When you hear United States Department of Agriculture or USDA, you might think about cows, chickens, or farming. However, the USDA is much more than farming and food safety. They are involved in rural development across America. One way they achieve this is through offering USDA loans.
Getting prequalified with a USDA-approved lender before you begin the formal application process is a good idea. This step will help you determine if you meet the basic eligibility requirements for a USDA loan, including income limits and credit score.
- A USDA loan, also known as a USDA Rural Development Guaranteed Housing Loan, is a type of mortgage loan program offered by the United States Department of Agriculture (USDA).
- To check the eligibility of a specific property or location for a USDA loan in Texas, you can use the USDAs online mapping tool, the USDA Property Eligibility Map.
- With the potential for no down payment, competitive interest rates, and various loan programs, USDA loans can be a viable path to achieving your dream of owning a home.
What is a USDA Loan?
A USDA loan, also known as a USDA Rural Development Guaranteed Housing Loan, is a type of mortgage loan program offered by the United States Department of Agriculture (USDA). These loans are designed to help low to moderate-income individuals and families in rural and some suburban areas achieve homeownership.
The government backs USDA loans, similar to VA and FHA loans, which allow mortgage lenders to offer lower interest rates in some cases compared to conventional loans. The most significant selling point for USDA loans is that you can buy a home with no down payment if you qualify. Although the down payment is covered, it is important to keep in mind that you will still be responsible for paying the closing costs.
Types of USDA Loans Offered in Texas
- USDA Single Family Housing Guaranteed Loan Program: This is the most common type of USDA loan available to eligible low to moderate-income homebuyers in rural and some suburban areas. This program provides approved lenders with 30-year fixed-rate loans without down payment requirements. Borrowers must meet income and credit score requirements, and the property must be in an eligible area.
- USDA Home Improvement Loan and Grant Program: This program provides loans and grants to eligible homeowners in rural areas to make necessary home repairs, improvements, and upgrades.
- USDA Multi-Family Housing Programs: These programs aim to increase the supply of affordable rental housing in rural areas. They include various loan and grant options for developers and organizations interested in building, rehabilitating, or preserving affordable rental housing for low-income individuals and families.
- USDA Rural Repair and Rehabilitation Grants: These grants are available to very low-income homeowners in rural areas who are 62 or older. The funds can be used to make repairs and improvements to ensure the safety and livability of their homes.
One of the top misconceptions about buying your first home is you need a 20% down payment. You do not have to have 20% down to buy a house. In fact, the average down payment on a house is actually 13%. Moreover, a first-time homebuyer can put down as little as 3%.Read More
What Areas in Texas Qualify for USDA Loans?
Rural Areas: Most areas outside major cities and their immediate suburbs are considered rural and eligible for USDA loans. These areas often have lower population densities and are not part of larger metropolitan statistical areas (MSAs).
As defined by the USDA, rural areas have a population of less than 50,000 people. To check the eligibility of a specific property or location for a USDA loan in Texas, you can use the USDA’s online mapping tool, the USDA Property Eligibility Map.
How to Qualify for a USDA Loan in Texas
All government-backed loans have strict guidelines that borrowers must meet to qualify for the mortgage loan. Examples include living in the home full time, and the home is your primary residence.
Location is the most important thing when getting a USDA loan because USDA loans are only available in rural areas. Use the USDA property eligibility map to determine if the area you are buying in qualifies. A USDA-approved lender can also help you determine if your purchasing property qualifies.
USDA loans are designed to assist low to moderate-income individuals and families. To qualify, your household income must fall within the income limits set by the USDA for the specific area where you plan to purchase a home. Income limits are based on household size and the county or area median income. You can check the income limits for your area on the USDA website or talk to a USDA-approved lender.
How to Apply for a USDA Loan in Texas
Choose a USDA-Approved Lender:
Not all lenders are USDA-approved, like Texas Regional Bank lenders. Contact one of our USDA-approved lenders online.
Getting prequalified with a USDA-approved lender before you begin the formal application process is a good idea. This step will help you determine if you meet the basic eligibility requirements for a USDA loan, including income limits and credit score. The lender can also provide an estimate of the loan amount you may qualify for.
Application Process for a USDA Loan
Gather Required Documentation:
- Proof of income (pay stubs, tax returns, W-2 forms).
- Bank statements.
- Proof of assets.
- Employment history.
- Proof of U.S. citizenship or legal residency (Social Security Number, green card, etc.).
- Credit history and credit score.
- Any other documents requested by the lender.
Complete a Loan Application:
Fill out the USDA loan application provided by your chosen lender. You can often complete this application in person, online, or over the phone.
Select a Property:
While you can start the application process before finding a property, you’ll need to choose a USDA-eligible property to proceed. Using the USDA’s Property Eligibility Map, your lender can help verify property eligibility.
Submit a Purchase Agreement:
Once you’ve found your dream home, submit a purchase agreement or contract to your lender for review. Purchase agreements outline the terms and conditions of the sale.
Appraisal and Inspection:
The lender will order an appraisal and inspection of the property to ensure it meets USDA standards for safety and quality. If the property does not meet these standards, the seller will need to make repairs.
Final Loan Approval:
After the appraisal and inspection, your lender will review all documentation and finalize your loan application. If approved, you’ll receive a commitment letter outlining the loan terms.
Once your loan is approved, you’ll proceed to the closing process. You’ll sign the final loan documents during the closing, and the property title will be transferred to you. You’ll also pay any closing costs and fees.
Move into Your New Home:
After closing, you can move into your new home. Make sure to stay current on your mortgage payments to maintain homeownership.
In Texas, USDA loans extend beyond farming and food safety; they facilitate homeownership for low to moderate-income families in rural and certain suburban areas. With the potential for no down payment, competitive interest rates, and various loan programs, USDA loans can be a viable path to achieving your dream of owning a home.
USDA loans are a valuable resource for individuals and families seeking affordable housing opportunities in rural Texas communities.
For more information, visit our Mortgage – Home Loans & Refinance from Texas Regional Bank website.
Texas Regional Bank Mortgage, NMLS Number 804865. All loans are subject to approval, including credit approval. Some Restrictions may apply. Texas Regional Bank Mortgage may change the products, services, and other information described on this site anytime. Texas Regional Bank Mortgage does business as TRB Mortgage in the State of Texas.