Do you want to purchase a home in Texas but are unsure if you qualify for a USDA Loans Dallas, TX? Don’t worry; we’re here to help! This article will explain the income limits for USDA loans in Texas. We will also provide information on how to apply and tell you about the requirements.
About USDA Loans
A USDA loan is a loan that allows borrowers to finance a home with as little as 0% down. The U.S. Department of Agriculture (USDA) guarantees the loan, making it easier for lenders to extend credit to low- and moderate-income borrowers.
USDA loans are also known as “rural development loans” because they can only be used to purchase homes in rural or suburban areas. However, some small towns may also qualify.
Income Limits
A household income must fall below a certain limit to qualify for a USDA loan. The limit varies by county and state but is generally around $85,000 for a family of four.
If your household income exceeds the limit, you may still be able to qualify if you have a low debt-to-income ratio or can demonstrate that the excess income is due to seasonal employment.
Types Of Income That May Be Considered For USDA Loans Dallas
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Wages, Salaries, Tips, Overtime Pay, Commissions, Etc
By wages, the USDA is referring to your regular paycheck before taxes are taken out. So, if you make $2,000/month before taxes, your monthly income would be considered $2000 for USDA purposes.
Overtime pay and commissions can also be included as income, but only if regularly received.
- Net Income From Self-Employment
If you are self-employed, your net profit (income after business expenses are deducted) can be used as qualifying income. To calculate monthly income, divide this number by 12. For example, if your net profit is $24,000, your monthly qualifying income would be $2,000.
- Rental Income
If you own rental property. The two primary requirements are:
The applicant is not an absentee owner. The applicant must live on the property or within 50 miles of it. The amount of rental income that can be included in your USDA loan qualifications will depend on the number of units the property has and the property’s location.
- Income from assets
The USDA considers this type of income “unearned” because it is not derived from employment. The percentages are:
- Savings and checking accounts: Up to 80%
- CDs and money market accounts: Up to 95%
- Stocks and bonds: Up to 70%
- Mutual funds: Up to 60%
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Unreimbursed Business Expenses
If you are running a small business, you may be able to deduct certain expenses related to your business. These include things like office expenses, supplies, mileage, and more.
For example, to qualify for a USDA loan, your business must make less than $750,000 in gross annual income.
- Income From Investments
Your USDA loan application can also include investment income as long as it is “verified and stable”. Your lender will request copies of your tax returns from the past two years to verify your investment income.
They will then take an average of your investment income from those tax returns to determine if it is eligible for inclusion in your USDA loan application. Keep in mind that, like all other forms of income, your investment income must meet the USDA’s gross annual income limit to be eligible for inclusion.
Eligibility Criteria
- Right Property
The property you want to purchase qualifies for a USDA loan. The property must be located in a designated rural area. You can use the USDA’s Property Eligibility Lookup tool to see if a particular address is eligible.
- Income Eligibility
Perhaps the biggest obstacle to USDA loan approval is income. The program looks for very low, low, and moderate incomes. To qualify, an average household income must be below a certain level. The limit varies by county and metro area, but it’s generally around 115% of the median income for that area.
- Loan Limit
The USDA loan limit is the maximum loan amount you can qualify for. It varies by county and metro area, but it’s generally around $285,000.
- Credit Score Requirements
There are no hard credit score requirements for USDA loans, but you’ll need about 620 to 640 credit history to qualify. That means you have a good mix of credit types (installment loans, revolving debt, etc.) and a history of on-time payments.
How To Apply For A USDA Loan
To apply, simply contact a participating lender. There is a list of every approved lender on the USDA website. Once you’ve found a lender, you’ll need to complete an application and provide the following documentation:
- A completed loan application
- Your most recent tax return
- Your pay stubs from the last 30 days
- Your bank statements from the last 60 days
- Proof of any other income you receive
Once everything is complete, the lender will review your information and decide.
Conclusion
USDA loans are a great option for people who want to buy a home in Texas. They offer low-interest rates and don’t require a down payment. Plus, there are no income limits. If you think you might qualify, contact a participating lender today.
