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.
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.