USDA Loan Income Limits and Eligibility in 2024
The USDA home loan program provides affordable, zero-down home financing options for low to moderate-income families across all fifty states. The USDA sets standard income limits to ensure these home loans are readily available to families that 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 one to four member households is $110,650, up from $103,500 in early 2023. The 2024 limit for five to eight member households is $146,050, up from $136,600. USDA loan limits by county may be higher to account for cost of living.
How The 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, then you can apply for the USDA zero-down loan program.
USDA sets new limits every year in the spring (usually May or June). These limits are capped at 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 July 13, 2023 are as follows:
•1-4 member households increased to $110,650
•5-8 member household increased to $146,050*
Higher income limits apply in areas with higher costs of living. For example, a homebuyer applying for a USDA loan in Santa Rosa, California could not have a combined total household income greater than $151,000 in a household of 1-4 or $199,300 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.
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:
•Total annual household income (from all adult income-earning household members)
•Projected annual income for the next 12 months (from supporting income documentation and third-party employer verification)
•Repayment income (adjusted annual total from supporting documentation)
All income is calculated and verified using the following documentation:
•Paystubs
•W-2s
•Third-party employer verification
After income is verified, USDA lenders review these additional financial factors to determine your repayment ability:
•Debt-to-income ratio
•Credit score
•Assets and savings
•Previous rental or mortgage payment history
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:
•Earned income from a minor
•Earned income of an adult, full-time student beyond $480
•Earned income tax credit
•Lump-sum allowances from inheritances, capital gains or life insurance policies
•Housing assistance payments (commonly referred to as Section 8 Homeownership Program)
•Earned income from caregivers, such as live-in nurses
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.
Misconception about Maximum Loan Limits and The Facts
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.
Facts: USDA loans empower buyers to borrow as much as they are able to repay.
What makes a future homebuyer USDA eligible?
•Meeting USDA loan limits for total household income
•Property must be in USDA-designated rural area
If you meet the above USDA requirements, you can borrow as much as a lender will give you.