USDA Loan and Rental Income

[Joe Brooks]

I’ve been researching how USDA Guaranteed Loans calculate the buyer’s rental income from a prior property. From what I have read, they take the rental profit/loss. If you are profiting, that is added to your income and the mortgage payment is not added to recurring debts. If you are losing money every month, the difference between the rent and mortgage payment is added to your recurring debts.

The property is a duplex, one tenant pays $1200 and the other $1400. The mortgage payment is $1600. I profit $1000 a month before other expenses.

I have only owned the property for 1 year now. One requirement I saw, was that you must have the rental income for 2 years. So I’m assuming that will disqualify my profit from the rental property, even though the tenants are in lease agreements. I’m wondering if I am correct in this, or if they will in fact count the income as it will be on my W-2 this year, before applying for the USDA Mortgage?

Let’s say they do not count the rental income. That’s fine. Will they still count the mortgage payment for the rental property against my monthly recurring debt? If they did, that seems it would be extremely unfair as it would be double dipping against me- not counting my income from the property, but then counting the debt from the property.

I do meet income qualifications for a USDA Direct Loan in the area I am looking, and it qualifies as rural.