Thinking about buying in or around Lubbock but unsure whether USDA or FHA is the better fit? You are not alone. Many buyers want a low down payment, a manageable monthly cost, and a clear path to approval. In this guide, you will learn the key differences between USDA and FHA loans, how they work in Lubbock County, and the simple steps to check your eligibility and costs. Let’s dive in.
USDA vs FHA overview
USDA and FHA are both federal-backed options that can make homeownership easier. Each serves a slightly different need.
- USDA Guaranteed loans are designed for low- to moderate-income buyers purchasing a primary residence in eligible rural or semi-rural areas. The standout feature is 0% down for qualified borrowers. You can also finance most closing costs and the upfront guarantee fee. Learn more on the USDA Single Family Housing Guaranteed Loan Program page.
- FHA loans are designed to help buyers with lower credit scores or smaller savings. FHA allows as little as 3.5% down for credit scores of 580 and higher. Buyers with scores between 500 and 579 may qualify with 10% down, subject to lender requirements. See FHA basics on HUD’s housing programs page.
In short, USDA fits buyers who want zero down and can buy in an eligible area just outside city limits. FHA fits buyers who need broad location flexibility, including inside the City of Lubbock or in condos and townhomes that meet FHA rules.
Who each loan fits in Lubbock
- Choose USDA if you plan to live in the home, meet area income limits, and can find an eligible property in Lubbock County outside many city tracts. This is common for homes just past the city boundary.
- Choose FHA if you need to buy within the City of Lubbock, want a condo or townhome in an FHA-approved project, or your income is above USDA’s limits.
Both programs are for primary residences only. Investment properties and second homes do not qualify.
Qualification differences
Credit score and down payment
- USDA: Many lenders look for a FICO score near 640 for streamlined approvals. Some lenders consider lower scores with compensating factors. USDA requires no minimum down payment.
- FHA: FHA permits 3.5% down with scores 580+ and 10% down for scores 500–579, subject to lender overlays. FHA is often more flexible with lower credit.
Income, DTI, and eligibility
- USDA: Household income must be within the limit for the specific area and family size. Income is calculated using household members, not just borrowers. Lenders often target a total DTI in the low 40% range, with room for compensating factors.
- FHA: No program income limit. Your income must simply support the payment under standard DTI guidelines. FHA commonly uses a back-end ratio around 43%, with flexibility when compensating factors are present.
Occupancy and credit history
- Both USDA and FHA require you to occupy the home as your primary residence.
- Both allow past credit challenges after set waiting periods. Final approval depends on lender review and program rules.
If you want a high-level, plain-English overview of these programs, the Consumer Financial Protection Bureau offers helpful explainers.
Property and location in Lubbock County
USDA map and eligibility checks
USDA approval depends on where the property sits. Many tracts outside the City of Lubbock are eligible, while most central city tracts are not.
- Check a specific address using the official USDA Property Eligibility tool. Enter the full street address for a yes or no answer.
- Use the income eligibility lookup on the same USDA site to confirm your household fits the limit for Lubbock County.
- Do not assume all of Lubbock County is ineligible. Many unincorporated areas just beyond city limits may qualify.
FHA property rules and condos
FHA can be used across cities and rural areas, including inside Lubbock. Properties must meet FHA’s Minimum Property Standards for safety, security, and soundness. Appraisers may require certain repairs before or at closing. If you are shopping for a condo or townhome, the project usually needs FHA approval. Read more on HUD’s housing programs page.
Local checks near the city limits
If you are searching in areas just outside Lubbock, confirm details that can affect financing.
- Utilities and services: verify water, sewer or septic, and road maintenance. Appraisers will note service types and conditions for both USDA and FHA.
- Flood zones: check the FEMA Flood Map Service Center to see if flood insurance is required.
- Boundaries: eligibility lines often track municipal boundaries. A parcel just across the line may be eligible for USDA.
Payment and cost tradeoffs
Upfront cash and fees
- USDA: 0% down. There is a one-time upfront guarantee fee commonly around 1.00% of the loan amount. This fee can usually be financed into the loan.
- FHA: Requires 3.5% down for scores 580+, or 10% down for 500–579. FHA also has an Upfront Mortgage Insurance Premium (UFMIP) of typically 1.75%, which can be financed. See FHA fee details via HUD’s housing programs page.
Monthly mortgage insurance
- USDA: Has an annual fee, commonly around 0.35% of the remaining principal, collected monthly.
- FHA: Has an annual Mortgage Insurance Premium that varies by loan term and loan-to-value. FHA’s annual MIP is usually higher than USDA’s standard annual fee for guaranteed loans.
The net result is that USDA often has a lower monthly mortgage insurance cost than FHA, but both programs include upfront fees that can be rolled into the loan.
Loan size limits and pricing
- FHA: Has county-level loan limits. Check the current maximum for Lubbock County using the HUD Mortgage Limits tool to make sure your target price fits.
- USDA: No standard county loan limit. The practical maximum depends on your income, debts, and the lender’s underwriting.
Interest rate notes
Rates change daily and vary by lender. FHA and USDA rates can be similar. The best comparison is a full quote that includes your interest rate, upfront fees, and monthly mortgage insurance.
Real Lubbock scenarios
- If you want the lowest cash to close and can buy just beyond Lubbock city limits, USDA may deliver the best payment due to zero down and a lower annual fee.
- If your dream home is inside the City of Lubbock, or you want a condo near Tech Terrace, FHA may be the practical path even with higher monthly MIP.
- If your income is above USDA’s limit, FHA removes that barrier and keeps your search wide open across Lubbock neighborhoods like Lakeridge and Quaker Heights.
Step-by-step: choose your best path
Gather your documents
Prepare a simple file so lenders can run accurate preapprovals.
- Photo ID and Social Security number
- Last 30 days of pay stubs
- W-2s for the past 2 years; 1099s if applicable
- Federal tax returns for 2 years if self-employed or with additional income
- Bank statements for the last 2 months
- Asset statements for retirement or investment accounts
- Proof of gift funds if you plan to use them
- Documentation for child support or alimony if used to qualify
- List of monthly debts and payments
- Purchase contract and earnest money receipt when under contract
- For FHA: condo project approval info if you are buying a condo
- For USDA: details on household members to confirm income eligibility
Check property eligibility and limits
Compare two preapprovals
Ask one USDA-approved lender and one FHA lender for full preapprovals. Request a side-by-side quote that includes:
- Interest rate
- Total cash to close
- Monthly payment with taxes, insurance, and mortgage insurance
- Any required repairs or property notes
This lets you see the true monthly and upfront difference for your specific price point.
Timeline expectations
- USDA: Adds map and income checks, plus a guarantee step. This can affect timing. The ability to finance the guarantee fee reduces cash needed at close.
- FHA: Common in urban markets like Lubbock. Appraisals may require repairs to meet Minimum Property Standards, which can add steps but are routine for local lenders.
Tips for shopping just outside Lubbock
- Do not guess on eligibility. Always verify the parcel in the USDA map.
- Ask about water, septic, and road maintenance. Lenders and appraisers will review these.
- Budget for any small repairs the appraiser may call out.
- If you are bilingual or prefer Spanish, ask for support. Hablamos español.
Ready to compare in Lubbock?
If you are near approval or just starting, a quick side-by-side USDA vs FHA review can save you time and money. Our process connects your property search with the right financing path so you can move forward with confidence. To get started, reach out to Freddie Marmolejo for a free home valuation and financing review.
FAQs
Is the City of Lubbock eligible for USDA loans?
- Many central city tracts are ineligible, but parts of Lubbock County outside city limits may be eligible. Always check a specific address with the USDA Property Eligibility tool.
What credit score do I need for FHA in Lubbock?
- FHA allows 3.5% down with scores 580+ and 10% down for scores 500–579, subject to lender requirements. See FHA basics on HUD’s housing programs page.
How do I confirm a condo is FHA approved?
- Ask your lender to check project approval or search eligibility through HUD resources. FHA requires most condo projects to be approved before financing an individual unit.
How do USDA income limits work in Lubbock County?
- USDA uses household income, not just borrower income, and limits vary by area and family size. Verify your status using the income lookup on the USDA eligibility site.
Which closes faster: USDA or FHA in Lubbock?
- Timelines vary by lender and property. FHA is common in the city and often moves quickly; USDA adds eligibility and guarantee steps that can extend timing slightly.
