USDA Single Family Housing 

Guaranteed Loan Program 

Income and Asset

Kendra Harmon, Finance & Loan Analyst

Lender and Partner Activities Branch

Washington, D.C. 
Annual Income

Adjusted Annual Income

Repayment Income

Assets

Q&A

AGENDA

TYPES OF INCOME

Unit 

must...

Annual 

Income Assets

Adjusted

Annual 

Income

Repayment

Income

Income 

Types
Types of Income

Annual 

Income

Adjusted 

Annual 

Income

Repayment 

Income

Income of all adult household members, not just 

parties to the note.

Annual income minus certain qualified household 

deductions.

Stable and dependable income used to calculate debt 

ratios.
https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

USDA Eligibility Site

Updated 

income limits 

just released 

on July 13, 

2023!

UPDATE
USDA Eligibility Site
USDA Eligibility Site
USDA Eligibility Site
USDA Eligibility Site
USDA Eligibility Site
Annual Income
Include

Income of all adult household members, including 

benefits received on behalf of minors.

The first $480 of earned income from adult full-time 

students who are not the applicant, co-applicant, 

or spouse of an applicant.

$0 for a business loss.

IRS transcripts required for all adult household 

members (except full-time students). Lender must 

obtain and review prior to closing.

Annual Income
Include

Assets: Include income from cumulative 

household non-retirement assets of $50,000 or 

greater.

Assets with actual earnings will use the stated rate 

of interest.

Assets that do not earn interest will use a current 

passbook savings rate.

Deduct any funds utilized for down payment, 

closing costs, pre-paids, etc. in the home purchase 

transaction PRIOR to calculating asset income.

Annual Income: Assets
Exclude

Lump Sum or Sporadic Payments

Section 8 Housing Vouchers

Student Loans 

SNAP Benefits

Fringe Benefit Packages

Annual Income: Exclusions
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Assets...Investigate

Always required to verify. Calculation 

required if cumulative household total 

exceeds $50,000.
Adults Minors

Bob (Applicant) 

(full-time employment; 

checking/savings - $20,000 jointly w/ Sue)

Jenny 

(part-time 

employment)

Sue (Co-Applicant) 

(full-time employment; 

checking/savings joint w/ Bob)

Lily

Grandpa Happy 

(SSI and 401k;

checking & savings $70,000 jointly w/ Grandma)

Ben

Grandma Happy 

(SSI and 401k; joint checking & savings w/ Grandpa)

Sophie

Sam 

(full-time college student)

Twins Lucy & 

Lucas Only first $480

$0

The Happy Family’s 

Annual Income

Annual Income – Example
GUS 

“Eligibility”
Adjusted Annual Income
$480 per eligible dependent (at time of application). May include when there is 

shared custody.

Verified childcare expenses for children 12 & under. Anticipated for next 12 months. That 

enables family member(s) to work, seek employment or attend school

Disability expenses that exceed 3% of annual income.

$400 elderly deduction (applicant or co-applicant is 62 or older). Only one $400 

deduction per household.

Unreimbursed medical expenses for elderly or disabled households that exceed 3% of 

annual income.

Annual Income – Allowable Deductions 
Adjusted Annual Income: Deductions

If Income Limit is $110,650

Gross Annual Income $114,500

3 children x $480 - $ 1,440

Subtotal $113,060

Childcare Expenses

$500/month x 12 - $ 6,000

Adjusted Income = $107,060
Allowable Deductions for Disability Expenses

Loan Scenario

• Payments to a care attendant to stay with a disabled 16-year-old child 

allow the child’s mother to go to work every day. 

o These payments are an eligible disability assistance expense.

o The disability assistance expenses cannot exceed the employment income of the 

family member enabled to work. 

o NOTE: Attendant care includes, but is not limited to, expenses for home medical 

care, nursing services, housekeeping and errand services, interpreters for hearingimpaired, and readers for persons with visual disabilities.
Allowable Deductions for Disability Expenses

Applicant/Borrower earned income: $60,000

Co-applicant/Co-borrower income: +$30,000

Total annual income: $90,000

Care expenses for disabled household member $10,000

Calculation: $10,000

(3% of annual income) (90,000 x 3%) - $2,700

Allowable disability assistance expenses $7,300

Deduction for eligible expenses that exceed three percent of the annual income.
Loan Scenario

• Elderly household with an annual income of $25,000

• Anticipated medical expenses of $3,000 that are not covered by insurance or 

another source

o Some anticipated expenses such as Medicare or other health insurance premiums and 

ongoing prescriptions can be documented easily.

o Others need to be estimated. Use historical information about medical bills to 

estimate future expenses. However, the estimates should be realistic. 

 For example, if the household has a significant medical bill, the Loan Originator would count only 

that portion of the bill that is likely to be paid during the coming year. 

Allowable Deductions for Medical Expenses
Applicant/Borrower income: $15,000

Co-applicant/Co-borrower income: +$10,000

Total annual income: $25,000

Total anticipated medical expenses: $3,000

Calculation: $3,000

(3% of annual income) (25,000 x 3%) - $750

Allowable medical expenses $2,250

Allowable Deductions for Medical Expenses

Deduction for eligible expenses that exceed three percent of the annual income.
Adults Minors

Bob (Applicant) 

(full-time employment; $20,000 joint 

checking/savings)

Jenny 

(part-time 

employment)

Sue (Co-Applicant) 

(full-time employment; $20,000 joint 

checking/savings)

Lily

Grandpa Happy 

(SSI and 401k; $70,000 joint checking & savings )

Ben

Grandma Happy 

(SSI and 401k; $70,000 joint checking & savings )

Sophie

Sam 

(full-time college student)

Twins Lucy & 

Lucas

$480 x 7 = $3360

May also include verified childcare expenses

Elderly deduction does not apply

The Happy Family’s 

Adjusted Annual Income

Adjusted Annual Income – Example
GUS 

“Eligibility”
Frequently Asked Questions...

The applicant currently lives with his sister; however, 

she will not be moving to the home being financed. Is 

her income required to be included in the annual and 

adjusted annual income calculations if they have not 

been living apart for three months?
Frequently Asked Questions...

ANSWER: NO

Chapter 9, Section 9.3B states that lenders must include the income of an 

applicant’s spouse, unless the spouse has been living apart from the 

applicant for at least 3 months.

This section further states, “This guidance applies to domestic partners, 

significant others, and fiancés that are currently living with the applicant as 

a household/family unit”

If the individual does not meet this definition, such as the case of living with 

a sister, then the three month evidence would not be required.
Frequently Asked Questions...

The applicant recently started a new job where the 

employer reimburses employees for market health 

insurance premiums up to $500/month. The income 

is non-taxable. Is this required to be included in the 

annual income calculation?
Frequently Asked Questions...

ANSWER: NO

Since the income is non-taxable, it is considered 

reimbursement, therefore not included in the annual income 

calculation.
Repayment Income
Helpful Tips

Include stable and dependable income of parties to 

the note only

Co-signers are not allowed

Use caution when wages have significantly increased or 

decreased (20% or greater)

USDA does not underwrite loans!

Lender = Underwriter USDA = Compliance 

Evidence of historical earnings – Lenders must analyze 

gaps

Repayment Income
Excluded 

Types

Any student financial aid received by household members for 

tuition, fees, books, equipment, materials and transportation

Amounts received that are specifically for or in reimbursement of 

the cost of medical expenses for any family member

Temporary, nonrecurring, or sporadic income – including gifts

Lump sum additions to family assets such as inheritances, capital 

gains, insurance payments and personal or property settlements

Payments for the care of foster children or adults

Supplemental Nutrition Assistance Program payments

Repayment Income – Excluded Types
6 Months: Court Ordered Child Support, Separate Maintenance/Alimony 

12 Months: Voluntary Child Support, Separate Maintenance/Alimony 

1 Year History: Base Wages, Expense Allowances, Bonus, Commission, Employee Fringe Benefits, 

Military, Overtime, Part-time, Tips 

2 Year History: Capital Gains, Dividends, Interest, Rental Income, Schedule K-1, Seasonal, SelfEmployment, Unemployment

Ineligible: Boarder Income, Non-Occupant Borrower, Less than 3 years remaining

(See HB-1-3555, Attachment 9-A for more inclusive list)

Repayment Income – Required History
Repayment Income – Special Considerations

• Income that has been verified as tax 

exempt may be grossed up by 25% for 

Repayment Income ONLY

• Do not gross up for Annual Household 

Income

• No other adjustments are authorized

Tax Exempt Income:

• Any loss incurred from a business that 

is closed may be removed from 

consideration when a letter is provided 

with documentation of the following: 

1. When the business closed

2. Why the business closed

3. How the business closed

4. Evidence to support the closure

Self-Employed 

Business
Adults Minors

Bob (Applicant) 

(full-time employment; $20,000 joint 

checking/savings)

Jenny 

(part-time 

employment)

Sue (Co-Applicant) 

(full-time employment; $20,000 joint 

checking/savings)

Lily

Grandpa Happy 

(SSI and 401k; $70,000 joint checking & savings )

Ben

Grandma Happy 

(SSI and 401k; $70,000 joint checking & savings )

Sophie

Sam 

(full-time college student)

Twins Lucy & 

Lucas

The Happy Family’s 

Repayment Income

Repayment Income – Example
GUS “Borrower 

Information”
37

Review Attachment 9-A

https://www.rd.usda.gov/files/3555-1chapter09.pdf 

Refer to applicable column.

GUS does not determine stable and 

dependable income. The underwriter does.

Retain all documentation in the 

permanent loan file.

Incorrect data entries will render the 

underwriting recommendation as invalid.
Income Documentation – Attachment 9-B

Attachment 9-B = 

 Not Required!

But a very helpful tool!
Frequently Asked Questions...

The applicant has only been at his current job for 4 

months, but it is mandatory that he works 10 hours of 

overtime per week. He does not have a history of 

earning overtime in his previous position. Since the 

overtime is mandatory, can it be used in repayment 

income?
Frequently Asked Questions...

ANSWER: NO

Even if the overtime is mandatory, a 12-month history of 

receipt in the same or similar line of work is required in order to

be considered for repayment income.
Frequently Asked Questions...

The applicant is employed by a manufacturing plant 

that shuts down each year in July for cleaning and 

maintenance. Employees are “laid off” for the month 

and return in August. 

Would we consider this seasonal employment and 

require a 2-year history or regular base wages?
Frequently Asked Questions...

ANSWER: Regular Base Wages

Although Rural Development guidelines do not define a set 

period of time to be considered seasonal employment, a onemonth layoff would generally not be considered a seasonal 

employment. 

In this case the layoff is for cleaning and maintenance, not the 

seasonality of the line of work.
Income Verification Requirements
Streamlined Documentation Full Documentation

1 recent paystub with YTD 

figure

Paystubs covering the most 

recent four weeks of earnings

Written VOE 

(may be electronically 

generated)

Verbal VOE (must be obtained 

within 10 business days of 

closing)

W-2’s for the most recent 

two tax years

Verbal VOE (must be obtained 

within 10 business days of 

closing)

Income Verification Requirements

EMPLOYED INCOME (base, 

overtime, bonus, 

commissions, etc.)

Verify for all adult 

household members 

except full-time 

students.
Trend analysis for the applicant’s business (Recommend use of Fannie 

Mae Form 1084, “Cash Flow Analysis” and Fannie Mae Form 1088, 

“Comparative Income Analysis”)

Confirmation the business is operational within 30 days of loan 

closing

2-years of signed individual and business tax returns with all 

schedules plus a recent profit and loss statement (not required to be 

audited)

OR

IRS transcripts with all schedules plus a recent profit and loss 

statement (not required to be audited)

SELF- EMPLOYED 

INCOME

Income Verification Requirements
IRS Transcripts

Required for all required household members.

Full time students age 18 and up that are not the applicant, co-applicant, or spouse of an 

applicant are not required to sign the 4506-T/4506-C or have transcripts provided. 

Transcripts provide a quality control measure to ensure all income and asset earnings reported 

to the IRS have been disclosed to the lender. 

Lenders must obtain and review the transcripts prior to loan closing and retain them in their 

permanent loan file. 

Previously unknown/undisclosed income or asset sources that are identified by the transcripts 

will require additional review by the lender and may render a loan file ineligible. 
Attachment 9-B, Underwriting Transmittal 

Summary, or Similar Form

Income worksheet was removed from the 

3555-21 but calculations are still required

Lender must document and retain income 

calculations for all adult household members

Do not submit to USDA for GUS “Accept” 

loans
Annual Income based on Hourly Rate 

at 40hr/week + YTD OT Average

Show Me the Math!

Annual Income: $32.50 x 40 hrs = $1,300 

x 52 = $67,600 

YTD OT 7,500/5.4 mos = $1,388.88 x 12 = 

$16,666.67 + hourly $67,600 = $84,266.67 
Assets
FACT OR FICTION

If an applicant does not need 

funds to close, assets must still 

be verified?
FACT OR FICTION

• Assets must be verified 

whether they are required 

for funds to close or not.

• Assets may affect income 

eligibility (Chapter 9) and 

applicant eligibility (Chapter 

8). 
Remember

Income from eligible assets may be 

required to be included in annual 

income

Assets are considered a compensating 

factor which do impact underwriting 

recommendations in GUS

Lenders will determine if assets are to be 

included in the underwriting analysis

Asset Tips
53

Asset Verification

You may not have to enter them...but you have to verify them!

Not required on “Assets & Liabilities” 

page, but may be required on 

“Eligibility” page.

Always required to verify. Calculation 

required if cumulative household total 

exceeds $50,000.
54

Asset Inflation

Not required on “Assets & Liabilities” 

page, but may be required on 

“Eligibility” page.

Always required to verify. Calculation 

required if cumulative household total 

exceeds $50,000.

Accuracy matters!

• Invalid GUS underwriting 

recommendations

• Invalid compensating factors

• Inaccurate annual income calculation

• Potential fraud
55

Assets...Which do I use?

Not required on “Assets & Liabilities” 

page, but may be required on 

“Eligibility” page.

Always required to verify. Calculation 

required if cumulative household total 

exceeds $50,000.

December Ending Balance: $4,354.53

January Current Balance: $4,534.32 Use this amount
56

Income: Calculating Assets

Example: Calculating Income from Assets

• Checking account (non‐interest bearing): $17,000

• Savings account (.25% interest): $24,000

• Certificate of Deposit (3% interest): $15,000

Total Assets: $56,000 less $5,000 from checking used to 

purchase the home

Remaining Assets = $51,000

Calculating Assets
57

Income: Calculating Assets

Example (continued): Calculating Income from Assets 

• Checking: $17,000 ‐ $5,000 = $12,000 x .25% = $30

• Savings: $25,000 x .25% = $62.50

• CD: $15,000 x 3% = $450

Asset Calculation: 30 + 62.50 + 450 = $542.50

Include $542.50 in annual income calculation

Calculating Assets
Frequently Asked Questions...

The applicant has a joint savings account with her 

mother. She indicates it is her mother’s account and 

she is only on the account for emergency purposes. 

Do we have to verify and consider the account since it 

is really the mother’s account?
Frequently Asked Questions...

ANSWER: Yes

Although the funds may be intended for the mother, if the funds are in the 

applicant’s name, including a joint account, with the applicant having 

access to the funds then those assets would be considered personal assets 

of the applicant.

The account would need to be verified and considered in accordance with 

Chapter 9 as well as considered in the review of the conventional credit test 

as outlined in Chapter 8.
Frequently Asked Questions...

The lender can consider up to what percent of the 

vested amount of a retirement account for reserves?

1. 40%

2. 60%

3. 0%
Frequently Asked Questions...

ANSWER: 60%

The lender can consider up to 60% of the vested amount of the retirement 

account as reserves.

Any funds borrowed from these accounts, such as a 401K loan, are not 

considered cash reserves.

Retirement accounts that restrict withdraws to circumstances involving the 

applicant’s employment separation, retirement, or death should not be 

considered as a cash reserve.
Frequently Asked Questions...

Proceeds from the sale of a home can be considered 

for reserves?

True or False?
Frequently Asked Questions...

ANSWER: TRUE

Verified sales proceeds can be considered reserves.

Documentation to verify sale proceeds includes the closing disclosure, or 

acceptable alternative, and verification of where the proceeds are held and 

their availability to the applicant.

Lenders should include the amount as an “Other Asset” labeled as 

“Proceeds from Real Estate Property to be sold on or before closing” to 

ensure GUS recognizes the inclusion in case reserves.
Handbook Updates
HB-1-3555, Chapter 4 & 6 Updates
HB-1-3555, Chapter 8 Update
HB-1-3555, Chapter 18 Update
Lender Resources
69

HBUSDA LINC Training -1-3555

& Resource Library

Loan Origination Tab

Resources at your 

fingertips!

https://www.rd.usda.gov/resources/usda-linc-training-resource-library
70

HBRegulation & -1-3555

Handbook

Forms & 

Worksheets

Frequently Asked 

Questions

https://www.rd.usda.gov/resources/usda-linc-training-resource-library
71

Have a question on 

POLICY?

Contact the PAC team!

Ext. 4

Need TRAINING?

Contact the LPA team!

Try our Toll-Free 

Lender Line

#833-314-0168

9:00 m – 3:30 pm EST

https://www.rd.usda.gov/media/file/download/sfhglpcontactlist.pdf
72

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