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How to Find Homes That Qualify for USDA Loans in Texas

EMS Blog 2 Banner - Jan 2023
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USDA home loans offer a way for low-income borrowers to have their own homes. These loan programs are backed by the U.S. Department of Agriculture to promote homeownership in rural areas. It's a great choice if you don't have enough money for a down payment or if you don't qualify for a conventional loan.

Although the USDA loan program is limited to certain designated areas, it doesn't mean that your only option is a secluded rural community. Suburban areas may qualify too. This means that even if you're planning to move just right outside of the city, there's a great chance your pick is one of the USDA-eligible areas.

Interested in USDA-eligible homes in Texas? In this article, we'll discuss what a USDA loan is, the requirements you'll need, and how to find homes that qualify for USDA loans.

What is a USDA loan?

USDA rural home loans are competitive mortgage options that help make home buying more affordable for low-income borrowers. The U.S. Department of Agriculture guarantees these home loans as part of its Rural Development program.

With this government backing, USDA loans are able to offer low-interest rates and a 0% down payment, making it an attractive option for anyone looking to purchase a home.

So why is it not as popular as conventional loans? This is because a USDA home loan can only be applied to a USDA-designated rural area. But if you're interested in moving to a quieter and wider area without breaking the bank, then this loan program might be for you.

What are the USDA loan requirements?

There are three main requirements needed to qualify for a USDA loan:

  1. The property that you want to buy should be located in an eligible area.
  2. Your total household income should not exceed the USDA income limit set for your location. This limit is often capped at 15% above the average local income.
  3. You need to have a minimum FICO score of 640.

Since the USDA does not set the requirement for the credit score, there might still be hope for those who have a lower number. But it will all depend on your USDA-approved lender. Your loan program application will have to undergo manual underwriting where they will check for a low debt-to-income ratio, a substantial savings account, and any other financial factors that would lessen your risk as a borrower.

If the credit score is not a problem, then the other requirements for USDA financing are pretty much straightforward.

  • The borrower must be a U.S. citizen or a legal permanent resident.
  • DTI ratio should be no more than 41% of monthly income.
  • The property should be used as a primary residence. USDA loans cannot be used on a second home or rental property.
  • The physical condition of the property should also meet the requirements set by the USDA. Examples of these conditions are the property should be structurally sound, easily accessible for a paved or all-weather road surface, and has an operational electric system.
  • There should be no history of late payments or collections for the past 12 months. Any other lender-specific requirements.

Qualification of "Rural Area" by the USDA/Rural Development

For a property to be qualified for USDA financing, it has to be located in a USDA-designated rural area. Thankfully, USDA's definition of "rural" is generous and often includes suburbs.

According to USDA, a "rural" area must fall into one of the following categories:

  • The community's population is less than 10,000.
  • If the area's population is between 10,001 to 20,0000, then it should not be located in a metropolitan statistical area (MSA) and should also have a serious lack of mortgage credit for low- to moderate-income families.
  • An area that was once classified as a "rural area" but lost its designation in the 1990, 2000, or 2010 census may still be eligible if the community's population doesn't exceed 35,000. Additionally, the area must also have a serious lack of mortgage credit for low- to moderate-income families.

To ensure that the property you want is in one of the eligible areas in Texas, please check the list below.

Determining USDA Eligibility Loans

USDA operates a multitude of financial assistance programs. Here are the most common USDA loan programs that might help you get the rural property you want.

Single-Family Housing

The Single Family Housing programs give qualifying borrowers the opportunity to buy, build or repair affordable single-family USDA homes. There are two main Single-Family Housing programs for homebuyers: the Single-Family Housing Direct Loans and the Single-Family Housing Guaranteed Loan.

As the name implies, the Single-Family Housing Direct means that you apply directly with the USDA Rural Development. This loan program usually has a 33-year term and also offers payment assistance. Single-Family Housing Direct loans are only available for individuals or households with low to very low income.

On the other hand, the Single-Family Housing Guaranteed Loan is available for low- to moderate-income households. It usually offers a 30-year fixed rate and also has refinance options available. The Single-Family Housing Guaranteed Loan can only be obtained from USDA-approved lenders.

Multi-Family Housing

The Multi-Family Housing programs offer financing to rural property owners so they can develop multi-family rental housing for low-income elderly and disabled individuals and families, as well as domestic farm laborers.

Depending on the Multi-Family Housing Program you qualify for, payment terms can be 25 to 40 years with a 1% annual interest rate. Vouchers are also provided to protect eligible tenants who otherwise may face hardships if they cannot find another affordable housing option.

Rural Business

USDA also provides assistance to promote business creation and growth in rural areas. The Rural Business Programs are available to qualified individuals, businesses, farmers, cooperatives, non-profit corporations, private companies, and Native American Tribes. Other than financial backing, these programs also help provide job training, equipment, and entrepreneurial skills to start or grow a business.


Using the USDA/Rural Development Map

The USDA property eligibility map is a tool that will help determine if a certain location is a USDA-eligible rural area. To use this map, you first have to go to their website by clicking here . At the top of the screen, you'll find links for different USDA loan programs. Click the link to the program you're applying for. To access the eligibility map, you have to accept the property eligibility disclaimer. After accepting, you'll be redirected to the interactive map.

There are several ways to find eligible properties with this map. One way is to enter a specific address on the search bar and then click the "Go!" button. The map will zoom in to that property address and display a message saying whether or not it's a USDA-eligible area.

The other method is to manually zoom in to a location by double-clicking on the map, scrolling in and out with your mouse wheel, or using the scroll bar on the left side of the screen. Once you've zoomed in enough to the desired location, click on the pushpin button and then click on the chosen area on the map. A green push pin will appear which shows the latitude and longitude of the location, as well as whether or not it's an eligible rural area.

Please note that the USDA property eligibility map is simply an informational tool. To make sure your desired address is eligible, you would have to apply for the mortgage officially.

Eligible Locations for USDA Loans in Texas

Want to move to a rural area in Texas? We've listed down the locations that are eligible for USDA loans to help you out.


Not eligible locations for USDA Loans in Texas

Think a USDA Loan Is For You?

USDA home loans are more affordable than conventional or FHA loans. Qualified borrowers will get to enjoy a 0% down payment and low-interest rates. However, USDA loans only apply to eligible rural areas. Additionally, your total household income should not exceed 115% of the local median income.

If you think a USDA home loan is for you, Ebenezer Mortgage Solutions can help with your mortgage application. If not, we can help you find a mortgage program that will fit your needs. Call us today at (813) 284 - 4027 to start your home loan application.

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