The United States Department of Agriculture (USDA) home loan program helps low-to-moderate income buyers purchase homes in rural areas These government-backed mortgages require no down payment and offer below-market interest rates.
To qualify for a USDA loan, your household income must fall under a maximum limit set by the agency. This income cap varies based on your family size and where you live.
In this article, we’ll break down the key details on USDA income limits:
- How the maximum income is calculated
- Factors that determine your limit
- Steps to check if you qualify
- Strategies if you’re over the limit
Let’s dive in!
How the USDA Calculates Maximum Income
The USDA sets income limits at 115% of the median household income in each county. The median is the midpoint of incomes in the area.
So if the median household income in your county is $60,000, your max income to qualify for USDA financing would be $69,000 (115% of $60,000).
The agency updates income limits annually based on data from the U.S. Census Bureau. Limits tend to increase slightly each year.
Factors That Determine Your USDA Income Limit
Two main factors impact your household’s maximum income for a USDA home loan:
1. Location
Income limits are higher in areas with a higher cost of living. For instance, the limit in San Francisco, CA for a 4-person family is $146,350. In Cass County, IN, it’s $77,000 for the same family size.
2. Household Size
The USDA allows higher incomes for larger households. A couple with 5 children has a higher maximum income than a couple with 1 child.
Here’s a glance at how 2023 USDA income limits vary by location and family size:
| Household Size | Cass County, IN | San Francisco, CA |
|---|---|---|
| 1-4 people | $77,000 | $146,350 |
| 5-8 people | $103,950 | $193,150 |
So make sure to check the limit for both your area and household size.
Checking Your Eligibility
You can verify if your income falls under the limit in a few easy steps:
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Determine your household size – This includes you, your spouse or partner, children under 18, and other adult dependents.
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Calculate your total household income – Add up gross income (before taxes) from all adult members. Include salaries, self-employment income, pensions, social security, child support, etc.
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Deduct eligible childcare expenses – You can subtract qualified childcare costs for dependents under age 12.
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Find your county’s income limits chart – Use USDA’s Income & Property Eligibility site.
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Compare your income – If it’s equal to or lower than the limit for your household size, you qualify!
I recommend connecting with a USDA lender to confirm you meet the maximum income requirement in your area. They can walk through the steps with you.
Strategies If You’re Over the Income Limit
Don’t lose hope if your income exceeds the USDA limit. You may still have options, such as:
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Apply with a larger lender – Some national lenders can approve loans up to 140% of the limit in certain counties.
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Remove sources of income – If you’re barely over, taking one wage-earner off the application may get you under.
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Use income-limiting strategies – Making a retirement contribution can reduce your countable income.
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Talk to a lender – A knowledgeable lender may identify ways to adjust your application to qualify.
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Consider alternative programs – An FHA or conventional 97% LTV loan can also offer low down payments.
The key is being open-minded and creative. With the right approach, homeownership may still be within your reach.
USDA Income Limits for Common Household Sizes
To give you a better idea of realistic income ranges, here are sample USDA income limits for 2023:
Limits for a 1-2 Person Household
| County | Maximum Income |
|---|---|
| Cass County, IN | $54,950 |
| Cook County, IL | $103,000 |
| Santa Clara County, CA | $128,050 |
| King County, WA | $103,700 |
Limits for a 3-4 Person Household
| County | Maximum Income |
|---|---|
| Cass County, IN | $77,000 |
| Cook County, IL | $146,350 |
| Santa Clara County, CA | $178,550 |
| King County, WA | $135,250 |
Limits for a 5-8 Person Household
| County | Maximum Income |
|---|---|
| Cass County, IN | $103,950 |
| Cook County, IL | $193,150 |
| Santa Clara County, CA | $233,550 |
| King County, WA | $176,900 |
When to Verify Your USDA Income Limit
The USDA updates income limits annually, so it’s important to check the current caps before applying for financing or making an offer on a home.
Ideally verify you qualify a few months before starting the mortgage process. That way you can plan ahead if your income requires adjustments to come in under the limit.
Connecting early with a USDA specialist can also help you determine the maximum you can earn to meet program guidelines in your specific location.
You Can Achieve the Dream of Homeownership!
While USDA loans come with income limits, they open the door to affordable home financing for many buyers. Now that you understand the key rules around maximum income, you can confidently assess if this government-backed program is right for you.
With proper planning and a trusted lender guiding you, the path to buying your dream home with a USDA loan may be smoother than you think. You got this!
USDA eligibility for 2024
Eligibility for a USDA loan is based on a combination of household size and geography, in addition to the typical mortgage approval standards such as income and credit score verification.
USDA eligibility for a 1-4 member household requires annual household income to not exceed $91,900 in most areas of the country, and annual household income for a 5-8 member household to not exceed $121,300 for most areas.
Whether you want to buy a home or refinance via USDA, this program tends to be accessible and affordable.
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USDA mortgage insurance requirements
The USDA single-family housing guaranteed program is partially funded by borrowers who use USDA loans.
Through mortgage insurance premiums charged to homeowners, the government is able to keep the USDA rural development program affordable.
USDA last changed its mortgage insurance rates in October 2016. Those rates remain in effect today.
Today’s USDA mortgage insurance rates are:
- 1.00% upfront fee, based on the loan size (can be rolled into the loan balance)
- 0.35% annual fee, based on the remaining principal balance
As a real-life example of how USDA mortgage insurance works, let’s say that a home buyer in rural Franklin County, New York is borrowing a loan amount of $200,000 to buy a home with no money down.
The buyer’s mortgage insurance costs include a $2,000 upfront mortgage insurance premium, plus a monthly $58.33 payment for mortgage insurance.
Note that the USDA upfront mortgage insurance is not required to be paid as cash. It can be added to your loan balance to reduce the funds required at closing.
NEW USDA Income Guidelines 2024 – First Time Home Buyer – USDA Loan 2024
FAQ
How does USDA calculate household income?
Does USDA have a maximum loan amount?
What are the DTI limits for USDA loans in 2024?
What is the USDA limit for 2024?
What is the income limit for a USDA loan?
Income limits for USDA loans vary by program and location. For guaranteed loans, your income can’t exceed 115% of the median income for your area. Income limits for direct-issue loans are much lower—as low as 50% of the median income in certain areas. To qualify for a USDA loan, your total debt-to-income (DTI) ratio should be no more than 41%.
What are the requirements for a USDA home loan?
Here are the key requirements: 1.**Income Eligibility**: – Your household income cannot exceed **115% of the median household income** for your area. – Applicants must have a stable income track
How much money do you need to buy a home with USDA?
Start here USDA eligibility for a 1-4 member household requires annual household income to not exceed $91,900 in most areas of the country, and annual household income for a 5-8 member household to not exceed $121,300 for most areas. Whether you want to buy a home or refinance via USDA, this program tends to be accessible and affordable.
How does the USDA finance a home loan?
The USDA provides funding for direct loans, which have favorable terms like low interest rates (as low as 1% with payment assistance) and long repayment periods (up to 38 years for eligible applicants). Income, creditworthiness, and the property’s location in an eligible rural area all affect eligibility.