Staying away from something that seems good is a crazy idea, right? Nobody willingly avoids an extra day of vacation or a chance to eat one of their favorite meals. However, too many prospective home buyers avoid using a USDA Rural Housing mortgage. The reason is actually ironic; many people think that they make too much money to qualify for the loan. For the majority of full-time employees, this is not the case.
USDA Rules about Income
In order to understand the whole misconception, it is important to be familiar with the USDA program rules concerning income. The rules state that the household income for the borrower cannot be higher than 115% of the average income in the area where the home is located. Furthermore, the income varies from county to county and is based on the number of people living in the home. A few examples will make this easier to understand.
Example 1. A husband and wife have one child. The husband has a full time job earning $43,000 per year. The wife stays home and cares for the child without any earnings from a job. In this example the household has 3 people and their total income level is $43,000. They would meet the income guidelines for most every county in Wisconsin.
Example 2. A husband and wife have two children under the age of 14 and the sister of the wife lives with the family. The husband, wife and her sister all have full time jobs. The combined yearly salaries of the three working adults are $110,639. That sounds like it would be too high to qualify for USDA. HOWEVER, because there are 5 people living in the home the household income across Wisconsin ranges between $98,650 and $123,350. Doing a little math 115% of $98,650 is $114,137. This means that our example family would meet the income guideline in every Wisconsin area.
How Many People Actually Meet the Income Criteria?
It might be surprising to you but most people have salaries that fall within the USDA guidelines. Consider the following income information, courtesy of www.areavibes.com
This graph shows the income for men and women across various brackets. According to these figures over 70% of the men in Janesville earn $65,000 per year or less while over 70% of the women make $40,000 or less per year.
The most recent census states that there are 63,588 people living in Janesville. Using the above figures, if an man with average salary married a woman with an average salary then over 40,000 couples would qualify for the income guidelines set out by the USDA mortgage program.
Basic Premise Applies to Many Areas
Obviously, Janesville is not the only area in Wisconsin. But this example drives home an important point. In high income areas a large percentage of people with full time jobs will be able to at least qualify under the income rules for a USDA loan. In some of the more remote locations the average income per household is generally lower. This means that some areas could have as much as 80% to 90% of its county residents eligible for this great loan.
Considering the 100% loan to value financing that USDA offers, it really boggles the mind to think that people are shying away from this type of mortgage. With rates so low this loan product presents a great way for a large number of people to get into a home with very little money out of their own pocket.