Today I will like to discuss what income is allowed by USDA Lenders in Kentucky when calculating your income, as well as income that is used to determine whether you meet Kentucky Rural Housing USDA Income Eligibility guidelines.
USDA Loans in Kentucky equire that the borrower's income meet both "Income Eligibility" and "Income Qualifying" requirements. Income Eligibility is income used to determine whether the income of all adult household members exceeds USDA's county specific and household size allowable limit. Income Qualifying is the income used to determine whether the income is appropriate to support the loan request. The components used to determine the income for both criteria differ.
A common list of areas that should be reviewed by the Loan Officer with the borrower is as follows:
USDA Loans in Kentucky equire that the borrower's income meet both "Income Eligibility" and "Income Qualifying" requirements. Income Eligibility is income used to determine whether the income of all adult household members exceeds USDA's county specific and household size allowable limit. Income Qualifying is the income used to determine whether the income is appropriate to support the loan request. The components used to determine the income for both criteria differ.
A common list of areas that should be reviewed by the Loan Officer with the borrower is as follows:
| Income Type | Income - Eligibility | Income -Qualifying |
|---|---|---|
| Household Income in Kentucky |
Income of all adult members of the household are considered for qualifying purposes even if they are not on the loan application
|
Use only income from borrower(s) on the loan application
|
| W-2 Annual Income in Kentucky |
Use Box 3 – Social Security Income
|
Use Box 1 – Wages, tips, other comp
|
| Court Ordered Child Support and Alimony | Use court ordered amount even if not receiving income regularly. This is for all members of the household | Must document on-time receipt over the previous 12 months |
| Part-Time, Overtime, and Bonus Income | Any income earned is extrapolated over a 12 month period of time | Need a two year documentable history with the same employer to be considered |
| Business Income/Loss | Business income or loss from a previously filed tax return will be used to determine income | Need a two year documentable history provided by tax return information obtained directly from the IRS |
| Unemployment Income | Benefit received from current year (and possibly previous year even if non-reoccurring) will be added to income eligibility | Only unemployment income derived from seasonal planned layoffs will be considered as qualifying income. All other unemployment income will be disregarded |
| Unreimbursed Business Expense | Reduce income eligibility income | Reduce income qualifying income |
Loan Officers that are inexperienced with USDA Loans in Kentucky often incorrectly calculate income eligibility, which may lead to a subsequent loan denial. Furthermore, the actual borrower should review this information as well. Borrowers need to realize there are variables identified through the loan approval process that the Loan Officer has no way of knowing when providing an initial pre-qualification letter. For instance, the Underwriter will not know if there are any unreimbursed business expenses until tax returns are obtained directly from the IRS, unless the borrower proactively communicates the information to the Loan Officer during the initial loan pre-qualification interview.
Most are familiar with USDA Rural Housing Loan Program being a great no money down program available and it is not just for Kentucky first time buyers.
Joel Lobb
Senior Loan Officer
(NMLS#57916
text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.com
Senior Loan Officer
(NMLS#57916
text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.com
The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org). USDA Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.
