Did you know that 97% of Texas in the United States is categorized as rural? That means that many prospective homeowners qualify for a USDA direct loan.Â
USDA home loans are backed by the Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program. The aim of this mortgage program is to help a new home buyer family with low or average income purchase a house in rural areas with the help of the United States government. USDA loans come with lower interest rates, a favorable loan-to-value ratio, and no down payments, designed to revive rural areas of the Lone Star.Â
The loan officer with whom the borrowers will be in contact plays a crucial role in guiding them through the USDA loan process, ensuring they share sensitive information carefully and that they get the best terms possible.
How Does a USDA Loan Work in Texas?
Texas USDA loans, facilitated through RD area offices, help rural and suburban community facilities programs by supporting mortgage lending in these areas. They are an excellent type of loan for those who are looking at financing a home in a rural setting.
Texas first-time homeowners looking to settle in a rural area or a little bit outside a city may apply and can benefit from a USDA RD home loan. Thanks to rural development loans, populations in rural areas increase and there is support for people wishing to get started a new life there. Â
Why Should a First-Time Home Buyer Get a USDA Home Loan in Texas?
Getting a USDA home loan in Texas comes with several benefits, from low interest rates to no down payment.
Low interest rates
USDA loans come with lower interest rates because they are backed by the U.S. Department of Agriculture, which is an official government organization. Borrowers pay less in interest charges throughout the lifespan of their mortgage, get special family house programs, and purchase a new house with better terms. Various housing programs have different benefits, and the USDA program is especially favorable for those looking to refinance or buy in rural areas.
Interest rates are subject to change, but they are fixed on USDA home loans. This helps you plan your finances as you know exactly how much you are going to pay every month. There are no unpleasant surprises with interest rate hikes.Â
Low-income households
USDA loans in Texas are geared towards single-family housing with average or low incomes. Conventional mortgages have strict income requirements which puts off many borrowers. A USDA loan, though, is a type of loan with which you can negotiate for the maximum loan amount and climb on the property ladder on favorable terms.Â
No down payment is required for a Texas USDA loan
Many borrowers balk at the need to make a down payment on their home. While most conventional loans require borrowers 10% to 20% equal house down payment of the home’s value, USDA loans have no such requirement. Borrowers who can’t save a sizable amount of money are in high percentage eligible for such loans.Â
Closing costs are included in the mortgage
Closing costs are often burdensome because they can account for up to 6% of the home value. With a USDA loan, you can include these in the mortgage. This saves you cash and liquidity for other purposes such as home remodeling or other family housing programs.Â
USDA Loan Qualifications
What are the requirements for getting a USDA loan in Texas?
Credit score
A USDA loan in Texas requires borrowers to have a 620 credit score. This will help you obtain a better interest rate and pay less overall on your mortgage.Â
Designated USDA rural area
To qualify for a USDA loan in Texas, the home must be located in a designated rural area. Bearing in mind that 97% of our Lone Star state is qualified as rural, this shouldn’t be a problem but it does exclude homes in cities like Houston, Austin, Dallas, Waco, San Antonio, and Fort Worth.Â
Private mortgage insurance is compulsory
When you apply for a USDA rural development loan in Texas, you must include private mortgage insurance (PMI) when you calculate your monthly mortgage payments.Â
Steady income for previous 2 years
When you apply for a USDA loan, you must prove employment for the past two years or other equal employment opportunity. This shows that you are able to pay the monthly mortgage. Your monthly mortgage payment should be less than 29% of your income.Â
USDA Loan Income Limits
Your income level will determine the amount of money you can borrow and the value of the home you can afford. The average household income limit in Texas for a USDA home loan is $110,650 for 2023. The limit increases with the number of household members.Â
Debt-to-Income Ratio
To qualify for a USDA loan, you must have a debt-to-income ratio of 41% at the most. This helps ensure you will be able to make the necessary payments.
Primary residence
You can apply for a USDA loan for your primary residence. You can’t finance a secondary residence or a holiday rental with such a loan.Â
Preparing Your Application for a USDA Loan in Texas
What are the steps involved in applying for a USDA loan in Texas?
Eligibility check
Before you apply for a USDA loan in Texas, check your income so you have a better idea of how much you can borrow to buy your home.Â
Whenever you can, pay off existing debts to improve your credit score and lower your debt-to-income ratio. You can then obtain better terms on your USDA loan.Â
Loan application
Submit an application through a USDA-approved lender like Society Mortgage and provide all the necessary documentation like pay stubs. Always ensure that you check the NMLS Consumer Access website for your lender’s credentials to be safe.
Loan approval
You then undergo a review process where your lender and the USDA assess your financial status. Once your loan is approved you can start searching for a home in a Texas rural area.Â
Property appraisal
A USDA-approved appraiser ensures the chosen home adheres to set standards. USDA loans come with specifications regarding the type of home you are about to buy. Specific sanitary and other safety standards must also be met.Â
Closing
Once you have found your dream home in rural Texas, you can close your loan and start planning your life with the certainty that you have a home.Â
Get Your USDA Loan in Texas with Society Mortgage
At the heart of the Rural Housing Service lies a commitment to bolster rural communities. Through multifamily housing programs, the USDA opens doors to homeownership while championing an employment opportunity policy. Upholding the principles of USDA equal employment, these initiatives not only provide housing solutions but also ensure a vibrant and inclusive future for rural Texas.
Don’t miss another day. Contact a mortgage loan officer today to apply for a rural housing loan and make homeownership a reality!
Frequently Asked Questions
What are the income requirements for a USDA loan in Texas?
USDA loans are geared toward assisting low-to-moderate-income individuals and families. Your income will be evaluated against the USDA’s income limits for Texas, which can vary by county and household size. With the help of Society Mortgage, check whether your income falls within these limits to get loan approval.
Are USDA loans only available for purchasing a new home?
No, USDA loans in Texas can be used for various purposes, such as purchasing a new home, refinancing an existing USDA loan, renovating a current home, or even relocating a home to a rural area. There are specific USDA loan programs designed to cater to different housing needs in rural communities.
What other federal funding opportunities are related to USDA loans?
The USDA loan program is backed by federal funding opportunities that make it possible to offer these favorable loan terms. Depending on the specific program and the applicant’s circumstances, funding might be available in the form of grants, direct loans, or loan guarantees. Interested parties should check with the USDA or an approved lender for detailed information on available funding for their specific situation.
What credit score do you need for a USDA loan in Texas?
The minimum credit score that lenders typically look for is 640 — a score that is, in fact, part of the USDA’s automated underwriting system. However, some lenders might consider lower scores if other financial qualifications are strong.
Is FHA better than USDA?
Which is better — an FHA loan or a USDA loan? The answer depends on your specific circumstances and needs. USDA loans offer 100% financing with no down payment required, along with lower mortgage insurance costs compared to FHA loans. However, they are restricted to rural and some suburban areas and have income limits. FHA loans, on the other hand, are more flexible regarding property location and income. They do require a down payment, though, and have higher mortgage insurance costs.
Can you buy land with a USDA loan in Texas?
USDA loans are designed for buying houses; not land. To buy land, you may opt for a USDA’s Single-Family Housing Direct Home Loan (aka Section 502 Direct Loan Program) that can finance the purchase of land as part of an overall construction-to-permanent loan. The land purchase must be part of the construction, and the loan is subject to the same eligibility requirements as other USDA loan programs. Talk to one of our Loan Officers for more details on your options.
