When applying for a USDA loan, it is important that you calculate your income correctly. USDA loans have a maximum amount of income that is allowed in order to be eligible for the program and sometimes it can be confusing to figure out what counts and what doesn’t.
USDA Loan Income Calculation Guidelines
The borrowers adjusted income may not exceed 115% of the U.S. median income. If Bond financing is involved, the borrowers income cannot exceed the lesser of 115% area *median income or income limits specified by the Bond Program.
The following are included in annual income to qualify for a USDA RHS guaranteed loan:
- Gross amount of wages, salaries, overtime pay, commissions, fees, tips, bonuses and other compensation for personal services of all adult members of the household.
- Net income from the operation of a farm, business or profession, interest, dividends and other net income of any kind from real or personal property.
- Payments from social security, annuities, insurance policies, pensions, unemployment, workers compensation, alimony and/or child support and other types of periodic receipts.
- All regular pay, special pay and allowances of a member of the armed forces who is the borrower or spouse whether or not that family member lives in the unit.
The following sources are not included in annual income but will be considered in determining the ability to repay the loan:
- Income from minors.
- Food stamp allotment.
- Payments from foster care.
- Irregular cash gifts.
- Lump sum additions, such as capital gains, etc.
- Medical reimbursements.
- Educational benefits.
- Hazardous duty pay for military person exposed to hostile fire.
- Income exempted by Federal Statue.
Adjustments to reduce annual income include $480.00 for each minor child, full timestudent or a disabled member of the family. $400.00 may be deducted from the annual income for each family member over 62 years of age. An additional deduction may be calculated for certain expenses when added together exceed 3% of gross annual income.