Hi Daniel, 
Thanks for posting.
You mentioned a loan officer, so I'm going to assume that you're talking
about a Guaranteed Loan, where a bank makes the loan and the USDA
guarantees (insures) it.
Since you've been reading the posts about USDA loans, I'm sure you
know that the new modified income requirements go into effect on or
about March 20th, 2009. This will make it much easier for more people
(including you) to qualify for USDA loans.
Instead of having 8 different income limits, there will be only two:
one for 1-4 person households and another for 5-8 person households.
The 2008 income limit for 4-person households will be the "new" 1-4 person
limit. The 2008 income limit for 8-person households will be the "new" 5-8
person limit. The amounts vary based on location.
It's best to give you an example of what I mean:
Where I live in Virginia, the "new" median income limit for 1-4 person
households is $70,750 for Guaranteed Loans. The USDA allows
applicants to earn up to 115% of this amount, or a total of $81,362.
Amounts do vary from location to location, but for most of the country
the modified income limit for 1-4 person households is $70,750.
Since you're applying for a Guaranteed Loan, you shouldn't have a problem.
If my math is correct, you earned $40,000 in 2007 and $55,000 in 2008.
Those amounts are well within the new income requirements.
So the question isn't about whether your income is base salary or commission.
The real question is whether or not your loan officer is qualifying you based on
the current USDA income charts or the modified charts I described above.
If it's the former, you might have a problem. If it's the latter, you should be home free.
And it might be smart to talk to a couple of different loan officers. People here
in the forum are having success with Wells Fargo and Chase for Guaranteed Loans.
If I'm not mistaken, they are qualifying people based on the modified income limits.
A 620 middle score is the magic number FICO-wise. That qualifies you for the best rate.
Here's the chart I'm pulling the numbers from. Just click on your state and
a pdf chart will appear. Just focus on the limits for 4-person and 8-person
households. Those are the "new" limits for the modified income structure:
http://www.rurdev.usda.gov/rhs/sfh/sfh%20guaranteed%20loan%20income%20limits.htm
Thanks again for posting, Daniel. We're happy to help.
CanDo
"The right attitude is everything"
Hey Daniel,
I did some detailed checking on your question. I called the mortgage
department at my credit union (Navy Fed). They don't offer USDA
loans, but they do originate FHA and VA loans (as well as conventional).
They said when salary + commissions are part of your employment
contract but the commission portion fluctuates from year to year,
they take an average of commissions earned. They also said it doesn't
matter if the loan is conventional or government-backed (FHA, VA, USDA).
The income qualification process is exactly the same.
The only exception to this rule is if commisions, bonuses or overtime are
guaranteed each year. In that scenario, total annual income for each year
would stand on its own and would not be averaged out over 2 years. Also,
your employer would be contacted and asked to provide written proof that
a set amount in commissions/bonuses/overtime is guaranteed.
So in your case, from a qualification standpoint you earned $47,500 both
years --- even though you actually earned $40,000 in Year 1 and $55,000
in Year 2. Since your USDA income threshold is $49,000, you should be
good.
Something else to think about: for USDA Guaranteed Loans you're allowed to
earn up to 115% of the median income in your area. If $49,000 is what's
printed on the income chart, you can actually earn up to $56,350 and still
be income eligible (49,000 x 1.15 = 56,350). So even with the 55k you earned
last year, you're still golden using this calculation.
So whether you use the $49,000 number or the $56,350 number, either way
should be fine. But like you said, you won't be 100% certain until the offer is
accepted and the application is sent in. And again, based on what I was told this
afternoon, things are looking good for you, Daniel
Hope this helps you. I'm sure one of the mortgage experts in the room will chime
in as well when they see this post. The more info you get, the better.
Good Luck to you, Daniel!!!
CanDo
"The right attitude is everything"
That's exactly right, Daniel.
Median means average. Some folks earn more, while
others earn less. So the 115% income calculation
allows for folks who earn more than the average income
in any given area to still qualify for a USDA loan.
It's hard to believe our government is actually that smart, huh?
Our tax dollars are actually working in this case...
Glad I could help. Like I said before, you won't know for
certain until everything comes back. But it looks good
based on what I found out today.
We'll keep our fingers crossed and think only good thoughts for you, Daniel.
Good Luck to you and please keep us posted. Enjoy the weekend!
CanDo
"The right attitude is everything"
@Anonymous wrote:That's exactly right, Daniel.
Median means average. Some folks earn more, while
others earn less. So the 115% income calculation
allows for folks who earn more than the average income
in any given area to still qualify for a USDA loan.
It's hard to believe our government is actually that smart, huh?
Our tax dollars are actually working in this case...
Glad I could help. Like I said before, you won't know for
certain until everything comes back. But it looks good
based on what I found out today.
We'll keep our fingers crossed and think only good thoughts for you, Daniel.
Good Luck to you and please keep us posted. Enjoy the weekend!
CanDo
"The right attitude is everything"
Clarification on statistical terminology: there are several different calculations that may be spoken of in casual conversation as "average," including such exotica as geometric mean, trimmed mean, and harmonic mean. But the two most common averages are the arithmetic mean and the median. The arithmetic mean is the sum divided by the count and the median is a value such that half the relevant population will be above or below it. Another measure sometimes used is the mode, the most-frequently-found value in the distribution.
In the case of a symmetrical "bell curve" gaussian normal distribution then mean, median, and mode will all be the same. But income distributions tend to be what statisticians call "skewed" because there are a small number of people with very large incomes, a lot of people in the middle, and a fair number of people in the lower range. Sometimes one hears Management and Union leaders talking about "average" pay during a labor dispute, in which case Management will emphasize the MEAN and Union leaders will emphasize the MEDIAN because mean income is usually much higher than median income.
For example, suppose a small town has one billionaire, several millionaires, and lots of farmers and small-business folks. The MEAN income will be quite large because when the income of those rich folks is divided by the town's population that will work out to a pretty hefty average. But the MEDIAN will be more representative of what finances are like for most folks.