The Home Loan Built For Moderate-Income Earners
Ever wondered if you can get a mortgage despite a modest income?
There’s a loan product on the market — the USDA loan — that is specifically designed for those with average or modest incomes. In fact, it doesn’t allow home buyers with very high incomes to qualify.
Each year, the USDA publishes income limits for every region of the country. Limits are based on the median income in the area.
If you make around the average income for your area, there’s a good chance you’re eligible for a USDA mortgage.
This zero-down loan is gaining in popularity as more home buyers discover its value.Verify your USDA loan eligibility (Jan 22nd, 2020)
Income Eligibility For A USDA Mortgage
USDA income eligibility is based on region.
For example, a buyer near Seattle, Washington can make up to $103,000 annually. But a home buyer in the Oklahoma City must have an income below $78,200.
There are limits of 115% of the area’s median income. The property determines the region, not the buyer’s current address before buying the home.
Following are income limits for 1-4 person households in select U.S. regions.
- Austin, Texas: $93,600
- Billings, Montana: $78,200
- Portland, Oregon: $85,900
- Reno, Nevada: $82,100
- Los Angeles County, California: $103,650
(Keep in mind that the property must be in a USDA-approved geographical area to be eligible.)
Home buyers with more than four persons in the household qualify for higher limits. Maximums are increased by about 30% for households of five or more.
Income limits are in place to ensure the program is accessible to those who need it most.
The loan is meant to bolster rural and suburban economies across the country. Making homeownership easier outside of city centers is USDA’s mission.
The “Household Income” Rule
Limits are based on total household income, not just the applicant’s income.
For instance, a husband and wife apply for the loan in a region with a limit of $100,000. Their income combined is $95,000.
But they have a live-in elderly parent who makes $10,000 in social security. They would not be eligible, even though the parent is not on the loan application.
USDA Income Deductions
Some buyers will find that they are slightly over their area’s income limits. In these cases, USDA-approved deductions might help.
A list of potential deductions are as follows.
- Dependents ($480 deducted from annual income per child)
- Childcare expenses
- Elderly family members living in the home ($400 flat deduction)
- Care of disabled persons (if over 3% of annual income)
- Medical expenses for elderly family members in the home
These deductions rarely reduce buyers’ income enough to qualify, but they are worth checking into if you are right above the line.
Check Your USDA Eligibility
USDA loans offer extreme value in today’s home buying market.
They are geared toward those who make modest incomes, and therefore, underwriting standards are lenient. Check your eligibility, and buy a home with zero down.Verify your USDA loan eligibility (Jan 22nd, 2020)