USDA Loan Income Requirements for 2019
When you apply for a USDA loan, your income must meet certain requirements in order to be approved. This includes having an income that does not exceed the limits for your area, as well as meeting certain debt-to-income ratios. Overall, there are much less strict guidelines related to job history / employment compared to other mortgage programs. However, your job will also be reviewed to ensure sufficient ability to repay the mortgage.
USDA Loan Income Limits for 2019
The USDA has strict income limits in place that determine who is eligible for a USDA loan. These limits are set at the county level. For most of the country, these limits are $82,700 for a household with 1-4 members. For a household with 5-8 members, this amount is $109,150. The limits are based on total income of all household members (not just relatives, but the entire household). In many counties, higher income limits are allowed. For instance, these counties:
There are several income limit adjustments which you may qualify for. You can reduce the counted income by $480 for each member of your household under the age of 18, any disabled individual, and any full-time student over the age of 18.
Viewing income limits is an important first step in determining your eligibility since making too much income will immediately disqualify an applicant from a USDA home loan. We would be happy to help you determine the precise income limits for your household. You can view the limits by county on this PDF spreadsheet. You may also use the handy USDA income eligibility tool, which will allow you to enter in any applicable income limit adjustments.
USDA Loan Debt-to-Income Ratios
The standard DTI ratios for USDA loans are 29/41. The front end number represents the maximum amount your new mortgage payment (PITI – principle, interest, taxes, and insurance) can be compared to your monthly income. The backend ratio is your mortgage payment, as well as other monthly payments on debts that are reported on your credit report (such as auto loans, credit cards, and other types of reported debts).
If your DTI is higher than the permitted 29/41, you might still qualify if you have adequate “compensating factors”. These so called compensating factors for USDA loans can include having a higher credit score (specifically higher than a 660), having money in savings, and other redeeming qualities that can compensate for higher DTI ratios. If you have a 680 or higher score, there should not be any complications in getting an exception for higher ratios (such as up to 45% on the backend).
Employment Requirements and Job History
Unlike other types of mortgages, the USDA does not require seasoned employment history. Most home loans, such as FHA and conventional, require 2 years on the job. This leniency with USDA loans is a huge benefit for newly employed prospective homebuyers.
Keep in mind, that in spite of the lax guidelines related to job history, you still need to prove you have stable, reliable income. A nice aspect of USDA loans is that the underwriting procedures takes a “common sense” approach and really looks at the entire situation, versus just strict requirements that could immediately disqualify an applicant. As long as you are able to show consistent employment with sufficient income (but not over the income limits), you should meet the employment requirements for USDA loans.
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USDA Income Requirement Questions:
Can I qualify with a second job, second income, or a part-time job?
Income from a second job can be counted, but it is handled a bit differently from the primary USDA job requirements. In order for second income to count, you must be able to provide two years of tax returns and also show that you will likely continue to receive the income for at least 3 more years.
Are USDA loans available for self-employed borrowers?
If you are self-employed, you may be eligible for a USDA loan. You must be able to provide 2 years of federal tax returns and meet the other guidelines of income limits and debt-to-income.
Whose income is counted towards the income limits?
Any family member or non-family member over the age of 18. Only the income of adults is counted, income received by minors is never counted towards the income limits or debt-to-income ratios.
Aside from employment income, is any other types of income counted?
Only verifiable income from steady employment received by adults living in the household is counted. If you or members in your household have recently received money in the form of any of the following examples of miscellaneous types of income, it is not counted: lump sums, gifts, withdrawal of cash assets, reimbursement of medical expenses, income received for foster care, and food stamps. These are just a few examples of income that is not counted.
Have more questions about USDA loans? Request a free consultation to speak with a loan representative today!