Income limits for USDA Guaranteed Loans

[Ktiz54]

I'm considering applying for a USDA home loan soon but just realized that at the beginning of the year I took a withdrawal from my 401K which is going to bump my income up this year and make me close to the limit.  I'm not sure if that fact will come out during the underwriting review and I wouldn't reach the limit until the end of the year anyway which would probably be after I closed on the house.  So are they actually looking at the current year that closely or more the last two year tax returns?  Am I overthinking this? 

[ShanetheMortgageMan]

Withdraw from a 401k doesn't increase your income.  Not sure what you mean by "I wouldn't reach the limit until the end of the year anyway" though.  Eligible income is determined by how much you are making now and if your employer verifies you will be getting a pay increase in the future, then the pay increase in figured into it as well.  So if you know you are going to get a pay increase later this year that would put you over the limit, and your employer verifies it, then you wouldn't be eligible.

[Ktiz54]

Thanks Shane.  I thought the 401K withdrawal (not a loan) would count since I will have to include it on my tax return for 2014.  I wasn't sure if they concentrated on the present year as much as the last two years since they are getting copies of tax returns.  I just meant that if they are adding income from the present year, until the year is over they can't include the months coming up - probably doesn't make sense when I try to put it into words!

[ShanetheMortgageMan]

Nah 401k withdrawal isn't included, it's really based on income that is likely to continue.

But still not clear what you are trying to say.  I am saying if your salary is currently $80k, and that puts you under the limit, but you are going to get a salary increase to say $90k and that would put you over the limit, and your employer verifies you'll be getting a $10k increase in salary, then you would not be eligible.  Usually better if you give an example to illustrate your point/question.

[Ktiz54]

Thanks Shane - that's a relief and makes sense when you look at it that way because I definitely won't get the withdrawal again in the future years. 

The other thing isn't relevant if I don't have to include the withdrawal but what I was trying to say was if they had to include the withdrawal as part of my income for 2014 and the year wasn't over yet, they couldn't positively say what my income for 2014 would be since I hadn't received all of the years paychecks yet - probably still doesn't make sense but the main thing is I should be fine with the income limits if that withdrawal doesn't count.

Thanks for all your good advice on the forums.