Many mortgage programs, or financial programs in general, seem to have some type of guideline that centers around income limitations that must be met in order to qualify.
For example, if you are in the market to buy a home in a rural area you may qualify for a USDA loan provided your income does not exceed the income limits for the program given the area where you are looking to buy. Similarly, there are income limits for Roth IRAs that limit your participation in making contributions if your adjusted gross income exceeds the program’s guidelines.
The USDA loan program is designed to help out low to moderate income home buyers living in rural areas. While the program guidelines are the same for all applicants throughout the US, there are some differences in how much money you can make based on the geographic area you are looking to purchase a home.
Essentially the USDA loan program works with two versions of your income: the eligibility income and the adjusted income. Eligibility income is basically your gross income which is compared to your debts in order to calculate your debt to income ratio. The eligibility income has nothing to do the income that USDA looks at to determine if you qualify for the program.
The income that USDA looks at to determine if you are “low to moderate income” is your adjusted income. This income takes into account income deductions for dependents living in your care as wells as students that are you dependents and even medical expenses and child care expenses. Basically your USDA lender will adjust your income down to account for any of these situations and others that apply.
With adjustments down in your income qualifying for a USDA loan may be easier than you think. Talk with a USDA lender to determine your eligibility for this 100% financing loan.