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For would-be home buyers that are looking to purchase a home with little to no money down the Texas USDA loan is a great option. There are two types of USDA home loans. There is the Guaranteed USDA Loan and the Direct USDA loan. The Direct USDA loan is when a borrower works directly with the USDA. USDA loans in Texas are facilitated most often by private lenders and backed by the United States Department of Agriculture. By definition, the Texas USDA loan is for low to moderate-income earners in rural areas. In Texas, a USDA loan offers several great features to qualified buyers or individuals looking to refinance. Some of those are:
The USDA loan also offers very competitive rates similar to FHA. The closing costs and rates will vary some from lender to lender how the competitive landscape of mortgage lending keeps most lenders very similar in this regard. Not all lenders offer the USDA loan so it’s important to ask on the front end.
USDA mortgages have several benefits for the borrowers that utilize them. As mentioned earlier the most attractive benefit is the 100% no money down feature. The only other loan type that offers this is the VA home loan but it only for veterans. This feature alone can save a home buyer thousands of dollars in out of pocket costs. While this is probably the most popular feature to Texas home buyers it is not the only great feature. Other things that people love about the USDA loan are:
The USDA home loan in Texas and all other parts of the country have income limits. This is the only loan type that has this restriction. Since the loan is designed for low to moderate-income households the United States Department of Agriculture limits the amount of income based on the median income for the area. They use a factor of 115% of the median income for the area. An example of this would be if the median household income for an area is $75,000 + $11,250 (15% of $75,000) the maximum household income would be $86,250. The thing Texas homebuyers have to remember about this is the word household. This means all working individuals collectively regardless of who is or who is not on the loan. The best way to determine the maximum household income for a given area is to use the USDA website and which lists by state and county the limits. One important thing to remember is that even if someone in the home receives tax-exempt income it will still be considered in the total household income.
The Texas USDA loan does not have a maximum loan amount but there are other important factors to consider when having this conversation. As mentioned earlier there is a maximum on the allowable household income that combined with the maximum debt ratios keeps the USDA loan at a certain level. For example, a sales price of $500,000 would technically be allowed however with a maximum household income of $90,000 would be hard-pressed to support the debt at the thresholds that are set forth.
The USDA loan does allow for refinances but there is a catch. Homeowners who currently have a USDA home loan can refinance with a new USDA loan but they must have been in their current USDA loan for a minimum of at least 1 year. They can do a standard refinance or a streamline refinance. The streamline has less documentation than the standard. If a homeowner has a mortgage that is not a USDA mortgage, they cannot refinance into a USDA mortgage. For example, if a person takes out a construction loan with their local bank to build a new home, they will typically want to refinance into a more permanent loan but they cannot refinance into a USDA loan because the original loan was a construction loan.
Yes, borrowers can put money down on a USDA loan. While the USDA home loan is known for the 100% no money down feature Texas homebuyers can and do put money down when using this loan product. The reason a borrower would put money down is that it could afford them more home thus reducing their payment. They can do this and still take advantage of all the other great features of this loan product such as low mortgage insurance, flexible credit, and 6% seller paid closing costs.
No, there is not necessarily a maximum amount of acreage allowed. The challenge arises when the land itself exceeds 30% of the total value of the transaction. When this happens it because less of a home loan and more of a land loan and while there are land loan programs available the USDA single-family housing loan is geared towards single-family residences.
The USDA home loan is designed for individuals who are purchasing or refinancing in what is considered a qualifying area. This sometimes can be misleading because people interrupt the word rural as remote and that’s defiantly not the case. Qualifying areas are areas deemed to be eligible based on population. It's oftentimes just outside of major cities. A large part of the U.S. actually qualifies for the USDA loan and this applies to Texas as well. Approximately 98% of the country qualifies. There is a stigma that a home buyer has to purchase in a very rural area and that’s obviously not the case.
Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice.