USDA Income Limit 2025

When buying a home in rural America, the USDA mortgage program is an attractive option. A USDA loan is a family housing guaranteed loan program that comes with no down payment and has competitive interest rates and flexible credit requirements. They are also geared toward low to medium-income households, with the main goal being to boost rural area regions across the United States.

One of the key aspects of USDA property eligibility is meeting the USDA income limit set by the United States Department of Agriculture (USDA). This article examines how income limits can impact your eligibility for a USDA mortgage.

What Is a USDA Mortgage?

The USDA mortgage program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is designed to promote homeownership in rural areas.

USDA home loans offer low and moderate-income households the opportunity to purchase homes with no down payment and competitive interest rates. Unlike conventional loans, USDA loans are backed by the government, which reduces the risk for lenders and makes it easier for borrowers to qualify.

If you like rural living or your work allows you to be located in a rural setting, then a USDA loan could be the perfect fit for your mortgage.

Income Limits for USDA Loans

USDA income limits are established to ensure that loans are provided to those who need them most — low to moderate-income families who might otherwise struggle to obtain financing.

These limits vary by location and household size. They reflect the cost of living and average income levels in different regions. The goal is that assistance is directed toward individuals and families who can benefit the most from these government-backed loans.

How Income Limits Are Determined

USDA loan income limits are determined based on the median household income for each area.

The limits are typically set at 115% of the median income for the area. This means that if the median income for a specific area is $50,000, the income limit for a USDA loan in that area would be $57,500.

The USDA updates these limits annually to reflect changes in economic conditions, usually around June each year.

USDA Income Limits as of 2024

For 1-4 member households, the current income limit for a USDA loan is $110,650, up from $103,500 in early 2023.

The 2024 limit for 5-8 member households is $146,050, up from $136,600 in 2023.

Factors Affecting Income Limits

Location

Income limits can vary significantly from one region to another. Urban areas adjacent to rural zones may have higher limits compared to remote rural areas due to differences in cost of living and average incomes.

Household size

Larger households have higher income limits since they generally have higher living expenses. For instance, the income limit for single-family housing will be lower than that for a household of five or six.

Income sources

The USDA home loan considers all sources of income when determining eligibility. This includes wages, salaries, tips, overtime, commissions, and bonuses. It also encompasses non-employment income such as alimony, child support, Social Security benefits, and other forms of income.

Sources of Income That Affect USDA Loan Eligibility

This last bot deserves further exploration. The handy checklist below explains what types of income affect your eligibility for a USDA loan.

Employment income

• Wages and Salaries: This is regular income from employment, including base pay, overtime, and holiday pay. It also includes tips, commissions, and bonuses.
• Self-Employment Income: Income from self-employment activities, such as freelance work, business ownership, and contract work, is included. Self-employed individuals must provide tax returns and other documentation to verify their income.

Government benefits

• Social Security Benefits: This includes income from Social Security, such as retirement, disability, and survivor benefits.
• Unemployment Benefits: Any income received from unemployment insurance.
• Disability Benefits: This is income from disability insurance or benefits from the government or private insurance policies.

Rental income

This is income received from renting out property, such as a house, apartment, or room. Documentation such as lease agreements and tax returns is required to verify rental income.

Retirement and pension income

• Pension Payments: This is regular income from pensions or retirement accounts.
• Annuities: Payments received from annuities.

Alimony and child support

Income received as alimony or child support is included in the calculation. Documentation such as court orders or payment records may be required.

Investment income

• Dividends and Interest: This is income from dividends, interest on savings, stocks, bonds, or other investments.
• Capital Gains: While not typically counted as regular income, significant and recurring capital gains may be considered.

Military income

• Basic Pay: Regular pay received from military service is included.
• Allowances: Housing allowances, cost of living allowances, and other military benefits are considered part of the total income.

Adjustments and deductions

While calculating the total household income, the USDA also considers allowable deductions that can lower the gross income. These deductions include:

• Childcare expenses for children under the age of 12.
• Medical expenses for elderly or disabled family members if these expenses exceed a certain percentage of household income.
• Annual deductions per child for dependents under the age of 18, full-time students aged 18 or older, or disabled family members.

Verification and Documentation

To qualify for a USDA loan, applicants must provide comprehensive documentation of all income sources. This may include:

• Recent pay stubs or salary statements.
• Tax returns and W-2 forms.
• Bank statements.
• Proof of government benefits.
• Rental agreements and proof of rental income.
• Court orders for alimony or child support.
• Documentation of self-employment income.

Check Your Eligibility

To find out if you meet the income limits for a USDA mortgage, you can use the USDA’s income eligibility tool available on their website. By entering your location and household size, you can quickly see the income limits for your area and determine if you qualify.

Why Are There Income Limits for USDA Loans?

There are actually several good reasons why USDA loans have income limits. Here are the most important ones.

Accessibility for low to moderate-income families

The main goal of the USDA loan program is to promote homeownership among families and individuals who have limited financial resources. By setting income limits, the USDA provides assistance to those who are truly in need.

Prevent abuse of the program

Income limits help prevent higher-income individuals and families from taking advantage of the benefits intended for those with lower incomes. Without these limits, the program could be exploited by those who do not need financial assistance — something that would reduce the available resources for those who genuinely require support.

Encourage responsible lending

Income limits are part of a broader set of eligibility criteria that promote responsible lending practices. The USDA focuses on applicants with lower incomes to offer more favorable rural development loan terms, such as no down payment and lower interest rates. The goal is to make mortgages sustainable and manageable for the borrowers. This reduces the risk of default and foreclosure and contributes to the stability of the housing market.

Trust Society Mortgage for Your Dream Home

Are you interested in a USDA loan but wonder if your income is too high to be eligible for one? Contact us at Society Mortgage and an expert loan officer will help you understand everything about applying for a USDA loan. Call us today and let’s start your mortgage process together!