding federal judgments or significant delinquencies. Even if you don’t have a 640 credit score, it’s still possible to apply and be approved for a USDA loan.

How to get a USDA loan for land in Texas?

In order to be approved for a USDA loan, you and the property must qualify. The property must be located in a rural area. This means the area must have a population of less than 20,000. In order to meet the income qualifications, you must make less than 15% above the average income for the area.

How much are closing costs in Texas with a USDA loan?

Generally speaking, for a new home purchase in Texas, the buyer can expect to pay around 4.5% (of the purchase price) for closing costs and prepaid escrow requirements. Escrow requirements include prepaid taxes and home insurance.