The following general guidelines were provided by USDA Rural Development and are not meant to give the entire USDA loan guideline package – just the highlights of what it takes to qualify for a USDA loan.
USDA rural housing loans are one of the best deals in the housing market today. Your income plays a major role in whether you qualify for one of these loans or not. You must be employed and prove that you can afford your monthly mortgage payment, as well as homeowner’s insurance, property taxes, and other items. Read on to find out basic facts about USDA loan eligibility.
USDA Rural Home Loan eligibility
- You must be willing to personally occupy the home. You cannot have a co-borrower who is not going to occupy the home.
- You must sell your existing home, if you have one.
- You must be a citizen of the United States or a permanent resident.
USDA income eligibility
The USDA housing loan program has specific guidelines for qualifying for a loan. There are two ways the applicant’s income is determined – eligibility income and adjusted income.
- Eligibility Income – Includes all income (salary, tips, bonus, overtime, alimony, child support, etc.) received by the applicant and co-applicant(s). Income from sources such as Social Security or Disability is also taken into account. This amount is used to calculate qualifying ratios.
- Adjusted Income – This is the applicant’s eligibility income minus any deductions applicable to the loan. Income from all household members must be included in the total adjusted income. This adjusted income must not exceed 115% of the median household income for the area.
You should have documentation of your income. The following usually provides proof of income.
- A dependable job is important for a USDA loan. You usually must provide 2 months of paycheck stubs and 2 years of tax returns.
- If you are self-employed you can usually show 2-3 years of tax returns.
Allowable Deductions to Determine “Adjusted Income”
- 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.
To determine your eligibility for a USDA Rural Home Loan, apply on this site today. Get started and get a free quote.
