USDA Loans in Texas: Buying in Rural Areas Around Austin (2026 Guide)

If you have been priced out of the Austin housing market, you are not alone. Home prices in the Austin metro have climbed significantly over the past decade, pushing many buyers to look at surrounding rural areas. The good news? The U.S. Department of Agriculture (USDA) offers a mortgage program that lets you buy a home with zero down payment in eligible rural areas around Austin.

This guide explains everything you need to know about USDA loans in Texas for 2026 — how they work, who qualifies, what areas around Austin are eligible, and how to apply.

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What Is a USDA Loan?

A USDA loan is a mortgage backed by the U.S. Department of Agriculture through its Rural Development program. The program's official name is the Section 502 Guaranteed Loan Program. It helps low- and moderate-income households buy homes in eligible rural areas with 100% financing — meaning no down payment is required.

The USDA does not lend money directly. Instead, it guarantees loans made by approved private lenders. This guarantee reduces the lender's risk, which makes them willing to offer zero-down loans to borrowers who might not qualify for conventional financing.

There are actually two USDA home loan programs:

1. USDA Guaranteed Loan Program (Section 502 Guaranteed) — The most common. You apply through an approved private lender. Income cannot exceed 115% of the area median household income. No down payment required. 30-year fixed rate.

2. USDA Direct Loan Program (Section 502 Direct) — The USDA lends directly to very-low and low-income borrowers. As of July 1, 2026, the interest rate is 5.250%, and with payment assistance, it can be as low as 1%. Up to a 33-year payback period (38 years for very-low-income applicants). No down payment is typically required.

Source: USDA Rural Development, Single Family Housing Guaranteed Loan Program and Single Family Housing Direct Home Loans program pages (rd.usda.gov).

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Why Choose a USDA Loan?

Here are the biggest advantages of a USDA loan:

• Zero down payment. You can finance 100% of the home's purchase price. This is one of only two zero-down mortgage programs in the U.S. (the other is the VA loan).
• Competitive interest rates. Because the USDA guarantees the loan, lenders often offer rates comparable to or even lower than conventional loans.
• No private mortgage insurance (PMI). Instead of PMI, USDA loans charge a guarantee fee, which is typically lower than PMI on conventional loans.
• Flexible credit requirements. The USDA program has no official minimum credit score, though most lenders look for a score of at least 620. The program focuses on your overall ability to repay, not just a number.
• 30-year fixed rate. USDA guaranteed loans are only offered as 30-year fixed-rate mortgages, giving you payment stability.
• Closing costs can be rolled in. In some cases, closing costs and repairs can be included in the loan amount.

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USDA Loan Eligibility: Who Qualifies?

Income Limits

For the Guaranteed Loan Program, your household income cannot exceed 115% of the area median household income (AMI) for the county where you are buying. Income limits vary by county and household size.

For the Direct Loan Program, your adjusted income must be at or below the low-income limit for your area.

You can check the specific income limits for your county and household size using the USDA's online eligibility tool at eligibility.sc.egov.usda.gov.

Citizenship Requirements

Applicants must be a U.S. citizen, U.S. non-citizen national, or a Qualified Alien. This is a federal program, so it does not accept ITIN numbers. If you do not have a Social Security Number, you may want to look into ITIN loans in Texas instead.

Occupancy Requirement

The home must be your primary residence. You cannot use a USDA loan to buy an investment property or a vacation home.

Property Requirements

The home must be located in an eligible rural area as defined by the USDA. It must be a modest, decent, safe, and sanitary dwelling. The property can be:

• New or existing
• Single-family detached, attached, condo, or planned unit development (PUD)
• Modular or manufactured housing
• Located on a site with no set acreage limits

The property cannot be income-producing (no farm operations, no rental units).

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Eligible Rural Areas Around Austin

This is one of the most important parts of understanding USDA loans in the Austin area. The USDA defines "rural" based on population — not on how the land looks. Areas with populations under certain thresholds are generally eligible, and many communities within a 30–60 minute drive of downtown Austin qualify.

Here are some areas near Austin that are typically USDA-eligible (you should always verify with the USDA eligibility map):

Williamson County

• Jarrell — About 35 miles north of Austin, Jarrell and its surrounding areas are largely USDA-eligible. The town has grown quickly but still qualifies.
• Liberty Hill — Located about 30 miles northwest of Austin, Liberty Hill and surrounding rural areas are generally eligible.
• Taylor — East of Round Rock, Taylor and the surrounding rural areas often qualify for USDA financing.
• Hutto — Parts of Hutto and the areas just outside the city limits may still be eligible, though rapid growth has changed some designations. Check the current map.
• Florence — A small community between Georgetown and Jarrell, generally USDA-eligible.

Hays County

• Buda — Some areas on the outskirts of Buda may still qualify, though rapid growth has affected eligibility. Check the map for specific addresses.
• Kyle — Areas south and east of Kyle's main development may be eligible.
• Wimberley — This hill country community is largely USDA-eligible.
• Dripping Springs — Parts of Dripping Springs and surrounding areas are generally eligible.
• San Marcos — Some areas on the outskirts of San Marcos may qualify.

Bastrop County

• Bastrop — Much of Bastrop and surrounding areas are USDA-eligible.
• Elgin — East of Austin, Elgin and its surrounding areas are generally eligible.
• Smithville — Further east along Highway 71, Smithville is USDA-eligible.

Caldwell County

• Lockhart — About 30 miles south of Austin, Lockhart is largely USDA-eligible.
• Luling — Further south, Luling and surrounding areas are eligible.

Lee County

• Giddings — About 60 miles east of Austin, Giddings and surrounding areas are USDA-eligible.

Important: USDA eligibility boundaries change. Always verify a specific property address using the USDA Property Eligibility Map before making an offer.

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How to Check if a Property Is USDA-Eligible

Checking property eligibility is free and takes about two minutes:

1. Go to USDA's Property Eligibility Site
2. Select "Single Family Housing Guaranteed" (for the most common program)
3. Enter the property address you are considering
4. The tool will tell you if the address is in an eligible rural area

You can also use the map view to explore which areas around Austin are eligible before you start your home search.

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USDA Loan Costs and Fees

While USDA loans do not require a down payment, there are still costs to be aware of:

Guarantee Fee

The USDA charges an upfront guarantee fee (sometimes called the funding fee) and an annual fee (similar to mortgage insurance). The upfront guarantee fee is currently 1% of the loan amount and is typically financed into the loan. The annual fee is 0.35% of the loan balance each year, paid monthly as part of your mortgage payment.

Note: These fees are set by the USDA and can change. Always check with your lender for the most current fee structure.

Closing Costs

Closing costs for USDA loans are similar to other loan types — typically 2% to 5% of the loan amount. In some cases, the seller can pay part or all of your closing costs, and you may be able to roll certain costs into the loan.

Interest Rates

Interest rates are set by individual lenders, not by the USDA. Rates vary based on your credit, the lender, and market conditions. The USDA recommends comparison shopping among approved lenders to find the best rate. USDA guaranteed loans are always 30-year fixed-rate mortgages.

For the Direct Loan Program, the current interest rate as of July 1, 2026 is 5.250% for low-income and very-low-income borrowers. With payment assistance, the effective rate can be as low as 1%.

Source: USDA Rural Development, Single Family Housing Direct Home Loans program page (rd.usda.gov), updated July 1, 2026.

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Step-by-Step: How to Get a USDA Loan in Texas

Step 1: Check Your Income Eligibility

Use the USDA Income Eligibility tool to confirm your household income is within the limits for the county where you want to buy.

Step 2: Check Property Eligibility

Use the USDA Property Eligibility Map to confirm the home you want to buy is in an eligible area.

Step 3: Find a USDA-Approved Lender

You can search for approved lenders on the USDA Active Lenders list. Shop around — interest rates and fees vary between lenders.

Step 4: Get Pre-Approved

Your lender will review your income, debts, credit history, and assets. They will determine how much you can borrow and give you a pre-approval letter.

Step 5: Find a Home in an Eligible Area

Work with a real estate agent who understands USDA loans. They can help you focus on eligible areas and avoid wasting time on properties that will not qualify.

Step 6: Make an Offer and Apply

Once you find a home, make an offer. If accepted, your lender will process your loan application and submit it to the USDA for guarantee approval.

Step 7: Close on Your Home

After final approval, you will sign the closing documents and get the keys to your new home — with no down payment required.

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USDA Loan vs. Other Zero-Down and Low-Down Loans

Feature	USDA Loan	VA Loan	FHA Loan	Conventional 3% Down
Down payment	0%	0%	3.5%	3%
PMI/Mortgage Insurance	Annual guarantee fee (0.35%)	No PMI	Upfront + annual MIP	PMI required
Minimum credit score	~620 (lender-dependent)	~620 (lender-dependent)	580 for 3.5% down	620+
Property location	Rural areas only	Anywhere	Anywhere	Anywhere
Income limits	Yes (115% AMI)	No	No	No
Citizenship	U.S. citizen, national, or Qualified Alien	U.S. citizen, national, or eligible non-citizen	No restriction	No restriction

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Common Myths About USDA Loans

Myth 1: "USDA loans are only for farms."

False. USDA loans are for residential properties in eligible rural areas. The home does not need to be a farm or have any agricultural use. It just needs to be in a qualifying area and be your primary residence.

Myth 2: "USDA loans take forever to close."

Mostly false. USDA loans can take a bit longer than conventional loans — typically 30 to 45 days — because the USDA must issue a final guarantee approval. But with an experienced lender, the timeline is manageable.

Myth 3: "You need perfect credit."

False. The USDA program has no minimum credit score requirement. Lenders typically look for at least a 620, but the program focuses on your overall financial picture and your willingness and ability to repay debt.

Myth 4: "USDA loans are only for first-time buyers."

False. You do not need to be a first-time homebuyer to qualify. You just need to meet income and property requirements and not currently own a home that you could occupy in the eligible area.

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Tips for Buying a Home with a USDA Loan Near Austin

1. Work with a knowledgeable agent. Not all real estate agents understand USDA loans. Find one who knows the eligible areas and has experience with USDA transactions. Sully Ruiz specializes in helping families find homes in the greater Austin area, including rural communities.

2. Verify eligibility before falling in love with a home. Always check the USDA eligibility map before making an offer. Boundaries can change, and some homes that look "rural" may not qualify.

3. Consider the commute. Many USDA-eligible areas are 30 to 60 minutes from downtown Austin. Think about your daily drive, school drop-offs, and access to amenities before committing.

4. Factor in all costs. Even with zero down, you will have closing costs, the guarantee fee, property taxes, and homeowners insurance. Make sure you understand the full monthly cost.

5. Get pre-approved early. USDA pre-approval involves income verification and property area eligibility. Start the process before you begin house hunting so you are ready to move quickly.

6. Ask about seller concessions. Sellers in rural areas may be more willing to help with closing costs. Your agent can negotiate this for you.

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Who Should Consider a USDA Loan?

A USDA loan might be right for you if:

• You want to buy a home with no down payment
• Your household income is at or below 115% of the area median
• You are willing to live in a rural area near Austin
• You are a U.S. citizen, U.S. national, or Qualified Alien
• You want a 30-year fixed-rate mortgage
• You do not qualify for a VA loan (which also offers zero down)

A USDA loan might not be right for you if:

• You want to live in the urban core of Austin or a major suburb like Round Rock or Cedar Park (these areas are generally not USDA-eligible)
• Your income exceeds the USDA limits
• You are not a U.S. citizen or Qualified Alien (look into ITIN loans instead)
• You want to buy an investment property

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The Bottom Line

USDA loans are one of the most underused mortgage programs in Texas. Many buyers who could qualify do not even know the program exists. If you are flexible about where you live and want to buy a home with zero down payment, a USDA loan could save you tens of thousands of dollars upfront compared to conventional financing.

The areas around Austin — including Jarrell, Liberty Hill, Taylor, Bastrop, Lockhart, Wimberley, and many others — offer beautiful homes, more space for your money, and a quieter lifestyle while keeping you within commuting distance of the city.

If you want to explore whether a USDA loan is right for you, reach out to a USDA-approved lender and check your eligibility. And if you need help finding a home in a USDA-eligible area near Austin, contact Sully Ruiz — we help families find the right home in the right community every day.

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Sources: USDA Rural Development, Single Family Housing Guaranteed Loan Program and Single Family Housing Direct Home Loans program pages at rd.usda.gov. USDA Income and Property Eligibility Site at eligibility.sc.egov.usda.gov. All program details are subject to change — always verify current requirements with the USDA and your lender.

This article is for informational purposes only and does not constitute financial advice. Loan terms, fees, and eligibility requirements are set by the USDA and approved lenders and may change without notice.