The United States Department of Agriculture ” USDA” loan program is designed to assist those wanting to buy a home in a less populated rural area. The program has been around for several years and is perhaps the most attractive financing option for borrowers who need to come in with as little cash as possible. The USDA program doesn’t have a down payment requirement so it can be a perfect fit for first-time homebuyers. But the USDA loan program does state the loan is designed for those with “moderate” income. How does the USDA determine moderate income?
The general rule is the income from all persons in the household cannot exceed 115% of the median income for the area but it goes a bit further than that. The USDA has a website that will provide you with the maximum income allowed based on the answers to a few questions. You can get a general idea on 2018-2019 USDA income limits here, but it’s best to speak with a loan officer experienced with the USDA program.
You will first provide the county and state where the subject property is located. Once that information is entered, it will ask how many people will be living in the property, including children, dependants, etc. After this, you will be asked to input the household’s gross income. When a couple jointly applies for a mortgage and using two incomes they may also have a son or daughter who is working or other relatives living in the home. A conventional mortgage isn’t concerned with other household members income, either part-time or full time because they won’t be on the loan application. With the USDA program, it DOES matter as all members of the household that generate income must be included for income eligibility purposes – even if they are not listed on the loan application.
It also asks how many residents are under the age of 18, are disabled or full-time students and if anyone 62 years or older. Finally, you’ll need to enter the number of any disabled persons who will be living in the property. Once the basic information is entered, you will be asked to the income for each person who will be living in the property. It’s more than just basic employment income but asks if there is any bonus or overtime income or income from a rental property. Once all the income is entered from all sources and qualified members of the household, the site will determine whether or not you’re eligible based upon income limitations.
There are some deductions you can take to reduce the qualifying income if you’re at or over the limit. For instance, you can take a $480 deduction for each child under the age of 18. You can also deduct the amount of any annual child care expenses if needed. The USDA home loan program is an ideal choice financing a home with zero money down. Remember, the home must also be located in an approved area which is researched by entering the property address on the USDA website. Contact us if you need assistance in determining household income, we have specialists available to help.