Texas home buyers can still purchase a home with NO down payment thanks to the USDA Rural Development loan. Many locations in Texas still qualify. This government backed 100% home mortgage offers first time buyers a way to purchase with little to no money out of pocket. USDA ( also known as 502 Guaranteed loan, RD, Rural Development or Rural Housing) also has a lot of other advantages for buyers. Below we will discuss the Texas USDA loan basics and everything buyers need to know. If you have questions, please reach out to us by calling ph: 800-743-7556 or just submit the quick contact form on this page. Mobile users will find the Quick Contact form above. We service all 50 states nationally, 7 days a week.
Before we start, let’s discuss some of the advantages of the 100% USDA home loan:
USDA loan advantages:
- USDA is the only mortgage program today (for civilians) that allows Texas home buyers to purchase with no down payment.
- In addition to no down payment, USDA allows for buyers to get their closing costs paid by the home seller, or added into their loan under certain cases.
- USDA loan applicants are NOT required to be first time home buyers.
- No USDA loan amount limits – home buyers qualify based on their income and debt to income ratios.
- Lower monthly mortgage insurance. USDA requires a monthly mortgage insurance costs each month like most home loans when the buyer is putting down less than 20%. The benefit with USDA is the monthly PMI costs is much less when compared to other home loans. Borrowers can calculate and compare with the USDA loan payment calculator here.
- Applying for a USDA loan doesn’t require any special class, or down payment assistance – it’s already 100% financing. Borrowers can get pre-approved and start searching for a home all in the same day.
- The USDA home inspection and appraisal requirements are the same as the other loan programs today – no special guide lines.
- Home buyers are NOT required to have a minimum amount of savings.
- Secure and safe 30 year fix terms at low interest rates.
- Great USDA refinance options available to home owners in the future if needed.
USDA loan obstacles :
- The property to be purchased must to be located in a USDA approved area. In addition the USDA program has income caps – please read below for more info on 2016 USDA eligibility.
- Student loans – Student loan debt is not deferred when qualifying for a USDA loans. Because of this, USDA loan applicants with significant student loan debt may have encounter obstacles in regards to debt to income ratio limits.
- Closing time frame – The USDA loan program is unique because the loan files are processed in two steps. First by the mortgage company, bank or broker originating the loan, then the file goes through a final review at the local USDA Texas office. This means that USDA loans will take an additional two weeks (give or take) to close when compared to other loans. Please note: USDA 502 Guaranteed loans can only be proceed by approved mortgage companies, not directly by the USDA. USDA only processes their “Direct” loan in house. This program is set aside strictly for very low income, subsidized housing.
Texas USDA Home Loan Eligibility
The USDA mortgage has a few core eligibility requirements that must be met in order to use the program. Let’s take a closer look below.
- The location of the house – The house you decide to purchase must be located in a select rural approved area according to the USDA property map here. You can input the property address and check to see if the house resides in an eligible location. The home can be any single family, town home and select FHA approved condo. Mobile homes and manufactured homes are not allowed. If you need assistance finding USDA approved homes in your area, please contact us below.
- The income for the household – The USDA Rural Development mortgage has income limits or “caps” in place. More importantly, the income caps apply to all income producers living in the house, even if they are NOT listed on the loan application. USDA limits vary based on the number of members living in the household, number of dependants, elderly and county. Contact us below to discuss in detail.
Texas USDA Loan Application Requirements
USDA loans really aren’t that much different than other home loans like FHA, VA, etc. USDA has standard qualifying guidelines that must be met. Let’s discuss the latest 2016 USDA guidelines below:
- Credit Score – USDA lenders will want to see applicants have a 620 or greater credit score to be approved. However, a 620 credit score do not guarantee loan approved. All mortgage companies have additional requirements in place for applicants that have experienced a past financial hardship like foreclosure, short sale or bankruptcy. These are called “overlays” Example – if you have a 710 credit score, but had a foreclosure 2 years ago, you would likely need to wait a few more years.
- Job/Income History- Two years of stable income will likely be needed. You are not required to have the same job for two years, just a stable history. Example: Let’s say you have been working as fireman for 3 years. You recently left one fire department and started working at another. In addition, you took a few weeks off between jobs. This is fine. Or maybe you needed to take a 3 weeks for hardship reasons – this likely would be okay as well. Recent graduates are the exception of this rule as they do not need a solid a two year job history. Self employed borrowers will need two years of tax returns. Any part time jobs will need two years of stable history to be included.
- Debt to income – Like all other home loan programs, USDA has debt to income ratio limits. Borrowers can read more about this under the USDA eligibility section.
- A copy of the borrowers bank statements will be needed during the approval process. Although USDA does not require a certain amount of savings, applicants will want to insure they can document any deposit out of the ordinary. Normal weekly, bi weekly or monthly payroll deposits are normal and to be expected. However, random deposits will be documented with a copy of the check, and deposit slip. Gift funds are allowed with USDA loans, just be sure to keep a proper paper trail when it comes time to document. Additionally, the gift donor may be required to provide their bank statements as well. These requirements are not exclusive to USDA loans, they are essentially required on all government loans today.
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USDA Mortgage Hub is Texas’s leading source for USDA loans. Buyers that have questions or want to learn about getting qualified can call 800-743-7556 or just fill out the Quick Contact form on the right side. Mobile users will find the Quick Contact icon at the top of their page.