USDA Rural Housing recently released their new increased household income limits for the remainder of 2024 and 2025. These household income caps are one of the primary factors for USDA mortgage eligibility. In this guide will provide you with a clear understanding of the income limits, ensuring you have all the information needed to determine your qualifications.
Understanding the USDA 502 Guaranteed Program:
Before we dive into the details of income limits, let’s briefly talk about what the USDA Home Loan 502 Guaranteed Program entails.
The USDA (United States Department of Agriculture) 502 Guaranteed Program is designed to help low-to-moderate income households secure home loans in eligible rural areas. The program offers numerous benefits, including:
- No down payment required
- Competitive government backed fixed interest rates
- Reduced mortgage insurance premiums
- Flexible credit guidelines
These benefits make the USDA home loan an attractive option for many prospective home buyers. However, to be eligible for the program, buyers must meet income and property locations requirements that we will discuss below.
Current 2025 USDA Income Limits?
USDA income limits are established to ensure that the program serves its intended audience – low-to-moderate income households. These limits vary based on household size and location. For the 502 Guaranteed program, the current income limit is $112,450 for a household size of 1–4 members. Families with 5 or more members have a higher income limit, which can go up to $148,450.
The income limits apply to most U.S. locations, however, select high-cost housing locations in Florida, California, etc. have even higher income caps. These income limits are in effect for the remainder of 2024, and into 2025.
For the USDA Direct loan, the income limits start at $32,600 for households with 1–4 members, and greater for larger households. The USDA direct program income limits vary greatly based on county, and whether the borrowers(s) are low, or very low income. Home buyers should note, USDA Direct loans are only processed in directly by USDA, not through approved lenders like the more common 502 Guaranteed program. Please learn more and start your direct loan self-assessment here.
It’s important to note that these limits apply to all income-producing members of the household, not only the applicant(s) on the loan application. This means that any income earned by adults living in the home, but not listed on the loan application, must be included when determining eligibility.
How to Determine Your Household Income:
To assess whether your household qualifies for the USDA Home Loan 502 Guaranteed Program, you’ll need to calculate your total household income. Here’s how you can do it:
- Identify All Income-Producing Members:
- List all adults in the household who earn an income. This includes disability and/or social security income.
- Gather Income Information:
- Collect documentation for all sources of income, including salaries, wages, bonuses, self-employment income, alimony, child support, and any other income sources.
- Calculate Gross Monthly Income:
- For each income-producing member, calculate their gross monthly income before taxes and deductions. Add up all the individual incomes to get the total gross monthly household income.
- Annualize the Income:
- Multiply the total gross monthly household income by 12 to get the annual household income.
- Compare with USDA Income Limits:
- Check your annual household income with the USDA income calculator here for your household size and location. *Please see the helpful video below for additional tips. If you need assistance, please contact us 7 days a week.
Special Considerations for Income Calculation:
When calculating household income, there are some special considerations to keep in mind:
1. Child and Dependent Care Costs:
- If your household incurs documented child or dependent care costs, these can be deducted from your gross income.
2. Elderly and Disabled Household Members:
- If there are elderly (62 years or older) or disabled members in your household, certain medical expenses can be deducted from your gross income.
3. Seasonal Employment and Part-Time Work:
- Income from seasonal jobs and part-time work must be included in your calculations.
4. Non-Taxable Income:
- Non-taxable income, such as certain Social Security benefits, must also be included in your household income calculations.
Common FAQs about USDA Income Limits:
1. Can I exclude my spouse’s income?
No, you cannot exclude your spouse’s income. The USDA requires that the income of all adult household members be included in the calculation.
2. What happens if my income exceeds the limit?
If your household income exceeds the USDA limit for your area and household size, you will not be eligible for the USDA Home Loan 502 Guaranteed Program. However, you may want to explore other loan options, such as FHA or conventional loans. There are many new down payment assistance programs available depending on your property state. Contact us to learn more.
3. Are there any updates to income limits?
Income limits are updated annually. It’s important to check for the most current limits when applying for the USDA Home Loan 502 Guaranteed Program.
4. How do I find the USDA income caps for my county?
You can find the USDA income limits for your area by visiting the USDA website above, or just contact us.
4. What happens if I meet the income eligibility now, but my income increases later and goes over the limit?
Great question, USDA is only concerned about your household income up to the time of closing. Future income potential is not considered.
Please read many more USDA FAQ’s here.
Steps to Apply for the USDA Home Loan 502 Guaranteed Program
Once you’ve determined that your household income falls within the USDA limits, you can proceed with the application process. Here are the steps to apply for the USDA Home Loan 502 Guaranteed Program:
1. Check Your Eligibility:
- Verify that your property is located in an eligible rural area by using the USDA’s property eligibility tool.
2. Gather Necessary Documentation:
- Prepare all required documentation, including income proof like (3) recent pay stubs, W2’s and tax returns, and employment verification.
3. Complete the Application:
- Submit your loan application along with the required documentation. The intial application process is simple and often completed in minutes online or over the phone.
4. Await Approval:
- The lender will review your application and determine your eligibility. If approved, you’ll receive a loan preapproval from the mortgage company.
5. Close the Loan:
- Once your loan is approved, you’ll proceed to the closing process, where you’ll sign the necessary paperwork and finalize the loan.
Understanding the USDA mortgage income limits is crucial for determining your eligibility and successfully navigating the application process. Homebuyers ready to take the next step can contact us 7 days a week by calling, or just submit the Info Request Form on this page.