For many Texans, buying a home in a rural area seems out of reach. With limited access to mortgage lending, how can you affordably achieve the dream of homeownership? This is where USDA home loans can help. (Road to Rural Homeownership: Your Guide to USDA Loans)
The U.S. Department of Agriculture’s Rural Development program provides multiple mortgage options to help rural Texans become homeowners. These government-backed loans offer advantages like no down payment and below-market interest rates.
In this comprehensive guide, we’ll explain everything you need to know about USDA mortgages in Texas including eligibility requirements, benefits, costs, and step-by-step instructions for getting started.
USDA Loan Eligibility – Who Qualifies for 100% Financing in Texas?
While USDA loans are designed for rural home purchases, you may be surprised at the number of Texas residents who qualify. Here are the key eligibility requirements:
– The house must be situated in a rural area as defined by the USDA. Over 75% of the state meets this geographic requirement, including many suburban and exurban counties near major cities. You can verify your address is eligible using the USDA’s online property eligibility tool.
– Applicants must meet income limits set annually by the USDA. For 2023, there are no income caps in the majority of Texas counties, making these loans widely accessible. In higher cost areas like the Dallas-Fort Worth metroplex, limits up to $125,000 apply.
– Borrowers must have sufficient income, assets, and credit to qualify for a mortgage loan. Minimum credit scores around 640 are often required. First-time homebuyers with limited credit history may still qualify with compensating factors.
Home Price Limits
– The purchase price of the home cannot exceed the maximum limit set by USDA for that county. Across most of rural Texas, the cap is $300,000. In lower cost areas it may be $200,000 or below. You can look up the exact limit by county.
Occupancy and Buyer Type
– The home must be used as the borrower’s primary residence. Second homes or investment properties do not qualify. First-time homebuyers get preference, but repeat buyers may still be eligible depending on their circumstances.
Key Benefits and Perks of USDA Mortgages
A USDA-backed loan offers major advantages to qualified rural homebuyers in Texas:
No Down Payment – Borrowers can finance 100% of the purchase price plus closing costs. This eliminates the biggest obstacle to homeownership – saving for a large down payment.
Below Market Interest Rates – USDA mortgages feature fixed interest rates that are very competitive with conventional loans. This makes monthly payments affordable.
Low Mortgage Insurance – Mortgage insurance is required, but at a lower cost than with an FHA or conventional loan.
Long Repayment Terms – Borrowers can stretch out payments for up to 38 years. This lowers the monthly amounts.
No Escrow Requirements – You pay your property taxes and homeowners insurance separately instead of having them escrowed into your monthly mortgage payment. This increases cash flow flexibility.
No Prepayment Penalties – You can pay off your loan early or refinance it at any time with no prepayment penalty fees.
Buying Closing Costs – In some cases, your closing costs can be rolled into the mortgage instead of paying them upfront. This further reduces the cash needed.
How to apply for a USDA mortgage in Texas
If a USDA mortgage sounds right for your needs, here are the steps to take:
1. The process can be walked through by their lending professionals. We recommend starting with ZAPA Mortgage, the top VA and USDA lender in Texas.
2. Get pre-approved for financing. This shows home sellers you are a serious buyer who is ready to move quickly. The process can be walked through by their lending professionals.
3. Once pre-approved, start hunting for homes in rural Texas communities that fit your criteria. Focus on properties listed as USDA-eligible.
4. Make an offer on a home you love in your target price range. Submit your pre-approval letter with the offer to strengthen your position.
5. After your offer is accepted, complete the full USDA loan application and approval process. Be responsive to requests for paperwork to keep things moving.
6. Close on your new home once final approval is secured!
The Road to Rural Homeownership
Thanks to USDA mortgages, rural Texas homeownership is possible even with limited savings and moderate income. These government-backed loans open the door to affordable home financing for responsible borrowers across rural Texas.
Connect with the knowledgeable team at ZAPA Mortgage to learn more about your options. They can guide you through every step of the process from pre-approval to closing, making your home buying journey a smooth one.