USDA Loan Requirements in Texas
Quick answer: To qualify for a USDA Guaranteed loan in Texas, your household income must be within the limit for your county, you must live in the home, your credit and debts must meet USDA and lender standards, and the property must be in a USDA-eligible area and meet USDA's property standards. These rules come from USDA Handbook HB-1-3555. All loans subject to credit and property approval.
USDA requirements fall into two groups: rules about you (the household) and rules about the home. A lender checks both. This page follows the order USDA's own handbook uses, with a chapter reference for each rule, so you can see where it comes from.
What are the USDA income requirements in Texas?
Your household's adjusted annual income must be at or below USDA's limit for your county and household size, and the people on the loan need stable, dependable income to repay it.
USDA looks at income two ways (HB-1-3555, Chapter 9):
- Annual and adjusted annual income count every adult member of the household, even adults who won't be on the loan. Adjusted income is annual income minus allowed deductions, such as for dependents, child care, an elderly household, and certain care expenses for household members with disabilities. This number is what's compared with the income limit.
- Repayment income counts only the borrowers. It's the income the lender uses to see if you can afford the payment.
The lender reviews your employment history to decide whether income is stable and dependable. USDA doesn't impose a fixed rule for employment gaps, and time spent in school or in military service can count toward your employment history. Self-employed applicants generally need a two-year history of business earnings. Learn how the limits work and how to check your county on our USDA income limits in Texas page.
What credit do you need for a USDA loan?
USDA's handbook doesn't set one minimum credit score for every loan; USDA's automated underwriting system weighs your score and history, and lenders may set their own requirements on top.
Most USDA files run through the Guaranteed Underwriting System (GUS). GUS returns a recommendation of Accept, Refer or Refer with Caution, and it decides which credit score to use for that recommendation (HB-1-3555, Chapter 10). An "Accept" streamlines the paperwork. A "Refer" means the underwriter reviews the file by hand against Chapter 10's credit standards.
A few points that help many Texas buyers:
- Thin or no credit file. USDA allows a non-traditional credit history, built from things like rent, utilities and insurance payments, when you don't have enough traditional accounts.
- Past credit problems. The handbook explains when an underwriter can look past them, for example with documented extenuating circumstances. It's case by case, so talk it through before you assume you're out.
- Lender requirements. Lenders may add their own credit standards. Danny Nassar, NMLS 220172, can tell you Canopy Mortgage's current requirements for your file.
What debt-to-income ratios does USDA use?
USDA uses two ratios: the PITI ratio (your new housing payment against repayment income) and the total debt ratio (housing plus other monthly debts).
USDA publishes standards for both ratios in HB-1-3555, Chapter 11, and allows some flexibility when the file has valid compensating factors, such as cash reserves left after closing or a long, steady job history. The housing payment includes principal, interest, property taxes, homeowners insurance and USDA's annual fee, plus HOA dues where they apply. Because Texas property taxes vary a lot by county and school district, two homes at the same price can produce different ratios. Danny will run your numbers on a specific property.
Who is eligible to apply?
Applicants must occupy the home as their primary residence, have legal capacity to sign, meet citizenship rules, not be barred from federal programs, and be unable to get traditional conventional credit.
| Rule | In plain language |
|---|---|
| Primary residence | You must live in the home. No second homes or rentals. |
| Citizenship | U.S. citizen, U.S. non-citizen national, or qualified alien with documentation |
| Legal capacity | Able to sign a binding contract |
| Federal standing | Not suspended or debarred from federal programs |
| Conventional credit | You can't get a traditional conventional loan as USDA defines it |
| Other homes | You may keep one other home if it no longer meets your needs, you qualify to carry both, and you're not responsible for another USDA home loan by closing |
| Co-signers | Not allowed. Everyone on the loan must live in the home. |
You don't need to be a first-time buyer. See our guide for first-time buyers in Texas for how USDA treats both.
What are the USDA property requirements?
The home must be in a USDA-eligible area, be modest and mainly residential, be decent, safe and sanitary, and serve as your primary home.
- Eligible area. Check the exact address on USDA's map. See how to use the USDA eligibility map.
- Modest housing. There's no program maximum price, but the home shouldn't be designed for income production. Properties used mainly for farming or business aren't eligible. A garden that brings in a small amount of extra income is fine.
- Condition. The appraisal must show the home meets standards for safety and soundness. Some repairs can be handled through a repair escrow; see USDA renovation loans.
- Property types. Single-family homes, eligible condos, modular homes, and manufactured homes that meet USDA's rules. See manufactured home rules.
- Texas water and septic. Many eligible Texas homes have private wells or septic systems. These are acceptable when they meet USDA and state or local health standards, and a water quality test is generally required for a private well.
What documents will you need?
Plan on income, asset and identity documents for borrowers, plus income information for every other adult in the household.
- Recent pay stubs and W-2s, or tax returns if you're self-employed
- Recent bank statements for the accounts you'll use
- Photo ID and, if applicable, immigration documentation
- Income information for other adult household members
- Records of child care or qualifying medical expenses, if you'll claim deductions
- Rent, utility or insurance payment records, if you need non-traditional credit
Your lender will give you an exact list for your situation. Then follow the USDA loan process step by step.
Source: USDA Single Family Housing Guaranteed Loan Program Technical Handbook, HB-1-3555, Chapters 8 to 12. All loans subject to credit and property approval.
Frequently asked questions
Is there a minimum credit score for a USDA loan in Texas?
USDA's handbook doesn't print a single minimum for every file. GUS weighs your credit, and an underwriter can review files by hand. Lenders, including Canopy Mortgage, may set their own requirements. Ask Danny for Canopy's current requirements.
Does my spouse's income count if they're not on the loan?
For the income limit, yes. USDA counts income from every adult in the household. For qualifying to repay the loan, only the borrowers' income is used.
Can a parent co-sign my USDA loan?
No. USDA doesn't allow co-signers or co-borrowers who won't live in the home.
Can I use a USDA loan if I'm self-employed?
Yes. The lender will usually review a two-year history of your business earnings using tax returns.
Do I need to be a first-time buyer?
No. Repeat buyers can qualify, and USDA has specific rules for applicants who already own a home.
Can a USDA home have a well and septic system?
Yes, as long as they meet USDA and state or local health standards. A private well generally needs a water quality test.
Talk with Danny about your Texas USDA loan
Tell Danny the county you're buying in and who lives in your household. He'll walk you through the USDA rules that apply to you and the next steps.
All loans subject to credit and property approval.