USDA Home Loan Income Requirements
The income requirements for the USDA Home Loan Program are similar to many non-government insured mortgages in many ways. Applicants must have the ability to show they will be able to make payments on the loan.
An applicant must have adequate, dependable income, with a 2 year history of employment.
- Qualification ratios are 29/41; however, a higher ratio will be considered with strong compensating factors such as good credit scores (660+), consistent employment history, increased earning potential, and the ability to place money into savings.
- Income will be verified by a written Verification of Employment (VOE) and 1 month’s worth of current pay stubs; or one month’s pay stubs and two year’s worth of W2′s.
- 2/1 buy downs qualifying ratios are calculated using start rate.
- Any debt with more than 6 remaining monthly payments must be included in qualifying ratios.
- Self employed borrowers must have 2 year’s worth of 1040′s and Profit and Loss Statements.
- Disability and Social Security benefits – 3 year’s worth of documentation with award letter or 2 month’s worth of bank statements, multiplied by 125%.
- Pay raises, within 60 days of the first payment due dates are acceptable.
- Part-time employment requires a history of at least 1 year.
- Alimony and income from child support must be in continuance for 3 years and have at least a 1 year history.
- Income of a non-purchasing spouse will be verified to ensure that income limits will not be exceeded.
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USDA Income Calculations
The USDA determines an applicant’s income in two ways:
- Eligibility Income – Includes all income, (salary, tips, bonus, overtime, alimony, child support, etc.) received by an applicant and co-applicant(s). This income is used in calculating qualifying ratios.
- Adjusted Income – This is an applicant’s eligibility income minus the total of any of the following deductions applicable to the loan. (see list below) Income from all household members must be included in the total adjusted income. The adjusted income must not exceed 115% of the median household income for the area. Please refer to the Income and USDA Home Loan Location Requirements page for income limits by county and total persons in the household.
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USDA Allowable Deductions to Determine “Adjusted Income”
| Member of Household | Amount of Annual Deduction |
| Each minor child under 18 years of age | $480 |
| Each disabled or handicapped individual who is not the applicant or co-applicant | $480 |
| Each full time student 18 years or older | $480 |
| Each elderly (62 years of age or older) or disabled applicant | $400 |
| Medical expenses for any elderly family member | Total that exceeds 3% of gross annual income |
| Child care expenses for children 12 years old or under | Actual cost of care, supported by full documentation of cost |
You can also check USDA Home Loan Income Guidelines by Location
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