NEW UPDATE SUMMER – USDA has published the latest 2019 income limits here.
Florida buyers interested in the USDA Rural Housing program often ask about the loan amount, or home purchase price limits? Simply put, USDA doesn’t have a purchase price/loan amount limits in places like other loan programs – FHA or Conventional loans as an example. Instead, homebuyers qualify based on their income and the corresponding USDA program debt to income limits. USDA wants to ensure the buyers housing expense ( mortgage principal, interest, home insurance, and taxes) not to exceed 29% of their monthly gross income. Housing expense, plus all of the other monthly payments ( like car loans, etc) should not exceed 43% of the monthly gross income.
Since the USDA 502 Guarantee program has income limits per each county in Florida, it will in turn “limit” the loan amount based on the debt ratio limits. Confused? Let’s take a look at an example below:
Mary is a Florida school teacher and she wants to purchase her first home. Mary makes an income of $39,000 per year. Her only debt on her credit report right now is her car payment, which is $315 per month. Assuming Mary’s credit score, etc is sufficient, how much will she qualify for?
$39,000 / 12 = $3,250 gross income per month for Mary
Her housing expense cannot exceed 29% of the $3,250, which is $925.50
$925.50 is the max allowed monthly mortgage payment Mary will qualify for assuming all of her other qualifying factors are ok.
$925.50 monthly mortgage payment (with taxes, insurance, etc included) will be approximately $135,000 home purchase price.
Now, keep in mind the back end debt ratio limit (total debt limit) of 43%. Mary’s housing payment of $925.50 + her car payment of $315.00 = $1,240.50 per month. The $1,240.50 is well below 43% “back end” debt ratio limit, so Mary is ok!
If you are a Florida homebuyer that has questions about your qualifying loan limits, please reach out to us by calling ph: 800-743-7556 or just submit the quick info request on this page and a specialist will contact you ASAP. USDA Mortgage Source is Florida’s 100% financing leader.