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USDA Income Limits

USDA income limits

If you are considering moving to a rural area and need help affording the home of your dreams, a USDA loan could work in your favor. This guide will explain USDA loan limits  and how to find out if you might be eligible by income.

The USDA loan program is administered by the U.S. Department of Agriculture and was created to bolster homeownership opportunities in rural areas, generally defined as those with a population less than 35,000.

The loans differ in requirements and meet different needs, but the overall goal is to help individuals and their families buy, renovate or repair a home in a rural area, either with a loan that comes directly from the USDA or from a participating lender.  Some of the housing help is for single-family homes only, but assistance is also available for low-income, disabled or elderly residents who live in rural areas and in multi-unit housing complexes or apartments.

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USDA loan requirements

USDA loans offer competitive interest rates, and you may be able to use a USDA loan to purchase a home with no money down. To determine which rural areas qualify for a USDA loan — as well as what income limits apply — go to the U.S. Department of Agriculture’s Income and Property Eligibility site. There, you’ll be able to see specifics on each type of loan program and search for eligible USDA areas near your current home address. You can also use the search function to explore the map and see where USDA-eligible areas are located across the United States. To learn more about finding a USDA-eligible property, read this.

What are USDA loan limits?

If you are applying for a loan directly from the USDA to help pay your mortgage for a single-family home, be aware that USDA Single Family Housing Direct home loans can have loan limits that vary by state and county.  In some cases, the limits vary drastically, depending on housing prices in the local area.

Here’s an example: A recent search showed a limit of $518,880 for Sonoma County in California and a limit of $257,600 for Hamilton County in Indiana. To find the limit for your county, search the map here by first looking for your state, then county.

The Single Family Housing Guaranteed loan doesn’t come with loan limits.  These loans are offered through affiliated lenders and aimed at low-to-moderate-income households. They feature higher income limits than direct loans. However, they also may require you to pay an upfront financing fee of less than 3.5 percent of the loan amount as well as an annual fee of up to 0.5 percent of the loan amount, although the annual fee may be used to reduce the upfront fee, and you may be able to finance some or all of the upfront fee within the loan amount.

How to determine USDA loan eligibility

Besides making sure USDA loans are available in your area, you will also need to ensure you are eligible for whichever loan program might work for you best. Like other federal housing programs, the USDA has its own rules that dictate who can qualify.

In general, areas with higher costs of living tend to have higher income limits for USDA loans compared to low-cost areas. Loan income limits also vary based on how many adults plan to reside in the home.

Still, it’s slightly more complex than that. When it comes to looking at your overall income eligibility, the USDA considers more factors than just income from employment. They may also consider:

  • Adoption assistance
  • Bonus wages
  • Child support
  • Commissions
  • Dividend and interest income
  • Employee fringe benefits
  • Expense allowances
  • Foreign income
  • Housing allowances
  • Military wages
  • Overtime pay
  • Pensions
  • Rental income
  • Stock income
  • Retirement benefits, including lump sum withdrawals or sporadic payments
  • Scholarships
  • Maintenance payments or alimony
  • Social Security income
  • Tips
  • Trust income
  • Unemployment income
  • VA benefits
  • Workers’ compensation

You must also count the first $480 of income earned from household members who are adult students and in school full-time but not applying for the loan.

Clearly, many factors will ultimately determine whether your income qualifies for a USDA direct loan. For this reason, your best bet is to first go to the USDA website and use the eligibility tool that’s available for the loan type you need.  

The tool isn’t meant to give you a final answer on your income eligibility, but it can help determine if you meet at least some basic USDA loan income requirements, based on the number of  household members, where you live and whether your home includes a student or someone who is disabled. With a little more information, it will also give you a quick, online pre-eligibility analysis. If you have further questions, the site offers a list of USDA loan representatives for each state.

One last caveat: You may qualify for a USDA loan if you earn up to 115 percent of the average income in your particular area, but only if you live in a designated rural area. If you earn considerably more than that, you may need to consider other options.

Other USDA loan requirements

You can only use a USDA loan for a primary residence you plan to live in. You may also need to prove the following:

  • Minimum credit score of 640
  • Proven history of paying bills
  • No outstanding federal judgments
  • Enough income to make your monthly mortgage payment
  • No significant delinquencies
  • U.S. citizenship, although some non-citizens can still qualify
  • Never been barred from using federal programs or benefits

If you are applying for a Single Family Housing Direct home loan, you’ll also need to prove that you currently don’t have a decent, safe and sanitary place to live.