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USDA Loan Income Limits and Eligibility in 2021

The USDA home loan program provides an affordable, zero-down home financing option for low to moderate-income families across all 50 states. The USDA sets standard income limits to ensure these home loans are readily available to the families they serve.

To be eligible for a USDA home loan, your total household income cannot exceed the local USDA income limits. The current standard USDA loan income limit for 1-4 member households is $91,900, up from $90,300 in 2020. The 2021 limit for 5-8 member households is $121,300, up from $119,200. USDA loan limits by county may be higher to account for cost of living.

For non-specific areas, the income limits are $91,900 for a 1-4 member household and $121,300 for a 5-8 member household.

*If a household exceeds 8 members, each additional member receives 8% of the 4-person income limit for their area towards the total.

How USDA Income Limits Work

USDA loan income limits act like an eligibility threshold. If your household’s combined total income is less than USDA’s limit, you can apply for the USDA zero-down loan program.

USDA sets new limits every year in the spring (May or June typically). These limits are capped around 15% above the average median income for households in the area.

Standard income limits for the Single-Family Housing Guaranteed Loan Program as of May 12, 2021 are as follows:

Higher income limits apply in areas with higher costs of living. For example, a homebuyer applying for a USDA loan in Sacramento County, California could not have a combined total household income greater than $104,200 in a household of 1-4 or $137,550 in a household of 5-8.

*Households of 8 or more get an 8% increase to their total household income limit for qualifying. The 8% gets applied to the 1-4 member household limit for each additional member. Calculate your city’s USDA income limit!

USDA Lenders Set Maximum Loan Amounts

USDA qualifies applicants using income from each adult earner in the household, regardless of whether they’re obligated on the loan. Add each adult’s annual income to find your household’s total annual income to get an idea of where you stand.

If you are paid by the hour, calculate your annual income using the following formula:

(Hourly Rate x Number of Hours per Week) x 52 = Total Annual Income

USDA lenders use these income calculations to determine your repayment ability:

  1. Total annual household income (from all adult income-earning household members)
  2. Projected annual income for the next 12 months (from supporting income documentation and third-party employer verification)
  3. Repayment income (adjusted annual total from supporting documentation)

All income is calculated and verified using the following documentation:

After income is verified, USDA lenders review these additional financial factors to determine your repayment ability:

Repayment ability helps USDA lenders determine a loan amount the buyer can afford. In other words, your lender sets your max USDA loan amount. But not all income types are eligible. Below are the most common types of income USDA does not allow for qualifying:

This list is not all-inclusive and not every applicant’s situation will fit perfectly inside these basic guidelines. In those cases, lenders may require an in-depth review of the applicant’s income against other determining factors to qualify.

Talk to a Neighbors Bank loan specialist to see if you meet USDA’s income requirements!

The Misconception about Maximum Loan Limits & The Facts

The Misconception: USDA loans limit how much homebuyers can borrow in addition to setting income limits.

Maximum loan limits do not apply to USDA home loans. USDA limits are often confused with maximum loan limits applying to FHA or other home loans, regardless of the buyer repayment ability. In reality, there is no such rule for USDA home loans.

The Facts: USDA loans empower buyers to borrow as much as they are able to repay.

What makes a future homebuyer USDA eligible?

In other words, if you meet the above USDA requirements, you can likely borrow as much as a lender will give you. Speak with a Neighbors Bank home loan specialist today to get started!