{"id":3433,"date":"2016-04-16T12:46:31","date_gmt":"2016-04-16T12:46:31","guid":{"rendered":"http:\/\/teammovemortgage.com\/?p=3433"},"modified":"2020-07-13T22:33:17","modified_gmt":"2020-07-13T22:33:17","slug":"how-to-exceed-the-usda-household-income-limits","status":"publish","type":"post","link":"https:\/\/teammovemortgage.com\/blog\/how-to-exceed-the-usda-household-income-limits\/","title":{"rendered":"How to Exceed the USDA Household Income Limits"},"content":{"rendered":"

Understanding USDA Income Limits\"How<\/h1>\n

It is possible to make\u00a0MORE than the USDA<\/strong><\/span><\/a> Household Income Limits<\/h2>\n

So you have just learned about the benefits of a USDA loan<\/strong> <\/span><\/a>and you get excited about being able to come to closing with no money down.\u00a0 BUT then you start looking at the household income limits for your county and realize you make a little too much money for USDA<\/strong><\/span><\/a>!\u00a0 Well, there are some little known tricks for actually exceeding your county household income limit so let’s see how we can get you into a home with no money down.<\/p>\n

USDA Rural Development Guaranteed Housing Income Limits<\/h2>\n

Before we learn the tricks for exceeding the income limits, let’s discuss how the limits work.\u00a0 Besides qualifying based on debt to income ratios, credit scores, appraisal, and assets, USDA<\/strong><\/span><\/a> has a “household income limit” for each U.S. county.\u00a0 So in order for a buyer to use this program, the total income for the household must be under the\u00a0home’s county income limit.\u00a0 Notice that I said “household” and not borrowers.\u00a0 This means that all income for people 18 and over which will live in the house, must be included and documented in the calculation unless there are exceptions mentioned below.\u00a0 Unborn children are not counted in these calculations.\u00a0 Each county has a 1 – 4 person income limit and a 5 or more person income limit which is higher.<\/p>\n

Example:<\/strong>\u00a0 Let’s say a couple is purchasing a house in New Hanover County NC and the two borrowers have combined salaries of $70,000\u00a0and there will be a total of 4 people living in the new home.\u00a0 The other two people living in the home will be\u00a0a borrower’s parents.\u00a0 This is important because we have other\u00a0adults in the household we need to count the income and the parents make a combined $25,000 per year.\u00a0 In this case we have a total of $95,000 in household income but the income limit for New Hanover County is $75,650.\u00a0 So these buyers may not use USDA<\/strong><\/span><\/a> even though they are under the income limit because it is the household that is important.\u00a0 That is unless they qualify for some of the allowed deductions to get their income under the limit.\u00a0 Let’s explore these tricks<\/p>\n

[av_button_big label=’Find Your County USDA Income Limits’ description_pos=’below’ link=’manually,http:\/\/eligibility.sc.egov.usda.gov\/eligibility\/incomeEligibilityAction.do?pageAction=state&NavKey=income@11′ link_target=’_blank’ icon_select=’no’ icon=’ue800′ font=’entypo-fontello’ custom_font=’#ffffff’ color=’theme-color’ custom_bg=’#444444′ color_hover=’theme-color-subtle’ custom_bg_hover=’#444444′][\/av_button_big]<\/p>\n

Trick #1 for Exceeding the USDA Household Income Limit<\/h2>\n

So you know that USDA<\/strong><\/span><\/a> cares about how many people will live in the new home and their ages.\u00a0 The ages of the occupants is not only important for including income but it is also important for lowering your income!\u00a0 Wait, why would you want to lower your income?\u00a0 Keep in mind that we are not lowering your qualifying income, but we are just lowering your income compared to the maximums allowed.\u00a0 So these are two different things.\u00a0 For each child under 18 that will live in the house, we can lower the total household income by $480 per child.\u00a0 So if there\u00a0are 3 children\u00a0under 18 living in the home, we can lower the household income by $1440 ($480 x 3).<\/p>\n

How to Lower Household Income with Children Example:<\/strong>\u00a0 A buyer is purchasing a home in \"HowBrunswick County NC and wants to use a USDA loan.\u00a0 The buyer has 3 children under 18 that will live in the house and no one else will live there.\u00a0 The buyer makes $76,500 salary per year and the Brunswick County income limit for a family of 4 is currently $75,650.\u00a0 She is over the limit.\u00a0 So we multiply $480 times the 3 children to get $1440 and subtract that from the borrower’s income to get $75,060.\u00a0 Now the buyer makes under the income limit and may proceed with the next steps in qualifying for a USDA<\/strong><\/span><\/a> loan.<\/p>\n

Trick #2 – How to Drastically Reduce Your Income Under the Income Limit<\/h2>\n

The least known but the biggest option for lowering your income compared to the household income limits is how much is paid for childcare.\u00a0 If a borrower pays childcare and can document the expense by tax returns, documentation from the childcare provider, receipts, or cancelled checks, then we may be able to reduce the household’s income by the annual amount paid.\u00a0 This can be huge for a family to be able to drop their income under the limit and get 100% financing!\u00a0 Child support payments or private school tuition (kindergarten through 12 years old) paid by the applicant are not eligible expenses to reduce the income.<\/p>\n

\"UsingHow to Lower Household Income by Childcare Expenses Example:<\/strong>\u00a0 Let’s assume that two buyers make $130,000 in the Raleigh, Wake County NC area, have 5 total in the family which includes 3 children under 18, and pay $10,000 per year in childcare expenses.\u00a0 Looking at the Wake County income limit for a family of 5 or more, we see that the limit is $121,250 so we are over the limit.\u00a0 Now let’s fix this!<\/p>\n

$130,000\u00a0household income – $1440 for 3 children – $10,000 for documented childcare expenses = $118,560.\u00a0 So we were originally over the $121,250 income limit and now we are under it.\u00a0 We can now proceed with\u00a0reviewing the borrower’s documentation\u00a0for a USDA loan<\/strong><\/span><\/a>!<\/p>\n

Trick #3 to Exceed the USDA Household Income Limit<\/h2>\n

What if you have children in the household that are 18 but are in school?\u00a0 Then if you can get documentation from the school proving the child is enrolled full time, then you may be able to claim the $480 per child deduction of income.\u00a0 Remember how the $480 per child calculation works above.<\/p>\n

Trick # 4 to Make More Money Than the USDA Income Limit<\/h2>\n

This option requires more work and documentation to prove but we have seen borrowers that have used this rule in the past to qualify for a USDA loan.\u00a0 This deduction to income can be allowed for disability expenses incurred.\u00a0 USDA Form RD1944-4 must be completed to verify a disability or other evidence that supports a member of the household has a disability.\u00a0 Other evidence can include medical bills, invoices, or others but it cannot be\u00a0reimbursed or paid\u00a0by insurance.\u00a0 Expenses can even include reasonable expenses related to the care of household members that allow another household member to work.\u00a0 This section can be rather detailed so rather than go through all of the details, just know that this could help a buyer and to contact our team for more.<\/p>\n

Trick #5 to Lower Your Income Under the USDA Income Limits<\/h2>\n

If you have an elderly or disabled household, then you could possibly reduce the household income by documenting the medical expenses anticipated to be incurred over the ensuing 12 months.\u00a0 But only the portion over 3% of the annual income may be counted and it cannot be paid by insurance or Medicare.\u00a0 Examples of these expenses could be doctors, dentists, hospitals, therapists, prescriptions, and others.<\/p>\n

There are even other rarely used ways to help a family buy a home using a USDA loan, so let us see if you can use this awesome mortgage or if you qualify for other low to no down payment loans.<\/p>\n

[av_button_big label=’Look Up USDA Eligible Homes or Areas ‘ description_pos=’below’ link=’manually,http:\/\/eligibility.sc.egov.usda.gov\/eligibility\/welcomeAction.do?pageAction=sfp&NavKey=property@11′ link_target=’_blank’ icon_select=’no’ icon=’ue800′ font=’entypo-fontello’ custom_font=’#ffffff’ color=’theme-color’ custom_bg=’#444444′ color_hover=’theme-color-subtle’ custom_bg_hover=’#444444′][\/av_button_big]<\/p>\n

Remember to Consider Using a USDA Guaranteed Home Loan to Buy Your Home<\/strong><\/p>\n