- Zero-down USDA loans
- Special homebuying programs
- Low down payment
- Less-than-perfect credit okay
USDA loans require no down payment, low mortgage rates, and lenient credit guidelines.
But not just anyone can qualify for these benefits. USDA’s mission is to provide safe housing to moderate-income homebuyers.
USDA defines “moderate income” as $103,500 per year for a 1-4 person household and $136,600 per year for a 5-8 person household.
But, if you make more than these limits, there are many exceptions and deductions that could bring you into income-eligible status. Here are ways to potentially become eligible despite higher income.See if you qualify for a zero-down USDA loan.
What’s in this article?
This exception to standard USDA loan income limits is probably your best bet.
USDA allows you to make more than its baseline $103,500 annually if you live in an area with high home prices and cost of living.
Here are a few examples of high-cost areas where your income can exceed standard limits. The highest USDA loan income limit in the country can be found in the San Francisco surrounding areas, where you are eligible even if you make more than $230,000 annually.
|County or Area||1-4 member household income limit 2023||5-8 member household income limit 2023|
|Standard income limit||$103,500||$136,600|
|San Francisco, CA||$238,200||$314,400|
USDA income limits are not only generous, but they allow for even higher incomes in expensive locations.
You can find a list of USDA income limits for all areas of the U.S. here.
If you have a big family, or just have multiple generations living in your home, you may be eligible for a zero-down USDA loan, even at a very high income.
Households of 5-8 members are eligible for increased limits of $136,600 in most areas of the country.
But income limits go even higher for larger households. USDA allows you to add 8% of the 4-person limit for each household member above eight.
For example, the standard 4-person limit is $103,500 per year. Eight percent of that is $8,280. So you can make an additional $8,280 per year for each household member in addition to the higher 5-8 person limit.
|Household members||USDA income limit – standard area|
But what if you have a large family and live in a high-cost area? The 8+ member household exception can be combined with high-cost area income limits. Here’s an example of limits for a large household in the Austin, Texas area.
In Austin, the 4-person limit is $126,850 and eight percent of that is $10,148. So you can make $10,148 more per year for each additional household member above eight.
|Household members||USDA income limit – Austin, Texas|
Very large households can make incomes of more than $200,000 per year and still be eligible for a USDA loan in many areas of the country.See if you’re eligible for a USDA loan.
3. Take deductions for dependents and childcare costs
USDA not only allows higher income limits in many cases, it also allows you to take deductions to meet income limits.
Much like you deduct certain expenses from your income to pay less in taxes each year, you can also deduct items to squeeze under USDA income maximums.
First, you can deduct $480 from your annual income for each dependent in your household. This includes any child for whom you have shared custody, and any adult full-time student who is not the applicant, co-applicant, or spouse.
You can deduct childcare expenses for children 12 and under if childcare is needed for the parent to work or attend school. USDA even allows you to deduct anticipated childcare expenses.
You must document these expenses. For instance, your child has been in childcare for the previous 12 months and you plan to continue. Submit 12 months of receipts to your lender when you apply, if needed to meet income eligibility.
If you are not using childcare now, but plan to over the next 12 months, ask your lender how best to prove future expenses.
|Dependent income deduction example|
|USDA area limit||$103,500|
|Daughter, age 9||-$480|
|Son, age 7||-$480|
|Son, full-time student, age 19||-$480|
|12 months childcare, 9-year-old daughter||-$6,500|
|12 months childcare, 7-year-old son||-$6,500|
|USDA eligibility income after deductions||$101,560|
|Meets USDA income eligibility?||Yes|
Care of persons who are disabled
Families may deduct expenses related to caring for household members with a disability if that care enables someone in the household to work.
Non-reimbursable expenses that exceed 3% of household income may be deducted. However, the deduction can’t be more than income produced by the person who is disabled or another household member who can work due to the care.
For example, your household income is $105,000, but you spent $4,200 (4% of income) on living assistance for the disabled household member. That would reduce your income to $100,800, and put you within USDA income limits.
Elderly families (meaning at least one applicant is 62 or older) or families caring for a person with a disability can deduct medical expenses. Expenses must be greater than 3% of household income.
A person with a disability does not have to be on the application to take medical deductions. However, your household is not considered an elderly household unless an applicant is 62 or older. A household member, such as an elderly parent or grandparent, does not make you eligible to deduct medical expenses if they are not on the loan application.
|USDA loan applicant 62+ medical deduction example|
|USDA area limit||$103,500|
|Annual medical costs||$26,000|
|USDA eligibility income after deductions||$94,000|
|Meets USDA income eligibility?||Yes|
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Other ways to be within USDA income limits
Because USDA looks at household income, it looks at everyone in the home for income limit purposes even if they are not on the loan application.
Be careful adding household members before you apply
Additional household members may push you over USDA-eligible income limits. For instance, you make $90,000 but a significant other who makes $50,000 plans to move in with you. That person could easily push you over income limits. Make no plans to have them move in before or after you apply. (USDA considers any future household income in the next 12 months when determining household income.)
Document romantic break-ups
In order to remove a spouse or significant other from household income, you will have to live separately for three months. The exception is when you have a legal document of commenced court proceedings. If you are in the middle of a break-up, have the spouse or significant other move out as soon as possible. If they push you over income limits, you can’t close the loan until they’ve been living separately for three months, documented by a separate apartment lease, or bills or bank statements showing a separate address.
Be careful of large raises
USDA looks at your projected income over the next 12 months. It’s possible to get a raise that pushes you over income limits, or receive a documented future raise. Delay any conversations or documentation of future raises until after closing.
USDA loan income eligibility FAQs
If your income is barely over USDA limits, check for deductions such as for dependents and childcare expenses. Also, check whether you’re in an area with higher USDA income limits or qualify for larger limits due to a household of 5+ members.
Standard limits are $103,500 for households of 1-4 and $136,600 for households of 5-8, but much higher in areas with more expensive home prices.
USDA income limits are based on gross (before tax) income. Additionally, it considers income of all household members for eligibility purposes, not only those on the loan application.
There is no shortage of ways to become income-eligible for a USDA loan.
However, figuring out whether you are within income limits can be challenging on your own, with so many different limits across the country, deductions, and other factors.
So, the best way to ensure that you are eligible is to be connected with an experienced USDA lender.See if you qualify for a zero-down USDA loan.