2023 USDA Guidelines

TAGS: USDA Loan ProgramLoan Programs
2023 USDA Guidelines
Article Excerpt

Check out Texas' 2023 USDA loan requirements: eligible area map, income limits, loan limits, credit score requirements, property eligibility, and more.

USDA Loans in Texas

The USDA loan program helps rural borrowers in small towns to purchase homes with $0 down payments. The USDA program assists the borrowers who need it most. You need to meet some specific guidelines in order to be approved for a USDA mortgage.

Home purchased with a USDA loan

Requirement #1: USDA Eligible Property Areas

See the USDA-eligible map. The highlighted regions are ineligible for USDA loans in 2023.

Properties located in certain areas aren’t eligible for loans through the USDA program. This mainly applies to areas surrounding our larger cities. USDA stands for “United States Department of Agriculture.” As the name suggests, they’re specifically involved with financing housing for families in rural areas.

2021 USDA loan property eligibility

Requirement #2: USDA Income Eligibility

See if your household income qualifies for a USDA loan here. Or, speak to an experienced Texas mortgage adviser to determine if you qualify for all aspects of a USDA loan.

Since the USDA program is aimed at rural borrowers without high incomes, each county has a maximum household income limit. If your household exceeds 115% of the median household income in your area, you may not qualify.

Your maximum household income limit is determined by:

  • The state and county in which you live

  • The number of people in your household

  • The number of people in your household who are under eighteen years old, disabled, or full-time students

  • Your age

  • Your income breakdown: base pay, overtime, bonuses, and more

All the following types of income count toward your total household income:

  • W2’s

  • 1099/Self-Employment income

  • Bonus Income & Commissions

  • Social Security Income

  • Rental Income

  • Trust Income

  • Military Income

  • Alimony, Child Support, and Separate Maintenance

No matter if you fall into the “very low,” “low,” or “moderate” income groups, there is no down payment requirement. Plus, the home seller is allowed to help with your closing costs.

Texas House

Requirement #3: Loan Limits

Most counties in Texas have a USDA loan limit of $336,500 in 2023. The highest counties are set at $386,400.

The amount you’re allowed to borrow is capped at a certain amount for every county. Check out page 86 in the official USDA Area Loan Limit document to see a list of USDA loan limits for every county in Texas.

Rural Home

Requirement #4: Credit Score

Lenders usually require a credit score between 620 and 640 for USDA loans. The USDA itself does not set a minimum credit score. They leave that decision to the mortgage lenders that actually serve the loans.

The USDA loan program tends to have a higher credit score requirement than some other government-backed mortgage programs. A minimum score of 620, for example, is higher than the FHA program’s minimum score of 580. There is a good tradeoff for this. By having a higher credit score requirement, USDA lenders have a lower overall risk that their borrowers will default on their loans. This enables lenders to offer the USDA program’s excellent benefits.

Smaller House with a nice fenced-in front lawn

Other Requirements

The USDA’s Program Fact Check outlines the basic requirements for eligibility. Here are some highlights that this article hasn’t mentioned yet.

  • Monthly debt limits. All payments included on your credit report (including the proposed new mortgage payment) typically should not exceed 41% of gross monthly income.

  • Monthly housing expenses. The total amount you spend per month on housing — including principal and interest on your mortgage, property taxes, homeowner’s insurance, and other fees — should not be more than 29% of your gross monthly income. You may be eligible for some adjustments or exceptions to this requirement.

  • Seller contributions. The home’s seller can’t contribute more than 6% of the sales price.

  • Gift funds. There is no limit to the amount of gift funding you can receive from family members assisting with the purchase of your USDA loan property.

  • Primary residence. You must intend to use the property as your primary residence. Investment-only properties are not eligible for USDA loans.

  • Ineligibility for conventional mortgages. You must be unable to qualify for a conventional mortgage without a private mortgage insurance (PMI) requirement. Lenders often require PMI for conventional mortgages if you are unable to make a 20% down payment on a property.

  • Acreage limits. There are no one-size-fits-all acreage or lot limits. However, the amount “must be common for the area.”

  • Property types. Detached, attached, PUDs, condos, modular, and manufactured homes are all eligible for USDA loans. Farms and income-providing properties are not eligible.

  • Citizenship. You must be a U.S. citizen, U.S. non-citizen national, or Qualified Alien. Examples of “Qualified Aliens” include lawful permanent residents (also known as green card holders) and individuals who have received asylum or refugee status from the federal government.

See if you qualify today!

Interested in finding out more about a zero-down mortgage option like a USDA loan? We’re proud to help Texan families all across the state. See exactly what you qualify for by starting with a few quick questions!