Refined Guidelines & Requirements To Qualify For A Mortgage Loans In Texas

Helpful Tips On How To Qualify For A Texas Home Loan Programs

Purchasing a home for the first time might appear to be an extremely daunting process, and in most cases it actually is.

In this guide, we will give you information on how the process works, along with what loan type suits you best if you qualify.

In this post, we have covered qualifying income, credit score, and down payment requirements, information about debt-to-income ratios, and more.

Each of the mortgage programs is linked to different requirements in order to qualify.

What Type Of Down Payment Will Do I Need?

In general, the need for a 20% down payment is no longer necessary in order to qualify to purchase a home. There are many mortgage types that do not require down payments or very minimal down payments. You are also not required to be a 1st-time home-buyer in order to qualify when it comes to these programs.

The FHA loans are among the more popular mortgage types that are used today. This has to do with its flexible requirements. In the majority of cases, you only need a 3.5% down payment. Each program that we have listed below allow you to utilize gift funds as a form of a down payment.

Here are the down payment requirements for each loan type:

  • USDA Loans – No down payment
  • Conventional Loans – 5% to 20% down payment
  • VA Loans – No down payment
  • FHA Loans – 3.5% down payment with a 580 credit score (10% down payment for credits scores between 500 and 579)

What Type Of Credit Score Will Do I Need To Qualify For A Mortgage?

Perhaps the biggest factor involved in deciding whether or not you are eligible to apply for a mortgage involves your current credit score. If your credit score is great there is nothing to worry about. On the other hand, if your credit score is poor, it becomes harder to obtain approval when searching for home loans. A credit score of 680 or higher is ideal. Some of the lenders will only accept credit scores of 640 or higher, while others may accept scores that are lower.

There are requirements for a set minimum credit score for each of the loan programs. However, the lenders are not required to follow these requirements and usually set their own guidelines when it comes to credit scores. If your credit score is low, it is important to request a copy of the report.

Below is a list of the minimum requirement for credit scores that you will typically find for each of the mortgage types.

Here are the lowest qualifying credit scores:

  • Conventional Loans: 640 credit score
  • USDA Loans: 620 credit score
  • FHA Loans: 580 credit score
  • VA Loans: 620 credit score (some of the lenders might still approve a 580 or higher credit score)

Income Guidelines To Qualify For A Mortgage

To make sure you are eligible for a mortgage, you have to provide proof that your current income is consistent and sufficient. If you receive a monthly salary then this task is simple. However, for those that work for commission-based jobs or self-employed borrowers, this becomes more difficult.

You will need a minimum of 2 years of your income documented from one company, or within the same field or industry in order to qualify. If you are a commission earner, you will be required to provide an average of your income over the last 2 years of your tax returns.

Income That Will Help You To Qualify For A Home Loan

  • W-2 Salary or Income
  • Bonuses and Overtime
  • Income received from a part-time job
  • Seasonal jobs
  • Income received from a 2nd job
  • Child Support and Alimony ( documentation is required)
  • Self-Employed income

Income Regarded As Non-Qualifying

  • Unemployment pay
  • Income received from Rental Properties
  • Gambling
  • VA Income
  • Single bonuses
  • Unverifiable income
  • Co-signer or non-occupying income
  • Income received from winning the Lottery

The Documents Required For A Mortgage

There a number of documents that the loan officers require in order to process loans. To save time and frustrations make sure you have all the right documents prepared before you approach your lender. Here is a list of what you will need:

  • 3 months past bank statements
  • W2’s over the last 2 years
  • Last 2 years of your tax return
  • 3 months of pay-stubs
  • Divorce decree
  • List of your assets and your debts
  • Documentation for additional income

FAQs On Mortgages

How Do I Qualify For A Mortgage?

In order to qualify your credit score should ideally not be below 580. You will need to provide documentation that proves a verifiable and consistent income with tax returns and W2s. Depending on the loan you might need to supply a down-payment.

What Type Of Credit Score Do I Need To Secure A Home Loan?

The FHA loans provide a way for borrowers with credit scores of between 500 and 579 to apply for a loan, but they will need to put down a 10% down payment. However, the rest of the lenders will not process loans for the borrowers in this credit score range. You will need a credit score of 580 or higher to improve your chances of approval.

What Type Of Down Payment Is Needed To Purchase A Home?

USDA and VA don’t require down payments. The FHA loans usually require a 3.5% down payment.

About The Texas Mortgage Pros

The team at Texas Mortgage Pros is made of mortgage experts from across Texas. We have a commitment to offering each client with high-quality services for all your mortgage requirements. A combination of various loan programs and low rates, we cover the areas of Houston, Austin, Dallas, The Woodlands, Tomball, San Antonio, Spring, and Texas. Our highly skilled mortgage experts are backed by many years in the industry and we work one-on-one with our clients to ensure they receive a home loan that is tailored to their expectations and requirements. Regardless of whether this is the first time you are buying a home, you are looking to refinance your existing loan, consolidating debt, or you are buying the home of your dreams, we will help to get you the perfect loan program at a low rate.

We have a goal to build up lasting relationships with our clients so that we can carry on providing exceptional services for years into the future. Unlike other mortgage companies across the nation, we maintain confidentiality when it comes to your information. We are a reliable and trusted name within the lending industry.

Contact our expert mortgage professionals, call us today or use our interactive tools that are on offer on our site. We cant wait to meet you.

The Important Things To Know About USDA Loans In Texas

All You Need To Know About Texas USDA Loans

If you have not yet heard of the USDA loan, you are not the only one. In many ways, this most advantageous form of financial aid has not been greatly publicized, until today.

In the following article, we will provide you with all you need to know about how USDA loans work.

The USDA Loan is available to most regions of the United States and offers zero-down mortgage opportunities. These loans come from private lenders with guarantees from the USDA. And are primarily used to provide homebuyers in rural areas a chance to purchase homes in less industrialized areas.

These USDA loans function in the same way as a government-backed mortgage. To gain the loan a homebuyer will work with a USDA lender to become preapproved before putting down an offer, going through the loan appraisal, getting the lender underwriting and closing the deal.

While the 0-down offer is probably the most enticing thing about this deal, there are some other benefits here too. Following are 10 other facts and benefits that you may not have known about.

1) Most of The U.S. Is Eligible

A USDA loan can be purchased for financing housing in just about any “rural area” and many people will be surprised what constitutes such a zone. You might think this means living miles from civilization, but actually any region with a population of under 35,000 could fall into this category. As a matter of fact, most of the US (97%) is eligible for this loan.

2) USDA Loans Are Only For Primary Residences

But, you are looking for that sweet little home away from home in the countryside? Sorry, the USDA loan is offered only to those homebuyers looking to finance their primary residence. This means that the home you would like to mortgage with a USDA loan will have to be the place where you reside all the time.

3) Many Property Types Are Eligible

When you were here rural, you may get the idea of a ranch or sprawling Southern Estate or anything with endless acreage. That’s not usually the case, USDA loans are in place for just about any size of the dwelling and include new constructions and single-family homes as well, the opportunities are truly extensive.

4) You Can Make Too Much Money To Qualify For A USDA Loan

The USDA loans will not be catering to all budgets either. Your household income levels will play an important role in deciding your eligibility for this. As a rule of thumb, a USDA loan will only be for those making within 115% of the areas average income.

Lenders will be looking at the household income although there will be some deductions that qualify for subtraction.

5) The Loan Program Encompasses Two Separate Types

The term “USDA Loan actually encompasses a couple of different loan types. Here is what you need to know about these very different programs.

  • USDA Direct Loan. This type of loan provides you with funds coming from the USDA directly. To qualify for this type of support, you must have an income equal to 50 to 80% of the local average. The terms can also be much longer than the average 30 years, up to 38 years in some cases. Plus, it comes with special interests rates that make the monthly payment plan far more attainable. Those looking for a USDA Direct Loan will need to contact their Rural Development office.
  • USDA Guaranteed Loan. The USDA Guaranteed Loan functions very much like any other loan backed by the government, like FHA and VA Loans. This type of loan must be processed through valid USDA lenders and uses the household income numbers to decide who is eligible. Because these loans are guaranteed by the USDA, they are a little more stringent in their policies. For example, the borrower must have a credit score of 640.

6) Even If You Have Had A Foreclosure Or Bankruptcy, You Can Still Qualify For A USDA Loan

If you have hit a rough road financially, you can expect the USDA to be very understanding. There is a chance for those recovering from foreclosure and bankruptcy. After a Chapter 7 Bankruptcy or a foreclosure, the USDA will ask for a three-year waiting period before eligibility is restored.

7) They Have Some Of The Lowest Mortgage Insurance Fees

When you request a loan through the regular mortgage process, you will need to pay up roughly 20% down as well as an additional monthly fee for “Private Mortgage Insurance”. This PMI protects the interests of the investment and can be anywhere from 0.5% to 1% of the entire loan value. In the traditional framework, this can be a very expensive payment and a $200,000 loan will cost as much as $200 a month in just PMI.

The USDA offers a much more rewarding scenario. The upfront fee is a mere 1% of the total loan amount and the annual insurance will come out to 0.35% of the loan. This means that on the same loan described above, the insurance payments would be $58.

8) Flexible Credit Guidelines

The USDA has not made any specific credit score too low, but you can expect that your USDA-approved lender will require a score of 640 or more. This is the number held by the USDA’s Guaranteed Underwriting System (GUS) and is used to determine credit risk. If your score is below 640, your loan would have to be underwritten manually, if your lender decides to grant you the loan.

9) They Allow You To Use A Co-borrower

The USDA also allows a co-borrower to sign on with you and promise to continue paying the loan if you will not be able to. There is no requirement to use such a co-borrower, but if in the event that you have one it can improve certain requirements and make you seem more creditworthy. You should note that the borrower should be someone who lives with you and the same income, credit and debt guidelines that apply to you will apply to them as well.

10) They Have No Pre-payment Penalty

Another important benefit is the lack of any penalty for prepayment. While it does seem unlikely that anyone would make larger payments on their loan than necessary, there are some situations in which the lender may require the borrower to pay a penalty if they have managed to pay their loan off before a specific timeframe. The good news, this is not a stipulation you will have to face when taking out a USDA loan.

Before making a decision, let one of the experts at The Texas Mortgage Pros help you find out exactly what loan is best for you.  Feel free to contact us or call us today!

Texas Eligibility Requirements For USDA Loans Plus The Pros And Cons

The USDA Rural Development Program for the state of Texas is the portion of the government responsible for administering the Single Family Housing Guaranteed Loan Program. Keep reading to learn about the USDA Loan eligibility requirements in Texas, program details, and pros and cons.

USDA Loan Eligibility Map

What Exactly Does This Particular Program Do For Users?

This particular program is designed to provide assistance to approved lenders, especially those of low- to moderate levels of income, in owning homes in certain rural areas. These are intended to be primary residences that are sufficient, sanitary, safe, modest, and adequate. Applicants who are eligible can potentially use the program benefits to relocate, improve, build, or rehabilitate dwellings in approved rural spaces. The program offers a 90-percent loan note guarantee to any approved lenders so that risks are minimized in terms of extending 100-percent loans.

Who Can Apply For This In The State Of Texas?

First of all, Texas residents have to meet the income-eligibility requirements. These can fluctuate from year to year, so it’s necessary to check what the most recent specific levels are.

Secondly, applicants have to agree to use the dwelling in question as an owner-occupied property. That means they must live in the property as their primary place of residence.

Applicants must also have the legal capacity to personally incur the obligation of the loan. This starts with being a United States citizen, a registered non-citizen national, or a legally qualified alien. It also means that haven’t been debarred or suspended from participating in federal programs.

Applicants must also demonstrate sufficient willingness to keep up with the credit obligations in a prompt and timely manner. They must also buy a property which also meets all of the criteria of the program.

How Can The Funds Be Used?

Funds that are backed by the loan guarantees are generally available for several different potential uses.

The first is buying an existing or even new residential property that will get used as a primary or permanent residence. Closing costs might get included into the transaction, as can any expenses considered customary or reasonable. These might include connection fees that buyers are liable for, including water, electricity, sewer, and gas.

These funds can also get used to refinance eligible loans or even conduct rehabilitation and repairs that are related to buying a currently existing dwelling.

In select cases, the funds can be applied towards permanently installed equipment or special design features that would better accommodate someone in the household that is afflicted by a physical disability.

Funds can also be used for a pro rata share of any real estate taxes that are due and/or payable at loan closing time. Funds can even be used to establish escrow accounts for later taxes, and even flood or hazard insurance programs, as well as essential household equipment. This could include HVAC equipment, laundry machines, kitchen appliances, and wall-to-wall carpeting. It’s also possible to buy and then install any measures that might increase the energy-efficiency of the home, such as solar panels, double-paned glass, and insulation.

Funds might even be used to install fixed broadband service, as well as site-prep costs like driveways, fences, walks, trees, sod or seeding, foundation plantings, and grading.

How Rural Is Rural?

While the program largely states it is intended for rural areas, don’t assume you’ll be living a mile away from your nearest neighbor. In fact, most of the eligible areas are surprisingly suburban. Most villages and towns are eligible, as are the spaces in between them, so you might be able to finance a home outside of San Antonio with this program, but not in the city itself. Likewise, the inner areas of metro areas like Houston or Dallas won’t count, but being a half-hour or more outside the city might.

This Program Isn’t Actually A Loan

The loans provided are supported fully by the United States of Department of Agriculture, but the department doesn’t actually offer you the home loan itself. That still comes from an approved private or commercial lender that you must apply to. However, the primary advantage of doing so is getting locked into a 30-year mortgage with a low fixed interest rate. You might not even have a down payment requirement. On the other hand, if you don’t put anything or much down, then you’re likely going to have to pay a premium for mortgage insurance to mitigate the lender’s risk.

The Pros Of The USDA Loan Program

For starters, it is 100-percent financing, if you want. That means you can choose to use a no-down-payment option.

Secondly, no cash reserves are necessary. This helps you buy a home faster without having a lot of money saved up in the bank.

The credit and qualifying guidelines are flexible, which also makes it easier to qualify for financing, even if your credit history, report, and scores are as ideal as they would need be for conventional or commercial financing.

Another perk of this program is that it can be set up so that the seller pays the closing costs. The lack of pre-payment penalties and low fixed interest rates are two more features that save you money. You can even use this loan to finance closing costs and repairs right into the loan.

The overall flexibility of the program is so versatile that you can use this option for building a home, purchasing a home, or even just refinancing one.

The Cons Of The Program

For all the benefits and advantages of the program, there are some downsides and drawbacks too. For starters, there are geographic restrictions. While many Texans are eligible for the program, it is oriented more towards rural and suburban homes, so those living in highly urban areas might not qualify. Fortunately, there are online resources where you can simply plug in the street address of any residential property to determine likely eligibility.

Secondly, there are income limits. If you or your household makes too much money in excess of the program caps, you might not qualify for assistance or benefits.

Third, mortgage insurance is usually included in the loan. While it’s good to have that coverage, and honestly essential to start with. However, forced inclusion into the loan might prevent you from shopping around for your own insurance carrier of choice.

Fourth and finally, this loan and program doesn’t qualify for duplex homes. Applicable residences can only be single-family units. Also, they must be owner-occupied, so you can’t use these benefits for flips, rentals, or vacation homes.

A Comprehensive Analysis Of USDA Loans In Texas

USDA loans are home buying mortgages that are backed by the U.S Department of Agriculture. They are also known as ‘Section 52’ loans or USDA Rural Development Guaranteed Housing Loans. These loans are offered to new and existing prospective home buyers to assist in the purchase of homes. USDA loans are highly available to all residents in the counties of Texas.

rural development loan programs in texas

These homes are offered to support prospective home buyers looking to acquire home owners in rural areas. Therefore, before applying for this loan, you should check to ascertain whether you are looking to acquire a home in an area that is considered to be a rural area. This should not worry you a lot since the USDA has very flexible descriptions on what area can be described as a ‘rural area’.

USDA Rural Development Loans loans give beneficiaries 100% financing for acquiring or building a home. These loans are typically given to low income earners.

In Texas, the average household income limit needed to acquire a USDA loan is $74,750. However, this limit can vary depending on the number of people in a household as well as the county in which you are applying for a loan.

In order to acquire a USDA loan, you must first meet the eligibility guidelines and the home that you want to acquire must also fall within the USDA housing limits. You can find out if your prospective dream home falls within communities eligible for USDA loans by visiting the U.S Department of Agriculture website.

If your home meets the eligibility standards, you can find a lender who offers USDA loans on the U.S. Department of Agriculture website. On finding a lender in your locality, they will guide you on how to know if you are eligible for a loan.

What Makes USDA Texas Housing Loans So Great?

If you have ever tried acquiring a house, you may have been asked to provide some form of down payment in order to get a mortgage from lending institutions. This is not the case when it comes to USDA housing loans. To get this loan, you do not need to put up any down payment. The loan offers full financing to beneficiaries.

There is also no limit to the amount that you can apply for in a USDA loan application in Texas. This means that these loans allow you to choose your dream home and offer full financial backing to make your house ownership dreams possible.

You also do not need to have any assets to offer as collateral when applying for a USDA loan. You simply need to meet the minimum application threshold to apply for a loan.

According to guidelines from the U.S Department of Agriculture, there is no minimum score to get a USDA loan. However, most lenders who are approved to offer these loans usually have a minimum credit score rating that you must meet to get this loan. In most counties in Texas, to get a USDA loan from an approved lender, you have to prove that you are credit worthy. However, this should not worry you as most USDA loan lenders have very flexible credit score requirements. In most counties in Texas, you simply need to have an average credit score of 620 to get a USDA housing loan.

You can also apply for a USDA loan whether you are looking to build your dream home from scratch or if you simply want to acquire an already existing property. This means that you can untether your imagination if you will be relying on a USDA loan to acquire a property. If you want to apply for a USDA loan, it also does not matter whether you are existing home owner. You can still apply for a USDA loan and get approval.

One of the reasons why most people tend to fear applying for housing mortgages from banks and other financial institutions is the high interest loan rates which can be changed by the lender at any time depending on market conditions. USDA loans are different in that they come with fixed repayment rates. These loans also have some of the lowest interest rates in the housing mortgage market.

USDA loans also have a very flexible and friendly repayment period. These loans can be repaid back over a period of either 15 or 30 years. This means that you can acquire a loan, buy or build your dream home and then make small repayments that will not get you in any financial constraints.

On acquiring a USDA housing loan, you can refinance your loan should mortgage housing rates fall. This means that you can save money through refinancing without having to verify your credit or income if you have a USDA loan. This is unlike other mortgage options where you have to verify both your current credit score and income.

On taking a USDA loan, if you cannot afford to pay the closing costs for a property, you can gift these costs to a member of your family or even other people that you are not related to. Your property seller can also pay for the closing costs of the property.

If you have a dilapidated property and want to make renovations to make your life easier and more convenient or even to sell your property, you can also apply and get a Texas USDA loan.

Top Pros and Cons of Texas USDA Loans

Pros

• You do not need to make a down payment when buying a property
• They have very flexible credit requirements
• They come at low and fixed interest rates
• They can be repaid over a period of over 15 or 30 years
• They are available to both new and existing home owners
• They can be refinanced

Cons

• Your application can be denied because of your income
• They are only available for people residing and looking to own homes in certain geographic locations in the United States
• USDA loans can only be used to build single family homes
• You cannot use USDA loans to build an investment property such as residential units
• They cannot be used to build a vacation home
• Your loan application can get denied by USDA lenders if you have a credit score that is extremely low

If you are looking to build a new home, acquire an existing property or make home improvements in your residence, you should consider acquire a Texas USDA loan. Among all the housing mortgage options available in the market, you are highly unlikely to find one that is better than the USDA.