How Much House Can I Afford With a USDA Loan? (TX vs AZ)

Two houses, same list price of $300,000. One is outside Waxahachie and the other is near Casa Grande. The buyers are the same couple with the same paychecks, the same car payment and the same student loan, and both houses would use the same USDA program. Underwriting can still approve them for noticeably different loan amounts on those two houses.

That couple is a made-up example, not a client, and I'll use them through this whole post. On an Ellis County file, one of the first things I pull is the appraisal district's list of taxing units for that exact parcel, because I want every unit on the bill, not just the ones the listing happens to mention.

The two tests underwriting runs

HB-1-3555, Chapter 11 sets USDA's baseline. You're considered to have repayment ability when your proposed housing expense is at or under 29 percent of your monthly repayment income and your total debts (housing plus everything else) are at or under 41 percent. You have to meet both. The handbook allows higher ratios when strong compensating factors show more repayment ability. More on that at the end.

The part people skip is how the two tests interact. Your car payment and student loan don't touch the housing ratio, but they eat into the total-debt ratio. Carry enough of them and the total-debt cap binds before the housing cap does. That's exactly what happens to our couple.

Here's a rough way to run it yourself. Multiply your gross monthly repayment income by 29 percent, then subtract the taxes, insurance, dues, assessments and the annual fee's monthly share for that specific address. Then multiply the same income by 41 percent, subtract your other monthly debts, and subtract those same housing costs. Whichever result is smaller is roughly what's left for principal and interest.

And the housing number isn't just the loan. Taxes, insurance, dues, assessments and USDA's annual fee all come out before anything is left for principal and interest. That's why the address matters as much as the paycheck.

Same couple, two very different tax bills

An address-specific estimate needs a handful of inputs: your gross monthly repayment income, your monthly debt payments, the tax bill you'll actually pay on that parcel, an insurance quote, any dues or assessments, and the rate you're quoted on the day we run it. Change any one of those and the answer moves.

What I can show you is the shape of it. Our couple's debts are identical on both houses, so their ratios leave the same amount for housing on both. The difference is how much each address takes before the loan gets any.

On the Texas house, the bill stacks up. County, city, school district, and in a lot of newer subdivisions around Waxahachie, a MUD tax on top of all of it. Then insurance and HOA dues. On the Arizona house in this example, the tax bill is lighter and there's no HOA. Neither house is in a flood zone.

So the Arizona house leaves more for principal, interest and the annual fee, and that supports a bigger loan. With financing assumptions held equal, the higher taxes and other housing expenses on the Texas house leave less capacity for mortgage debt.

Two cautions. A cheaper house in the same Texas taxing districts usually carries a smaller tax bill, so I re-run the numbers for each address instead of assuming one gap applies everywhere. And this is baseline-ratio thinking. A GUS Accept could support more, but I wouldn't shop on that assumption.

What goes into the housing number

Under Chapter 11, paragraph 11.2, housing expense is a lot more than principal and interest. It includes principal and interest on the first mortgage and any subordinate lien, property taxes whether escrowed or not, homeowner's insurance, supplemental property insurance such as flood coverage in a flood zone, the first-year monthly amount of USDA's annual fee, HOA or other association dues, and other housing expenses including special assessments.

That last item is where the Texas house in our example got hit. In newer subdivisions a Municipal Utility District levies its own ad valorem tax, and a Public Improvement District can levy a special assessment secured like a tax lien. Both belong in the housing number.

USDA charges two fees. The upfront guarantee fee is based on the loan amount, and if it's financed, your balance goes up. The annual fee is figured on the average scheduled unpaid balance and collected monthly through escrow. Current figures are on USDA's Single Family Housing Guaranteed Loan Program page. If you're planning to finance costs, read how rolling closing costs into a USDA loan works.

The couple's car and student loan are the usual suspects. Debts include car payments, minimum card payments, student loans, personal loans, court-ordered payments and tax repayment plans. Installment and court-ordered debts can be left out when there are ten or fewer payments left and the payment is at or under 5 percent of monthly repayment income, under paragraph 11.2 of Chapter 11. A zero-balance card doesn't need a payment counted, and you don't have to close it. Texas and Arizona are both community property states, and USDA's guidance generally requires the lender to count a non-purchasing spouse's debts unless state law specifically excludes them.

One recent change matters if you've been playing with online calculators. Procedure Notice 621 temporarily raised the baseline housing ratio to 34 percent in 2024. Procedure Notice 651, dated November 25, 2025, restored it to 29. A tool still using 34 may overstate what you're eligible for unless a GUS Accept or an approved waiver actually supports the higher ratio on your file.

Does the USDA annual fee count in my DTI?

Yes. The first-year monthly amount counts in both the housing ratio and the total-debt ratio under HB-1-3555 Chapter 11. In our example it competes with principal and interest for whatever is left after taxes and insurance.

What income does USDA use to qualify me?

USDA counts income two different ways, and they get mixed up constantly.

Annual income counts eligible income from the adults in the household, whether or not they're on the loan, plus benefits paid on behalf of minors and, when cumulative non-retirement household assets reach $50,000 or more, the income those assets earn. It's subject to the exclusions in Chapter 9 and its Attachment 9-A. USDA's April 2026 lender training lists some of them, such as lump-sum or sporadic payments, SNAP benefits and student loans. Subtract certain deductions (a $480 deduction per dependent, qualifying childcare for kids 12 and under, and a few others) and you get adjusted annual income. That's the figure compared against the county income limit.

Repayment income includes only the applicants on the note. It has to be stable and dependable, and the training says it should be expected to continue at least three years into the mortgage. Co-signers aren't permitted. Verified tax-exempt income can be grossed up by 25 percent, but only for repayment income and never for household income. The ratios in our example come from repayment income.

Say one spouse in our couple stays off the loan because of credit. Their paycheck counts toward the income limit and does nothing for the ratios. Our walkthrough on how to calculate USDA household income shows how underwriters add it up.

Can earning more stop me from getting a USDA loan?

It can. For FY 2026, USDA's standard baseline guaranteed limit is $122,800 for households of one to four people and $162,100 for five to eight, effective July 13, 2026 under Procedure Notice 657. Many counties have higher limits. Look up yours on the USDA eligibility site and check again after USDA's usual July update.

A raise for someone on the note lifts repayment income, which helps the ratios. The same raise also flows into household annual income, along with a non-borrowing spouse's overtime. An adult child's new job counts too, with an exception. If that adult child is a full-time student and isn't an applicant, co-applicant or an applicant's spouse, only the first $480 of their earned income is included. If adjusted annual income ends up over the county limit, the file is ineligible no matter how good the ratios look. If a raise is coming, I run both numbers before anyone counts on it.

How do I estimate Texas property taxes for a house I'm buying?

The seller's current tax bill is a starting point. It isn't your number.

The seller's homestead exemptions and homestead appraisal limitation belong to the seller, and they don't transfer to you. They also don't end the day you close. Texas sets that timing by statute. The Texas Comptroller's valuation guidance explains that the homestead appraisal limitation expires on January 1 of the year after the owner stops qualifying. So the bill for the year you buy may still reflect the seller's situation, while a later year's bill is figured without the seller's cap and with only the exemptions you qualify for. That later bill is the one I want to underwrite to.

For a buyer-specific estimate on an existing home, I'd want a realistic value for the parcel after your purchase, the exemptions you'll personally qualify for and when they'd take effect, every taxing unit's rate including any MUD, and any PID installment. New construction needs extra care, because a bill based on the lot alone or a partial-year assessment will understate the finished home.

Arizona works differently, but the principle holds. Ask the Pinal County Assessor (or your county's) how the parcel is valued and whether anything on the current bill belongs to the seller and not to you. In Texas, start with the Ellis Central Appraisal District. Our Ellis County USDA guide covers the local districts.

When ratios above 29/41 can still work

If GUS, USDA's automated system, returns an Accept, Chapter 11 says no debt-ratio waiver is required even when ratios are above 29/41. USDA doesn't publish a fixed ceiling for an Accept. Files past GUS's internal thresholds come back Refer or Ineligible.

On a Refer, Refer with Caution, or manually underwritten purchase, the lender can request a waiver, with housing capped at 32 percent and total debt at 44. Every applicant needs a validated credit score of 680 or higher, and applicants using non-traditional credit can't get a waiver. You also need at least one documented compensating factor:

• reserves after closing equal to at least three months of the new housing payment (cash on hand doesn't count)
• every employed applicant with the same primary employer for at least two years, or two years of Social Security or retirement income (self-employed applicants can't use this one)
• minimal payment shock, meaning the new housing payment is no more than $100 or 5 percent above your current verified housing expense, whichever is less
• a home that meets the applicable IECC energy code

The payment-shock factor requires a verified housing payment history for the 12 months before application, through a verification of rent, a verification of mortgage, or the credit report, and it has to meet the handbook's late-payment standard. If you've been paying rent to a relative or an interested party, the lender needs 12 months of canceled checks, money order receipts or electronic payment confirmations.

I don't build an offer around a waiver. If the Texas house in our example only worked with a waiver, I'd want the couple to know that before signing a contract, not after GUS comes back Refer.

If your own file looks like theirs, close to the line on one address and comfortable on another, send your numbers and a buyer-specific tax estimate through our qualifier quiz and we'll check them against both the ratios and your county's income limit.

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This article is for educational purposes only. It is not financial advice or a commitment to lend. Tanner Cook is a licensed mortgage loan originator (NMLS #2090424) with the Cook Brothers Mortgage Team, powered by Cornerstone First Mortgage, LLC (NMLS #173855). Cornerstone First Mortgage is not affiliated with, endorsed by, or acting on behalf of the U.S. Department of Agriculture (USDA) or any federal or state government agency. USDA guarantee fees, income limits, and eligible-area maps referenced here reflect 2025 figures set by USDA and are subject to change. Not all applicants will qualify; approval depends on credit, income, and property eligibility. Equal Housing Lender.