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Should I wait for USDA or go for FHA now?

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omgitsMatt
Frequent Contributor

Should I wait for USDA or go for FHA now?

My problem is my wife & I make just a little over the income limit for a USDA loan. Maybe though, I'm not certain yet

Between our two incomes on straight time alone we make 78.5k a year

However I've worked an incredible amount of OT the last two pays, grossing 4k a pay.

That was absolutely necessary to beat down debt and qualify for a particular BT CC through a local credit union, it needed to be done. Tackling high interest credit card debt seemed more productive than trying to squirm into a box to qualify for a USDA loan.

I've talked a lot about it in previous threads when asking for advice, but I'm in the process of changing careers. I'm going to take a significant pay cut, taking our combined yearly gross to from 78.5k to 70.5k.

These two pay checks with all that OT is going to be a problem when they do their 12 month income projection though.

Our regions income limit is 82,700 btw

If I wait two months and work no OT I can have two bank statements, two pay stubs and two tax returns that would bring me back down to my traditional income

I'm going to talk to a lender then.

I could possibly get proof I'm not going to be working anymore OT from my employer AND my doctor, so I could potentially get that 12 month income projection down a bit. I read in the income verification the USDA provides to lenders for how they should determine income that if the borrower can prove the OT was temporary that it wouldnt have to be considered when doing a projection.

I could also wait for the new apprenticeship I am starting soon to kick in? That pay cut would probably be enough to get us to qualify.

The catch there is I'm on a waiting list

It could take 2 weeks or 12 months, who knows?

So with that random jumble of information, should I wait until I qualify for the USDA income limits and go for that? Because in time we COULD qualify. 12 months at the absolute worst and then we would qualify.

Is it that much better than the FHA loan that this hassle would be worth waiting up to a year?

Thoughts?
Message 1 of 9
8 REPLIES 8
stinastina
Established Contributor

Re: Should I wait for USDA or go for FHA now?

I don't have any answers for you but you may be waiting on USDA anyways just because of the long process. Are you looking at USDA Guaranteed or Direct ? I think Guaranteed has higher income limits than the Direct Loan.

BK7 Discharge 1/16
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Message 2 of 9
omgitsMatt
Frequent Contributor

Re: Should I wait for USDA or go for FHA now?

Guaranteed, because you're right, direct you need 55k or lower or something like that

Guaranteed you need 82,700 or lower

In time we could climb under that threshold naturally, but def not enough for direct threshold requirements

I'm going to talk to a lender in a few months and see if we pre qualify then go for a preapproval before we even shop around for homes

While I bide my time and get my ducks in a row I'll squirrel money away for enough to do a FHA loan if all this falls through

I'm preparing for FHA loan, but I'm trying my hardest to make the USDA loan happen first

Message 3 of 9
NC_Mtg_Loaner
Valued Contributor

Re: Should I wait for USDA or go for FHA now?

DO you have the 3.5% saved for an FHA LOan?   Maybe you qualify for the 3% down Conventional loans from FNMA or Freddie Mac?

 

When it's all said and done, a mortgage loan is a loan to get you into a home and the APRs are going to be similar but I'd be shocked if one was > 1% better than the other.   

 

So the morale to the story is to simply buy a home when you are ready~even if you have to shell out the Minimum Required Investment to obtain whatever loan product for which you qualify. 

__________________________________________________

Licensed NC Mortgage Loan Originator
Message 4 of 9
VALoanMaster
Valued Contributor

Re: Should I wait for USDA or go for FHA now?

Hi OmgitsMatt,

 

When you say you're changing careers does that include a change in employers?

Do you have child care expenses?
How much of the 4K gross was OT & how much was straight time? If your combined straight time income is $78,000 per year you would need to add just your OT from the last 2 pay stubs to see if you're over the limit of $82,700.

If you have child care expenses, that money is deducted from gross annual household income. For example:

Let's say your household income is $85,000 with your OT included. Now let's say you have $4,000 in child care expenses. 

$85,000 - $4,000 = $81,000 which puts you just under the limit.

 

As far as calculating the household income for the county income limits goes, the lender should take the current income (so when your income goes down due to job change) and calculate it moving forward so you would be fine.

 

As far as waiting to go USDA vs going FHA, it depends on your scenario & needs.

FHA has more flexibility with debt to income ratios & credit but USDA's mortgage insurance (MI) is cheaper. Using a loan amount of $250,000, the USDA MI is $104.17 less per month than FHA's MI.

FHA also doesn't have the location & income limit restrictions like USDA but FHA does have county loan limits.

 

 

 

 

VA Mortgage Expert. Mortgage Banker lending in All 50 States.
VA, FHA, USDA. Jumbo, Conventional.
CAIVRS Expert.
Message 5 of 9
omgitsMatt
Frequent Contributor

Re: Should I wait for USDA or go for FHA now?

VALoanMaster,

1400 ST
2600 OT

No childcare expense and the only thing I believe we can deduct is any medical expenses for me so I can work, as I'm disabled.

She the Primary insurer in the house and she has good insurance, so it wouldn't make much of a difference sadly

Changing employers, but I can't guess when that would be tbh. They could call in a few days, or months. I suspect not until next fall but its impossible to say
Message 6 of 9
omgitsMatt
Frequent Contributor

Re: Should I wait for USDA or go for FHA now?

I have the 3.5 percent for up to 150k loan

I need to look into FNMA and Freddie Mac both, I know nothing about them tbh. I'm just learning about this in the last few weeks, its all new

Thats a great morale, I like the way you put it into perspective, ty Smiley Happy
Message 7 of 9
omgitsMatt
Frequent Contributor

Re: Should I wait for USDA or go for FHA now?

She meets all the requirements for USDA, her DTI is right and everything else is too

If the income limits work out for us then we'd make it, but I need to see what a lender says
Message 8 of 9
Anonymous
Not applicable

Re: Should I wait for USDA or go for FHA now?

Hello Matt,

 

I am in the process of getting all my ducks in a row so I can get pre-approved for a USDA guaranteed loan. I was iffy about my income exceeding the limit as well so I did some research and came across a handbook given to all USDA approved lenders. 

 

https://www.rd.usda.gov/publications/regulations-guidelines/handbooks

 

It has a lot of great information that has left me feeling much more confident about this process. In short, however, the handbook details that for me particularly it isn't necessarily my net income that is considered but your AGI (adjusted gross income). I'm a self-employed contractor so they would be using an average of two years of tax returns for me. 

 

In 2017 my net income was $84k but my AGI was $78k. In 2018 my net income was $78k and my AGI was $72k. This would average it for me to be about $75k counted towards repayable income per their guidelines in the handbook. Even without the AGI requirements I still would have fallen with the limit but it was looking so close that I was afraid something would go awry in the closing process. 

 

I hope you find some useful tips that are specific to your situation in there. Good luck!

Message 9 of 9
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