USDA Technical Handbook HB-1-3555 §9.11 — Education

USDA HB-1-3555, Chapter 9, § 9.11 — Education

Effective 2025-05-05 · USDA chapter revision · Procedure Notice 640

The Agency will allow time spent in school towards the required employment history for repayment income This includes college, technical school, and career-based certificates in high school (e.g. health and public safety career tracks). A standard high school diploma without an accompanying certificate does not meet the time requirements. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. ATTACHMENT 9-A Income and Documentation Matrix Income guidance: 7 CFR 3555, Sections 3555.152(a) and (b) This matrix cannot cover every income/asset type, employment scenario, etc. USDA requires approved lenders to use sound judgment to make an accurate and dependable analysis of income per 7 CFR 3555.152. Exclusions may apply under 7 CFR 3555.152(b)(5) and Attachment 9-D. Considerations for Income Calculations x Lenders must verify the income for each adult household member for the previous 2 years. x Annual and adjusted annual income calculations must include all eligible income sources from all adult household members, not just parties to the loan note. x Annual income is calculated for the ensuing 12 months, based on income verifications, documentation, and household composition. x Include only the first $480 of earned income from adult full-time students who are not the applicants, or a spouse of an applicants in annual and adjusted annual income. x Income from assets that meet the criteria of Section 9.4 must be included in annual and adjusted annual income. x Repayment income calculations include the income sources of the applicants who will be parties to the note that meet the minimum required history identified in this matrix and have been determined to be stable and dependable income by the approved lender. x Income used in repayment income calculations must be confirmed to continue a minimum of three years into the mortgage. x If the income is tax exempt, it may be grossed up 25 percent for repayment income. x “Documentation Source Options” lists eligible documentation. Every item listed is not required unless otherwise stated. Lenders must obtain and maintain documentation in the loan file supporting the lender’s income calculations. Income Type Annual Income Repayment Income Adoption Assistance or Subsidy If the income will be received in the ensuing 12 months, include the first $480 of adoption income or subsidy assistance for each grantee. Required History: None, the income must be received at the time of submission to the Agency. Lenders must document: o The applicants are currently receiving the income; and o The amount of the income received each month. Benefits that do not include expiration dates on the documentation will be presumed to continue. Documentation Source Options: x Benefit/Award letter to document the amount and duration of payments. x Online payment schedule from the Agency, bank statements, etc. x Federal income tax returns or IRS tax transcripts with all schedules. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Automobile Allowance Include amounts documented on the pay statements as taxable gross earnings that will be received in the ensuing 12 months. Required History: Two years Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. The full amount of the expense allowance may be included. Refer to Chapter 11 for additional guidance when there is a monthly debt associated with the income (such as a car payment). Documentation Source Options: x Paystub(s)/Earning statement(s). x Contract/agreement from employer to state terms and duration of payments. x Federal income tax returns or IRS tax transcripts with all schedules. Base Wages (Hourly or Salary) Full or Part Time Include amounts received before deductions for payroll taxes, insurance, etc. Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Full time students age 18 and above that are not applicants, coapplicants, or a spouse of an applicant will only have $480 of their earnings included in the annual income calculation. These household members are not required to present income documentation. Required History: One year Income must be received at the time of submission to the Agency. The one year of required history may be met through a combination of employers, education, or military service. This history is not required to be with the same or current employer. Applicants that were on leave with their employer due to maternity/paternity leave, medical leave, relocation, etc. remain employed. Underwriters may use discretion for applicants returning to the workforce after leaving a previous job to care for a child/family member, complete education, etc. for an extended time of one year or greater. Documentation Source Options: x Paystub(s)/Earning statement(s). x W-2s. x Written Verification of Employment (VOE) or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Boarder Income Guaranteed loans are for the purchase of a primary residence. Boarder income refers to rental income received from an individual renting space inside the dwelling, thus making the property income producing. The financing of income producing property is an ineligible loan purpose for the SFHGLP. Ineligible Ineligible Bonus Include amounts that will be received in the ensuing 12 months based on employment verifications. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: One year in the same, or similar, line of work. Underwriters must analyze bonus income for the current pay period and YTD earnings. Significant variances (increase or decrease) of 20 percent or greater in income from the previous 12 months must be analyzed and documented (e.g. paid once annually, paid monthly, etc.) before considering the income stable and dependable. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x Paystub(s)/Earnings statement(s). x W-2s. x Written VOE or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Capital Gains Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: Two years Lenders must analyze the previous two years of capital gains income. An average of the previous two years may be logical, or if the current year was 20 percent less than the previous year, the lesser must be utilized. Required Documentation: x Federal income tax returns or IRS transcripts with all schedules. x Evidence of additional property or assets retained by the applicants through title, bank statements, etc. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Child Support Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Legally enforceable payments that have not been received may be excluded when payments are not received for an extended time and a reasonable effort has been made to collect them through the official entity responsible for enforcing such payments. Court Ordered Payments: Required History: Six months Child support that meets the minimum history, but the payment amounts are not consistent, must use an average consistent with the payor’s current ability/willingness to pay. Voluntary Payment Agreements: Required History: One year Child support that meets the minimum history, but the payment amounts are not consistent, must use an average consistent with the payor’s current ability/willingness to pay. Documentation Source Options: x Final divorce decree, legal separation agreement, or court order (front and pertinent pages) to document the amount and timeframe of the obligation. x Evidence of timely receipt/consistent amount for required history: bank statements, canceled checks, deposit slips, tax returns, etc. Commission Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: One year in the same, or similar, line of work. Underwriters must analyze commission for the current pay period and YTD earnings. Significant variances (increase or decrease) of 20 percent or greater in income from the previous 12 months must be analyzed and documented (e.g. variances due to seasonal/holiday, etc.) before considering the income stable and dependable. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x Paystub(s)/Earning statement(s). x W-2s. x Written VOE or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Contract / Employment Offer Include amounts that will be received in the ensuing 12 months based on employment verifications. Required History: One year The one year of required history may be met through a combination of employers, education, or military service. This history is not required to be with the same or current employer. Applicants moving to a new employer (e.g. school district, same profession, etc.) with a contract to begin employment within 60 days of loan closing may be eligible if the underwriter determines the applicants have reserves available post loan closing to cover all monthly liability payments and the new mortgage obligation until employment begins. Documentation Source Options: x Copy of signed employment contract/offer. x Paystub(s)/Earning statement(s) of current/former employer to confirm employment/income history. x W-2s. x Written Verification of Employment (VOE) or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Depreciation/Depletion The amount(s) of straight-line depreciation and/or depletion documented on acceptable IRS forms may be deducted. Required History: Two years Continuance: These amounts will be presumed to continue unless there is documented evidence they will cease. The amount(s) of straight-line depreciation and/or depletion may be added back to repayment income. Required Documentation: x Federal income tax returns or IRS tax transcripts with all schedules. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Disability Income – Long Term This section does not refer to disability income received from the Social Security Administration. Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: None, the income must be received at the time of submission to the Agency. Lenders must document: o The applicants are currently receiving the income; o The amount of the income received each month; and o Determine if there is a contract termination or modification date. Documentation Source Options: x Verification from the disability policy or benefits provider to document the applicant’s eligibility for benefits, amount and frequency of payments, and termination/modification date. x Federal income tax returns or IRS transcripts with all schedules. Dividends Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: Two years Required Documentation: x Account statements to support amount of income utilized for repayment purposes, including the balance, rate of interest, and payment amounts/continuance. x Federal income tax returns or IRS tax transcripts with all schedules. Earned Income Tax Credit Do not include Do not include Employee Fringe Benefits Include amounts documented on the pay statements as taxable gross earnings that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: One year Employer-provided fringe benefit packages documented on earning statements as taxable income may be included. Documentation Source Options: x Paystub(s)/Earning statement(s). x Contract/agreement from employer to state terms and duration of payments. x Written VOE or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Employment Related Account This income source may be a non-self-employed severance package. Lump sum retirement packages should refer to Retirement Income. All payments must be deposited to a verified asset account with acceptable documentation of receipt. Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: None, the income must be received at the time of submission to the Agency. Lenders must document: o The applicants are currently receiving the income; o The amount of the income received each month; and o Determine if there is a contract termination or modification date. Required Documentation: x Contract/agreement from employer to state terms and duration of payments. x Benefit/Award verification letter, IRS 1099, evidence of current receipt, bank statements, etc. x Federal income tax returns or IRS transcripts with all schedules. Expense Allowance Include amounts documented on the pay statements as taxable gross earnings that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: Two years Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. The full amount of the expense allowance may be included. Refer to Chapter 11 for additional guidance when there is a monthly debt associated with the income. Documentation Source Options: x Paystub(s)/Earning statement(s). x Contract/agreement from employer to state terms and duration of payments. x Federal income tax returns or IRS tax transcripts with all schedules. Foreign Income Include all wages, salaries, and additional income types that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: One year (Refer to Base Wages) Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x Paystub(s)/Earning statement(s), translated into English if applicable. x Written VOE or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Foster child or adult income Do not include Do not include Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income GI Bill This income source is paid directly to veterans and/or their dependents attending college or university for the purpose of covering tuition and related expenses. Do not include Do not include Government Benefits Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5) and Attachment 9-C. Required History: None, the income must be received at the time of submission to the Agency. Lenders must document: o The applicants are currently receiving the income; and o The amount of the income received each month. Continuance: Benefits that do not include expiration dates on the documentation will be presumed to continue. Required Documentation: x Benefit/Award documentation to support payment amounts and duration. Guardianship/Conservatorship Income This guidance does not apply to income earned from foster care. Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: None, the income must be received at the time of submission to the Agency. Lenders must document: o The applicants are currently receiving the income; and o The amount of the income received each month. Continuance: Benefits that do not include expiration dates on the documentation will be presumed to continue. Documentation Source Options: x Documentation to support payment amounts and duration, such as a court order, legal documents, or other supplemental information. x Online payment schedule from the Agency, bank statements, etc. x Federal income tax returns or IRS tax transcripts with all schedules. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Housing or Parsonage Allowance Include amounts documented on the pay statements as taxable gross earnings that will be received in the ensuing 12 months.. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: One year The full amount of the allowance may be included. Do not offset the mortgage payment with the amount of the allowance. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x Paystub(s)/Earning statement(s). x Contract/Agreement from employer to state the terms and duration of payments. x Federal income tax returns or IRS tax transcripts with all schedules. Individual Retirement Account (IRA) Distributions Include amounts that will be received in the ensuing 12 months. Lump sum withdrawals or sporadic payments may be excluded under 7 CFR 3555.152(b)(5). Required History: None, the income must be received at the time of submission to the Agency. Lenders must document: o The applicants are currently receiving the income; and o The amount of income received each month. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x IRA documents, IRS 1099, evidence of current receipt, bank statements, etc. x Federal income tax returns or IRS tax transcripts with all schedules. Interest Include income that will be received in the ensuing 12 months. Net family assets that do not exceed a cumulative total of $50,000 are not required to be considered in the annual income calculation. Required History: Two years Required Documentation: x Account statements to support the balance, rate of interest, and payment amounts/continuance. x Federal income tax returns or IRS tax transcripts with all schedules. Live in Aides Do not include Do not include Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Medical Reimbursement Do not include Do not include Mileage Include amounts documented on the pay statements as taxable gross earnings that will be received in the ensuing 12 months. Required History: One year Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Mileage documented on earning statements as taxable income may be included. When a mileage deduction is claimed on the income tax return, the calculated amount may be added to repayment income. Lenders must follow current IRS guidance to calculate this amount. Documentation Source Options: x Paystub(s)/Earning statement(s). x Federal income tax returns or IRS tax transcripts with all schedules. Military Include all wages and pay allowances that will be received in the ensuing 12 months. Hazardous duty pay and additional income sources may be excluded under 7 CFR 3555.152(b)(5). Required History: One year College/Technical School attendance may be substituted. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. In addition to base pay, military personnel may be entitled to additional forms of pay. Income sources such as basic allowance for housing and subsistence (BAH/BAS), clothing allowances, flight or hazard pay, rations, and proficiency pay may be used for repayment income provided it is verified to continue. Additional consideration for the taxexempt nature of these payments may be applied. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Documentation Source Options: x Military Earnings and Leave Statement(s). x W-2s. x Written VOE or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Income Type Annual Income Repayment Income Mortgage Credit Certificate Do not include Required History: None The monthly benefit amount may be included in repayment income. Self-employed applicants are not eligible for MCC. Required Documentation: x Copy of the approved MCC award letter/contract with the rate of credit documented. GUS Instructions: x In the “Borrower Information” page under “Income from Other Sources,” use the dropdown button in the “Income Source” field and select “Mortgage Credit Certificate.” Tab to the “Monthly Income” field and enter the amount. Mortgage Differential Payment Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: One year Include the differential payment in repayment income. Do not offset the mortgage payment with the amount of the allowance. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Required Documentation: x Verification from the employer to confirm the subsidy amount and duration of payments. Notes Receivable Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: Two years Required Documentation: x Copy of note to establish the amount and length of time of payment. x Federal income tax returns or IRS transcripts with all schedules, for proof of receipt of income. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Overtime Include amounts that will be received in the ensuing 12 months based on employment verifications. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: One year in the same, or similar, line of work. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Underwriters must analyze overtime for the current pay period, and YTD earnings. Significant variances (increase or decrease) of 20 percent or greater in income from the previous 12 months must be analyzed and documented (e.g. variances due to seasonal/holiday, etc.) before considering the income stable and dependable. Documentation Source Options: x Paystub(s)/Earning statement(s). x W-2s. x Written VOE or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Pensions Include amounts that will be received in the ensuing 12 months. Lump sum withdrawals or sporadic payments may be excluded under 7 CFR 3555.152(b)(5). Required History: None, the income must be received at the time of submission to the Agency. Lenders must document: o The applicants are currently receiving the income; and o The amount of the income received each month. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x Benefit/Award verification letter, retirement documents, IRS 1099, evidence of current receipt, bank statements, etc. x Federal income tax returns or IRS tax transcripts with all schedules. Per Diem Include amounts documented on the pay statements as taxable gross earnings that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: One year Taxable income may be included. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x Paystub(s)/Earning statement(s). x Contract/agreement from employer to state terms and duration of payments. x Federal income tax returns or IRS tax transcripts with all schedules. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Rental Income A retained dwelling must meet the requirements of 7 CFR 3555.151(e). Include positive net rental income that will be received in the ensuing 12 months. Negative net rental income is counted as zero in the annual income calculation. Required History: Two years Rents Received 24 Months or More Positive net rental income received may be included in the repayment income. Negative net rental income is treated as a recurring liability in the debt ratios. Refer to Chapter 11 for additional guidance when there is a mortgage liability associated with the rental income. Rents Received Less than 24 Months No rental income may be included for repayment purposes. Negative net rental income is treated as a recurring liability in the debt ratios. Refer to Chapter 11 for additional guidance when there is a mortgage liability associated with the rental income. Required Documentation: x Federal income tax returns with all schedules, specifically Schedule E; or x IRS transcripts with all schedules, confirm Schedule E is completed. x Evidence of cash/check deposits, money order receipts, electronic payment receipt, etc. to document rents received for last 30 days. x Signed lease of current occupants. GUS Instructions: x Complete the applicable fields in the “Real Estate” page. Include the corresponding mortgage debt associated with the property, if applicable. x Unless manually overwritten, GUS auto-calculates net rental income by employing a 25% vacancy factor. GUS uses 75% of the lender entered amount for monthly rental income and subtracts the lender entered amounts for monthly mortgage payment(s), insurance, taxes, association dues, etc. Restricted Stock Units (RSU) Include amounts listed as taxable income on the pay statements as gross earnings that will continue to be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: Two years Required Documentation: x RSU account statements or award letters. x Paystubs, VOE’s, or other documentation from the employer to support previous and future payments. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Retirement Include amounts that will be received in the ensuing 12 months. Lump sum withdrawals or sporadic payments may be excluded under 7 CFR 3555.152(b)(5). Required History: None, the income must be received at the time of submission to the Agency. Lenders must document: o The applicants are currently receiving the income; and o The amount of the income received each month. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x Benefit/Award verification letter, retirement documents, IRS 1099, evidence of current receipt, bank statements, etc. x Federal income tax returns or IRS tax transcripts with all schedules. Royalty Payments Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: Two years Lenders must confirm the amount, frequency, and duration of these payments. Required Documentation: x Royalty contract or agreement. x Federal income tax returns or IRS transcripts including all schedules. Schedule K-1 This may be utilized to document income for applicants with less than a 25 percent ownership of a partnership, S corporation, limited liability company (LLC), ordinary income, net rental real estate income, or other net rental income reported on IRS Form 1065, 1120S, etc. Include monetary amounts (cash distributions) that will be received in the ensuing 12 months. Distributions of equipment, shares of real estate interest/ownership, non-monetary items, etc. are not included in the annual income. Required History: Two years Schedule K-1 income may be utilized to qualify applicants if the lender can confirm the business has adequate liquidity to support the withdrawal of earnings. The Schedule K-1 may provide this confirmation through “guaranteed payments to the partner.” Continuance: These amounts will be presumed to continue unless there is documented evidence they will cease. Required Documentation: x Federal tax returns or IRS transcripts with all schedules. x Schedule K-1 forms. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Scholarships Include funds that will be received in the ensuing 12 months after deducting for tuition, fees, books and equipment. Required History: Two years Include remaining funds after deducting tuition, fees, books, and equipment. Required Documentation: x Award letter to state the benefit/scholarship amount or tuition assistance and date of termination. x Evidence to support the deductions required to arrive at any repayment amount. Seasonal Employment Include amounts that will be received in the ensuing 12 months. Evidence of resignation, termination, retirement, or relocation from these positions may result in the exclusion of this income. Required History: Two years, in the same line of work. If the income is not earned at the time of submission to the Agency, the employer must provide verification that the applicants are still an employee along with an anticipated return to work date. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x Paystub(s)/Earning statement(s). x W-2s. x Written VOE or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Secondary Employment Include amounts that will be received in the ensuing 12 months. Evidence of resignation, termination, retirement, or relocation from these positions may result in the exclusion of this income. Required History: One year of working primary and secondary employment concurrently. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x Paystub(s)/Earning statement(s). x W-2s. x Written VOE or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Section 8 Housing Vouchers Do not include Required History: None The amount of the benefit payment may be included in repayment income. When the benefit is paid directly to the servicer, the amount of the benefit may be considered as a reduction of the PITI, rather than an addition to repayment income. A manual file submission is required in this instance. Required Documentation: x Benefit/Award letter to verify the subsidy amount. x When used as a reduction of the PITI, documentation verifying the benefit is paid directly to the servicer must be maintained in the lender’s permanent loan file. GUS Instructions: x Enter the amount on the “Borrower Information” page under “Income from Other Sources.” Use the dropdown button in the “Income Source” field and select “Housing Choice Voucher Program.” Tab to the “Monthly Income” field and enter the amount. Self-Employment Income and Independent Contractors (1099) Lenders must analyze Federal tax returns to determine the appropriate gross income calculations. Include zero in annual income for a business loss. Required History: Two years Lenders must analyze Federal tax returns to determine the appropriate gross income. Depreciation, depletion, business use of home, and other paper deductions may be allowed to be added back to the net profit/loss. Lenders may refer to Fannie Mae Form 1084 or comparable self-employment analysis form for assistance. A business loss must be deducted from repayment income. Required Documentation: x Most recent two years of Federal income tax returns or IRS tax transcripts with all schedules; and x YTD Profit and Loss Statement (audited or unaudited), used for income trend analysis. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Separate Maintenance/Alimony Include amounts that will be received in the ensuing 12 months. Legally enforceable payments that have not been received may be excluded when payments are not received for an extended period of time and a reasonable effort has been made to collect them through the official entity responsible for enforcing such payments. Court Ordered Payments: Required History: Six months Maintenance that meets the minimum history, but the payment amounts are not consistent must use an average that is consistent with the payor’s current ability/willingness to pay. Voluntary Payment Agreements: Required History: One year Maintenance that meets the minimum history, but the payment amounts are not consistent must use an average that is consistent with the payor’s current ability/willingness to pay. Required Documentation: x Final divorce decree, legal separation agreement, or court order (front and pertinent pages) to document the amount and timeframe of the obligation. x Evidence of timely receipt and consistent amount for required history: bank statements, canceled checks, deposit slips, tax returns, etc. Social Security Income Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: None, the income must be received at the time of submission to the Agency. Benefits that do not include an expiration date and are expected to be received for at least three years into the mortgage may be considered. Benefits received by applicants on behalf of minors (funds are intended for their support) may be utilized for repayment income if they are expected to be received for at least three years into the mortgage. Benefits received by applicants on behalf of an adult household member may be used for repayment income if they are expected to be received for at least three years into the mortgage when there is evidence they are the legal guardian for the non-applicant adult household member. Documentation Source Options: x Benefit statement from the Social Security Office or Form SSA-1099/1042S, Social Security Benefit Statement. x Legal guardianship/payee status for adult household members. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Student Loans Do not include Do not include Supplemental Nutrition Assistance Program (SNAP) Do not include Do not include Temporary Leave Income/Temporary Reduction to Income with current employer This guidance is for applicants that are currently employed. This guidance does not apply to applicants that are currently unemployed. Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(a)(5). Required History: None, the income must be received at the time of loan closing. The lender must obtain all the following from the employer: o Verification the applicants have the right to return to work following the leave; o Documentation of the applicant’s return date; o Verification of the duration and amount of temporary leave income; and o Documentation of regular employment prior to temporary leave. Applicants that will return to work prior to the first mortgage payment may use their pre-leave income. Applicants that will not return to work prior to the first mortgage payment must use their current income received (which may be zero) plus non-retirement liquid reserves. Reserves must meet the required history and calculations in the Asset and Reserves section of this matrix. The total of income and assets must meet the mortgage obligation and additional monthly liability payments until the applicant’s date of return to work. Lenders must document their calculation of income plus reserves divided by applicable months on Attachment 9-B, the Uniform Underwriting and Transmittal Summary, or on an alternate underwriting form. Documentation Source Options: x All employer verifications required by this section. x Benefit statement/Contract. x Paystub(s)/Earning statement(s). x Written VOE or electronic verification. x Section 9.3E provides additional information on employment verification options. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Tips Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: One year Underwriters must analyze tip income for the current pay period, and YTD earnings. Significant variances (increase or decrease) of 20 percent or greater in income from the previous 12 months must be analyzed and documented (e.g. variances due to seasonal/holiday/etc.) before considering the income stable and dependable. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Documentation Source Options: x Paystub(s)/Earning statement(s). x W-2s. x Written VOE or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Trust Income Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: Six months Required Documentation: x Trust documents: legally filed or recognized to document the balance, monthly payments, term of payments, mode of payment delivery (revocable or irrevocable), etc. x Documentation to support payments received: bank statements, deposit slips, trust account statements, etc. Unemployment Include amounts that will be received in the ensuing 12 months. Benefits received while seeking new full/part time employment that have ended are excluded under 7 CFR 3555.152(b)(5)(v). Required History: Two years Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Applicants with a sole source of unemployment income are ineligible for a guaranteed loan. Documentation Source Options: x Evidence of compensation: IRS Form 1099 or equivalent. x Federal income tax returns or IRS tax transcripts with all schedules. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Unreimbursed Employee or Business Expenses The total amount of unreimbursed expenses may be deducted from annual and adjusted annual income. Required History: None The amount(s) of unreimbursed employee or business expenses deducted from the annual income must also be deducted from repayment income. Documentation Source Options: x IRS Form 2106, Schedule A, Schedule C, or equivalent IRS filed form. x Federal income tax returns or IRS tax transcripts with all schedules. VA Benefits Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: None, the income must be received at the time of submission to the Agency. Lenders must document: o Applicants are currently receiving the income; and o The amount of the income received each month Benefits with no expiration date stated will be presumed to continue. Benefits received by applicants on behalf of minors (funds are intended for their support) may be utilized for repayment income. Benefits received by applicants on behalf of an adult household member may be used for repayment income when there is evidence they are the legal guardian for the non-applicant adult household member. Documentation Source Options: x Benefit statement from the Office of Veteran’s Affairs. x Legal guardianship/payee status for adult household members. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Income Type Annual Income Repayment Income Variable Income (e.g. piece rate, union work, and other similar types of pay structures) Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5). Required History: One year, in the same or similar line of work. Underwriters must analyze variable income earnings for the current pay period and YTD earnings. Significant variances (increase or decrease) of 20 percent or greater in income from the previous 12 months must be analyzed and documented (e.g. variances due to seasonal/holiday, etc.) before considering the income stable and dependable. Continuance: Income will be presumed to continue unless there is documented evidence the income will cease. Required Documentation: x Paystub(s)/Earning statement(s). x W-2s. x Written VOE or electronic verifications. x Federal income tax returns or IRS tax transcripts with all schedules. x Section 9.3E provides additional information on employment verification options. Worker’s Compensation Include amounts that will be received in the ensuing 12 months. Lump sums or sporadic payments may be excluded under 7 CFR 3555.152(b)(5). Required History: Six months . Required Documentation: x Award letter or settlement to state amount and duration of payments. x Earnings statements/Paystubs. x Written VOE from employer. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Adjusted Annual Income Deductions 7 CFR 3555.152(c) Dependent Deduction [7 CFR 3555.152(c)(1)]: x $480 deduction per eligible dependent at the time of submission to the Agency. x Applicants with shared custody may include their child(ren). Documentation Source Options: x Certify to the number of household members in GUS. x List all household members in GUS and Attachment 9-B, the lender’s Uniform Underwriting Transmittal Summary (FNMA Form 1008/Freddie Mac Form 1077), or equivalent. Child Care Expenses [7 CFR 3555.152(c)(2)]: x Care for children age 12 and under. x Care is necessary to enable a family member to work, seek employment, or attend school. x Calculate anticipated child care expenses for the ensuing 12 months. x Applicants that have not placed their child into care or have no evidence to support payments, deposits, or registration fees are ineligible for this deduction. x Child care expenses that exceed the earnings of the family member enabled to work are not permissible for deduction. Documentation Source Options: x Utilize income tax returns, receipts, or third- party verifications provided by a licensed child care facility or provider on letterhead that 1. Identifies the child enrolled; 2. Date of enrollment; 3. Payment due; and 4. Payment history. x Relatives or non-licensed private individuals who provide care must also provide evidence of payments made (e.g. canceled checks, money order receipts, bank statements, etc.). x Child support payments and school tuition are not eligible deductions. x Attachment 9-G is an available option to document child care expenses but may not be used alone when additional documentation is required per this section to verify payment (i.e. relatives and private individuals). x Calculations must be recorded on Attachment 9-B, the lender’s Uniform Underwriting Transmittal Summary (FNMA Form 1008/Freddie Mac Form 1077), or equivalent. Disability Expenses [7 CFR 3555.152(c)(3)]: x Deduction for eligible expenses that exceed three percent of the annual income. x Eligible expenses: 1. Allow the disabled individual or another household member to work; 2. Are nonreimbursable by insurance or other sources; and 3. Do not exceed the income earned by the person who is working due to the care provided. x Examples include but are not limited to daily living assistance, wheelchairs, ramps, adaption needs, workplace equipment, etc. x Utilize documentation to estimate anticipated annual expenses. Documentation Source Options: x Third party verifications for caregivers/agencies for the dates, costs, and fees. x Receipts, itemized income tax returns, and other evidence to support the deductions. x Calculations must be recorded on Attachment 9-B, the lender’s Uniform Underwriting Transmittal Summary (FNMA Form 1008/Freddie Mac Form 1077), or equivalent. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Adjusted Annual Income Deductions 7 CFR 3555.152(c) Elderly Household Deduction [7 CFR 3555.152(c)(4)]: x Applicants age 62 or older. x One $400 deduction allowed per household. Documentation Source Options: x Certify to date of birth on the loan application. Medical Expenses [7 CFR 3555.152(c)(5)] (Elderly and Disabled Households Only): x Deduction for eligible expenses that exceed 3 percent of the annual income for entire family. x Definition of elderly family is in 7 CFR 3555.10. x Utilize documentation to estimate anticipated annual expenses. Documentation Source Options: x Itemized tax return documents. x Receipts for insurance premiums, prescriptions, dental and eye exams, eyeglasses, medical/health products or apparatus, hearing aids, visiting or live in care providers, etc. x Calculations must be recorded on Attachment 9-B, or lender’s Uniform Underwriting Transmittal Summary (FNMA Form 1008/Freddie Mac Form 1077), or equivalent. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Assets and Reserves 7 CFR 3555.152(d) Cash Reserves calculated by the system represent the amount of liquid assets that remain available to the applicants/borrowers after loan closing (includes amounts received at closing). Lenders must use caution and not overstate assets utilized for reserves. Although all household assets must be verified and documented in the permanent loan file, the lender may underwrite to the most conservative approach with no consideration of assets entered into GUS. When assets are entered into GUS and used as reserves, lenders must ensure that the funds will be available to the applicants post-closing. Unverified funds are not an acceptable source of funds for down payment, closing costs, etc. USDA does not require evidence from all parties to access joint or business accounts unless access to the funds are restricted without it. Bridge Loan Documentation: x Evidence of loan proceeds, where they are held (depository account, etc.), and balance remaining. x Confirm corresponding liability for this debt is included in the total debt ratio if applicable. Reserves: Eligible Funds to Close: Eligible Business Accounts Documentation: x Two months of recent bank statements; or x Verification of Deposit (VOD) and a recent bank statement (official monthly bank statement provided by the banking institution); or x Direct verification by a third-party verification (TPV) vendor of the borrower’s account covering activity for a minimum of the most recent available 60 days. The date of the data contained in the completed verification must be current, within 30 days of the date of the verification. Reserves: Eligible x Lenders must not exceed the balance from the most recent official monthly bank statement provided by the banking institution, TPV, or the verification of deposit if dated after the bank statement. Lenders may choose to use a lower balance at their discretion. Online screen print outs of transactions are not permitted. Funds to Close: Eligible GUS Instructions: x Enter as Asset Type “Other” in the “Other Assets You Have” section and select either “Other Liquid Asset” or “Other Non-Liquid Asset.” Cash on Hand Documentation: x Applicants must supply a letter of explanation to state how the funds were accumulated (how much weekly/monthly/etc.). x Lender must determine reasonableness of accumulation based on income stream, spending habits, etc. Reserves: Ineligible Funds to Close: Eligible Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Assets and Reserves Certificate of Deposit (CD) Documentation: x Recent account statement (monthly, quarterly, etc.) to evidence the account balance and early withdrawal penalty, if applicable. Reserves: Eligible x Lenders may use the current vested balance, minus applicable fees/penalties. Funds to Close: Eligible Depository Accounts: Checking, Money Market Accounts, and Savings Documentation: x Two months of recent bank statements; or x Verification of Deposit (VOD) and a recent bank statement (official monthly bank statement provided by the banking institution); or x Direct verification by a third-party verification (TPV) vendor of the borrower’s account covering activity for a minimum of the most recent available 60 days. The date of the data contained in the completed verification must be current, within 30 days of the date of the verification. x Investigate all recurring deposits on the account statements that are not attributed to wages or earnings to confirm the deposits are not from undisclosed income sources. There is no tolerance or percentage of the amount of a recurring deposit that is not required to be investigated. x Investigate individual (non-recurring) deposits greater than $1,000 on the account statements that are not attributed to wages or earnings to confirm the deposits are not from undisclosed income sources. x If the source of a deposit is readily identifiable on the account statement(s), such as a direct deposit from an employer, the Social Security Administration, an IRS or state income tax refund, or a transfer of funds between verified accounts, and the source of the deposit is printed on the statement, the lender does not need to obtain further explanation or documentation. However, if the source of the deposit is printed on the statement, but the lender still has questions as to the source of the deposit, the lender should obtain additional documentation. Reserves: Eligible x Lenders must not exceed the balance from the most recent official monthly bank statement provided by the banking institution, TPV, or the verification of deposit if dated after the bank statement. Lenders may choose to use a lower balance at their discretion. Online screen print outs of transactions are not permitted. Deposited gift funds require further documentation and calculation. Refer to the “Gift Funds” section of this Attachment for further guidance. Funds to Close: Eligible x In addition to the documentation requirements above, printed transaction histories are permitted to verify cash to close. Earnest Money Documentation: x Retain a copy of the check, money order receipt, etc. that was remitted for the earnest money. Reserves: Eligible Funds to Close: Eligible GUS Instructions: x Earnest money that has cleared an applicant’s depository account may be entered under the “Other Credits” section of the “Lender Loan Information” GUS application page. The amount of earnest money should not be reflected in the balance of any asset entered on the “Assets and Liabilities” application page. x Refer to the “Gift Funds” section of this Attachment for additional guidance when gift funds are used for the Earnest Money deposit. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Assets and Reserves Foreign Assets (Assets located outside of the United States and its territories) Documentation: x Documentation verifying assets have been exchanged to U.S. dollars and held in a Federal or State regulated financial institution prior to closing. x Lender must verify funds availability and accompanying documentation that has been converted to English, or provide a translation attached to each document, and ensure the translation is complete and accurate. Reserves: Eligible Funds to Close: Eligible Gift of Equity, Sweat Equity, or Rent Credits Documentation: x These gifts or credits must be applied as a reduction to the purchase price of the dwelling. x Ensure the appraiser is aware of the gift and/or credit. This will allow them to properly complete the appraisal report, note the reduction, and support the appraised value compared to purchase price, if applicable. x The borrower may not receive cash back at loan closing for these gifts and/or credits. Reserves: Ineligible Funds to Close: Ineligible Gift Funds Documentation: x Gift funds are considered the applicant’s own funds; therefore, excess gift funds are eligible to be returned to the applicant at loan closing. x Gift funds may not be contributed from any source that has an interest in the sale of the property (seller, builder, real estate agent, etc.). x Cash on hand is not an acceptable source of donor gift funds. x A gift letter must be obtained to specify the donor, the dollar amount of the gift, and include a statement that the funds do not have to be repaid. x The lender must verify that sufficient funds to cover the gift have been transferred to the applicant’s account, or will be documented as received by the closing agent at the time of closing. Acceptable documentation includes: o Evidence of the applicant’s deposit; o A copy of the donor’s funds by check/electronic transfer to the closing agent; or o A copy of the Closing Disclosure showing receipt of the donor’s funds. Reserves: Ineligible Funds to Close: Eligible GUS Instructions: x Gift funds should be entered in the “Gifts or Grants You Have Been Given or Will Receive for This Loan” section of the “Loan and Property Information” GUS application page. If the funds have already been deposited into an asset account, select “deposited” and include the amount of the gift in the applicable asset account on the “Assets and Liabilities” GUS application page. If the funds have not been deposited into an asset account, select “not deposited” and do not include the gift in an asset account on the “Assets and Liabilities” GUS application page. x Gift funds applied as Earnest Money should not be reflected in the “Gifts or Grants You Have Been Given or Will Receive for This Loan” section of the “Loan and Property Information” GUS application page. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Assets and Reserves Individual Development Account (IDA) Documentation: x Two months of account statements; or x Verification of Deposit (VOD) and a recent bank statement (official monthly bank statement provided by the banking institution); or x Direct verification by a third-party verification (TPV) vendor of the borrower’s account covering activity for a minimum of the most recent available 60 days. The date of the data contained in the completed verification must be current, within 30 days of the date of the verification; or x Alternate evidence provided by the account trustee/management to support account activity and monthly balances. x Verification must document the vested/amount available for withdrawal without penalty or reimbursement. Reserves: Eligible x Lenders must not exceed the vested balance on the most recent statement. Lenders may choose to use a lower balance at their discretion. Funds to Close: Eligible Life Insurance Documentation: x Document the applicant’s receipt of funds from the policy. x Verify where the proceeds are held and confirm they are available to the applicants. x Confirm corresponding liability for this debt in the total debt ratio, if applicable. Reserves: Eligible Funds to Close: Eligible Lump Sum Additions: IRS Refunds, Lottery Winnings, Inheritances, Withdrawals from Retirement Accounts Documentation: x Document the applicant’s receipt of funds. x Verify where the proceeds are held and confirm they are available to the applicants. x One-time deposits may not require annual income consideration under 7 CFR 3555.152(b)(5)(vi). x Do not enter into GUS separately if it is already included in the borrower’s depository account. Reserves: Eligible Funds to Close: Eligible Personal Property Sold Documentation: x Document the applicant’s ownership of the asset. x Evidence of the transfer of ownership of the asset through a bill of sale or statement from the purchaser. x Receipt of sales proceeds through deposit slips, bank statements, or a copy of the purchasing party’s canceled check, money order, or electronic funds transfer. Reserves: Eligible Funds to Close: Eligible Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Assets and Reserves Retirement: 401(k), IRA, etc. Documentation: x Recent account statement (monthly, quarterly, etc.) to evidence the account balance, vested balance available for withdrawal, and early withdrawal penalty, if applicable. x Funds borrowed against these accounts may be used for funds to close but are not considered in reserves. The borrowed funds should not be reflected in the balance of any asset entered on the “Assets and Liabilities” application page. Reserves: Eligible x 60 percent of the vested amount available to the applicants may be used as reserves. x Funds borrowed against these accounts are not eligible for reserves. The borrowed funds should not be reflected in the balance of any asset entered on the “Assets and Liabilities” application page. Funds to Close: Eligible Sales Proceeds: Real Estate Owned Documentation: x Closing disclosure or acceptable alternative. x Verify where the proceeds are held and confirm they are available to the applicants. Reserves: Eligible x Reserves will be calculated based on the data entered in the “Assets and Liabilities” and “Real Estate” application pages in GUS. Lenders must confirm the GUS calculation. An override of the data entry, or other asset data entry for this purpose, must have supporting documentation. x Net equity/sales proceeds manually entered on a loan application must have supporting documentation. Funds to Close: Eligible Secured Loan from Personal Asset Documentation: x Document the amount of the secured loan proceeds and the source (e.g. Certificate of Deposit, stocks, etc.). x Confirm corresponding liability for this debt is included in the total debt ratio, if applicable. x This guidance does not apply to funds borrowed from an applicant’s retirement account (e.g. 401(k), IRA, etc.). Please review the “Retirement” section of this matrix for guidance on these types of accounts. Reserves: Eligible Funds to Close: Eligible Stocks, Stock Options, Bonds, Mutual Funds, and Investments Documentation: x Recent account statement (monthly, quarterly, etc.) to evidence the account balance, vested balance available for withdrawal, and early withdrawal penalty, if applicable. Reserves: Eligible Funds to Close: Eligible Trust Accounts Documentation: x Verify applicants have access to the funds, amounts, circumstances, requirement to repay withdrawal, etc. x Recent account/trust statement (monthly, quarterly, etc.) to evidence the account balance. Reserves: Eligible Funds to Close: Eligible Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Assets and Reserves Unsecured Loan: Borrowed Funds Documentation: x Document the amount of the loan proceeds and the source (e.g. signature loan, line of credit, credit card advance/loan, overdraft protection, etc.). x Confirm corresponding liability for this debt is included in the total debt ratio, if applicable. Reserves: Ineligible Funds to Close: Ineligible ASSET CHANGES AFTER CONDITIONAL COMMITMENT ISSUANCE Assets verified prior to loan closing that are less than the amounts entered into GUS or on the loan application may retain the issued Conditional Commitment (Form RD 3555-18/18E) when one the following are met: 1. The application was approved with zero months of cash reserves; or 2. The application will continue to have a minimum of four months of cash reserves. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. ATTACHMENT 9-B Applicant: Co Applicant: WORKSHEET FOR DOCUMENTING ELIGIBLE HOUSEHOLD AND REPAYMENT INCOME Lender Instructions: Determine eligible household income for the Single-Family Housing Guaranteed Loan Program (SFHGLP) by documenting all sources/types of income for all household members. Qualify the loan by documenting all sources/types of income that is stable and dependable, utilized to repay the loan. Identify all Household Members Age Full-time Student Y/N? Disabled Y/N? Receive Income Y/N? Source of Income ANNUAL INCOME CALCULATION (Consider anticipated income for the next 12 months for all adult household members as described in 7 CFR 3555.152(b) and HB-1-3555, Chapter 9. Website for instructions: https://www.rd.usda.gov/resources/directives) 1. Applicant (Wages, salary, self-employed, commission, overtime, bonus, tips, alimony, child support, pension/retirement, social security, disability, trust income, etc.). Calculate and record how the calculation of each income source/type was determined in the space below. 2. Co-Applicant (Wages, salary, self-employed, commission, overtime, bonus, tips, alimony, child support, pension/retirement, social security, disability, trust income, etc.) Calculate and record how the calculation of each income source/type was determined in the space below. 3. Additional Income to Primary Income (Automobile Allowance, Mortgage Differential, Military, Secondary Employment, Seasonal Employment, Unemployment, etc.). Calculate and record how the calculation of each income source/type was determined in the space below. 4. Additional Adult Household Member (s) who are not a party to the note (Primary Employment from Wages, Salary, Self- Employed, Additional Income to Primary Employment, Other Income, etc.). Calculate and record how the calculation of each income source/type was determined in the space below. 5. Income from Assets (Income from household assets as described in HB-1-3555, Chapter 9). Calculate and record how the calculation of each income source/type was determined in the space below. 6. Annual Household Income (Total 1 through 5) Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Applicant: Co Applicant: ADJUSTED ANNUAL INCOME CALCULATION (Consider qualifying deductions as described in 7 CFR 3555.152(c) and HB-1-3555 Chapter 9) 7. Dependent Deduction ($480 for each child under age 18, full-time student, or disabled family member over the age of 18) - # x $480 8. Annual Child Care Expenses (Reasonable expenses for children 12 and under) Calculate and record the calculation of the deduction in the space below. 9. Elderly/Disabled Household (1 household deduction of $400 if 62 years of age or older, or disabled and a party to the note) 10. Disability (Unreimbursed expenses in excess of 3% of annual income per 7 CFR 3555.152(c) and HB-1-3555 Chapter 9) Calculate and record the calculation of the deduction in the space below. 11. Medical Expenses (Elderly/Disabled households only. Unreimbursed medical expenses in excess of 3% of annual income per 7 CFR 3555.152(c) and HB-1-3555 Chapter 9) Calculate and record the calculation of the deduction in the space below. 12. Total Household Deductions (Total 7 through 11) 13. Adjusted Annual Income (Item 6 minus item 12) Income cannot exceed Moderate Income Limit to be eligible for SFHGLP Moderate Income Limit State: County: Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Applicant: ___________________________________________ Co Applicant: ______________________________________________ MONTHLY REPAYMENT INCOME CALCULATION (Consider stable and dependable income of parties to the note as described in 7 CFR 3555.152(a) and HBͲ1Ͳ3555 Chapter 9. Non-occupant borrowers or co-signers are not allowed.) 14. Stable Dependable Monthly Income (Parties to note only). Calculate and record how the calculation of each income source/type was determined in the space below. Identify income type by party to note. Applicant Co-Applicant Total Base Income Calculation of Base Income: Calculation of Base Income: Other Income Calculation of Other Income: Calculation of Other Income: Total Income 15. Monthly Repayment Income (Total of 14) Preparer’s Signature: Name (Print): Title: Date: ___________________ Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. ATTACHMENT 9-C EXAMPLE CASE STUDY Household members: Name Relationship Comments Household Income, Assets, and Expenses David Example Applicant Age: 40 Employed, party to note $1,250/week wages; Savings account balance $41,400 (APY .5) Checking account balance $3,500 Betsy Example Applicant Age: 40 Employed, party to note $15.50/hr. wages – working 20 hours week $100/month child support from ex-husband (Kathy’s father) Cynthia Example David’s mother Age: 67 Disabled, moved in when husband died, not a party to the note $800/month Social Security benefits Savings account balance $3,800 (APY .045) Checking account balance $1,400 Janet Smith Daughter Age: 19 Full-time college student, parttime employed, not a party to the note $600/month wages Kathy Smith Daughter Age: 14 Full-time junior-high school student, part-time employed, not a party to the note $9.00/hour x 8 hours per week x 4 weeks = $288 monthly earnings Chris Doe Foster child Age: 8 Full-time elementary student, not a party to the note County pays household $800/month to care for foster child. The family pays $50 per week/$200 per month for after school child care. Eligible Household Income: Calculate annual and adjusted annual income to determine eligibility of the household for the SFHGLP. For Annual Income Calculation – Consider income of all household members: x Count David’s wages Count Betsy’s wages Count child support (Betsy) x Count only the first $480 of Janet’s wages (Household member is greater than 18 years of age but is a fulltime student) x Do not count Kathy’s wages (Household member is a minor and less than 18 years of age) x Count Cynthia’s Social Security x Count actual income from assets from all members of the household if they total $50,000 or more. x Do not count payments for Care of foster child x Passbook rate is .03 Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Adjusted Annual Income Calculation: Dependent Deduction x Three dependent deductions are permitted for Kathy (a minor), Janet (an adult full-time student, who is not the head of household or spouse), and Cynthia (an adult individual with disabilities, who is not the head of household or spouse). x A foster child is not a permanent household member, and therefore is not an eligible dependent. x Total household members that meet the Household member definition in 7 CFR 3555.10 are David, Betsey, Cynthia, Janet, and Kathy. x A deduction of $1,440 in this example may be deducted ($480 for each eligible dependent x 3 = $1,440). Dependents are Kathy, Janet, and Cynthia. Child Care Deduction x Child care expenses are permitted for the care of a foster child but must not exceed the amount earned by the family member enabled to work. x Child care expenses are not permitted if another adult household member is available to care for the child. In this example, it is assumed there are no adult household members available to care for the child. x Since the cost of child care does not exceed an adult household member’s monthly earnings, the full amount of the child care may be deducted. Elderly or Disabled Household Deduction x Cynthia, a household member, is 67. But she is not an applicant on the loan, therefore no elderly family deduction is allowed. Medical Expense Deduction x Family medical expenses cannot be deducted since this is not an elderly or disabled household as defined in 7 CFR 3555.152(c). Disability Assistance Expenses x No disability assistance expenses were claimed. To be allowed a deduction, the expenses would have to be necessary to enable a family member to work. Repayment Income: Calculate the income utilized to repay the loan. Consider only income from parties to the note that is determined to be stable and dependable per 7 CFR 3555.152(a). David and Betsy are parties to the note. David has worked the last two years earning $1,250 per week or $65,000 annually. Betsy has made $15.50/hour and worked 20 hours per week for the past five years consistently. Betsy receives child support for Kathy, paid through the court at $100 a month, or $1,200 annually. She has received support consistently for the past three years. Kathy is 14. David and Betsy have cared for foster children for the past three years. Chris Doe is 8 years of age. The county pays $800.00 per month, or $9,600 annually to the household to care for the foster child. Foster care is not a source of income that is eligible for repayment income. x David: $65,000 historical employment income divided by 12 = $5,416.67 x Betsy: $16,120 historical employment income divided by 12 = $1,343.33 x Betsy: $1,200 historical child support income divided by 12 = $100.00 [3-year continuance since Kathy is 14] x Total stable and dependable income in accordance with 7 CFR 3555.152(a) = $6,860.00/month Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. ATTACHMENT 9-C EXAMPLE CASE STUDY: Applicant: David Example Co Applicant: Betsy Example WORKSHEET FOR DOCUMENTING ELIGIBLE HOUSEHOLD AND REPAYMENT INCOME Lender Instructions: Determine eligible household income for the Single-Family Housing Guaranteed Loan Program (SFHGLP) by documenting all sources/types of income for all household members. Qualify the loan by documenting all sources/type of income that is stable and dependable utilized to repay the loan. Identify all Household Members Age Full-time Student Y/N? Disabled Y/N? Receive Income Y/N? Source of Income David Example 40 N N Y XYZ Employment Betsy Example 40 N N Y 123 Employment, child support Cynthia Example 67 N Y Y Social Security Janet Smith 19 Y N Y PT Employment Kathy Smith 14 Y N Y PT Employment Chris Doe 8 Y N Y Foster care income ANNUAL INCOME CALCULATION (Consider anticipated income for the next 12 months for all adult household members as described in 7 CFR 3555.152(b) and HB-1-3555 Chapter 9. Website for instructions: https://www.rd.usda.gov/resources/directives) 1. Applicant (Wages, salary, self-employed, commission, overtime, bonus, tips, alimony, child support, pension/retirement, social security, disability, trust income, etc.) Calculate and record how the calculation of each income source/type was determined in the space below. David - $1,250/wk. x 52 = $65,000 $65,000.00 2. Co-Applicant (Wages, salary, self-employed, commission, overtime, bonus, tips, alimony, child support, pension/retirement, social security, disability, trust income, etc.) Calculate and record how the calculation of each income source/type was determined in the space below. Betsy - $15.50/hr. x 20 hrs./wk. x 52 = $16,120 Betsy – child support - $100 x 12 = $1,200 $17,320.00 3. Additional Income to Primary Income (Automobile Allowance, Mortgage Differential, Military, Secondary Employment, Seasonal Employment, Unemployment, etc.) Calculate and record how the calculation of each income source/type was determined in the space below. $0 4. Additional Adult Household Member (s) who are not a party to the note (Primary Employment from Wages, Salary, SelfEmployed, Additional income to Primary Employment, Other Income). Calculate and record how the calculation of each income source/type was determined in the space below. Cynthia- $800/month x 12 = $9,600 Janet = first $480 must be counted as full-time student over 18 years of age $10,080.00 5. Income from Assets (Income from household assets, if total exceeds $50,000, as described in HB-1-3555, Chapter 9). Calculate and record how the calculation of each income source/type was determined in the space below. Total assets=$50,100 David: Savings $41400x.005=$207, Checking: 3500x.003(passbook rate)=$10.50 Cynthia: Savings $3800x.0045=$17.10, Checking: $1400x.003=$4.20 $238.80 6. Annual Household Income (Total 1 through 5) $92,638 Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. Applicant: David Example Co Applicant: Betsy Example ADJUSTED ANNUAL INCOME CALCULATION (Consider qualifying deductions as described in 7 CFR 3555.152(c) and HB-1-3555 Chapter 9) 7. Dependent Deduction ($480 for each child under age 18, full-time student, or disabled family member over the age of 18) - # 3 x $480 $1,440.00 8. Annual Child Care Expenses (Reasonable expenses for children 12 and under) Calculate and record the calculation of the deduction in the space below. $50/week x 52 weeks/year = $2,600 $2,600.00 9. Elderly/Disabled Household (1 household deduction of $400 if 62 years of age or older, or disabled and a party to the note) $0 10. Disability (Unreimbursed expenses in excess of 3% of annual income per 7 CFR 3555.152(c) and HB-1-3555 Chapter 9) Calculate and record the calculation of the deduction in the space below. $0 11. Medical Expenses (Elderly/Disabled households only. Unreimbursed medical expenses in excess of 3% of annual income per 7 CFR 3555.152(c) and HB-1-3555 Chapter 9.) Calculate and record the calculation of the deduction in the space below. $0 12. Total Household Deductions (Total 7 through 11) $4,040.00 Applicant: David Example Co Applicant: Betsy Example $88,598.80 County: Washington Oklahoma State: Moderate Income Limit: $121,300 13. Adjusted Annual Income (Item 6 minus item 12) Income cannot exceed Moderate Income Limit to be eligible for SFHGLP Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. MONTHLY REPAYMENT INCOME CALCULATION (Consider stable and dependable income of parties to the note as described in 7 CFR 3555.152(a) and HB‐1‐3555 Chapter 9. Non-occupant borrowers or co-signers are not allowed.) 14. Stable Dependable Monthly Income (Parties to note only). Calculate and record how the calculation of each income source/type was determined in the space below. Identify income type by party to note. Applicant Co-Applicant Total Base Income $5,416.67 Calculation of Base Income: David: $65,000 / 12 = $5,416.67 $1,343.33 Calculation of Base Income: Betsy: $16,120 /12 = $1,343.33 $6,760.00 Other Income Calculation of Other Income: $100.00 Calculation of Other Income: Betsy: Child Support: $1,200 / 12 = $100.00 [3 year continuance confirmed: Kathy is 14] $100.00 Total Income $5,416.67 $1,443.33 $6,860.00 15. Monthly Repayment Income (Total of 14) $6,860.00 Preparer’s Signature: [Signature] Name (Print): [Name] Title: [Title] Date: [Date] Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. ATTACHMENT 9-D ANNUAL INCOME SOURCES OF INCOME WHICH BY FEDERAL STATUTE ARE EXCLUDED FROM ANNUAL INCOME The following sources, subject to exemption by Federal statute, are never considered when calculating annual income. Any revenue which a Federal statute exempts shall not be considered income or used as a basis for determining eligibility for an Agency loan, payment assistance, or denying or reducing Federal financial assistance or benefits to which the recipient would otherwise be entitled. Additional financial assistance, which is considered exempt income under Federal statutes, includes: 1. The imminent danger duty-pay to a service person applicant or spouse away from home and exposed to hostile fire. Amounts of imminent danger pay for military personnel stationed in the Combat Zone are excluded from annual income effective August 2, 1990. Any military pay received by persons serving in the Combat Zone received on or after January 17, 1991, is excluded from annual income. The Combat Zone, as defined by the Presidential Executive Order 12744 dated January 21, 1991, consists of the Persian Gulf, the Red Sea, the Gulf of Oman, that portion of the Arabian Sea that lies north of 10 degrees north latitude and west of 68 degrees east longitude, the Gulf of Aden, the total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates. Immediately upon notification by the family or based on information from a knowledgeable source that a member of the household was serving in the Combat Zone, the Loan Approval Official shall re- determine the household income retroactive to January 17, 1991, and adjust the applicant’s payment assistance accordingly. 2. Payments and assets, including for supportive services and reimbursement of out-ofpocket expenses, for volunteers under the Domestic Volunteer Service Act of 1973, including, but not limited to: a. National Volunteer Antipoverty Programs, which include Volunteers in Service to America (VISTA), Peace Corps, Service Learning Programs, and Special Volunteer Programs. National Older American Volunteer Programs for persons age 60 and over who include Retired Senior Volunteer Programs, Foster Grandparent Program, Older American Community Services Program, and National Volunteer Programs to Assist Small Business and Promote Volunteer Service to Persons with Business Experience, Service Corps of Retired Executives (SCORE), and Active Corps of Executives (ACE). Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. 3. Allowances, earnings, and payments to individuals participating in programs under the Workforce Investment Act of 1998 reauthorized as the Workforce Innovation and Opportunity Act of 2014. 4. Allowances, earnings, and payments to AmeriCorps participants under the National and Community Service Act of 1990. 5. Payments and assets received after January 1, 1989, from the Agent Orange Settlement Fund or any other fund established pursuant to the settlement in the "In Re Agent Orange Product Liability Litigation”, M.D.L. No. 381 (E.D.N.Y.). 6. Payments and assets received under the "Alaska Native Claims Settlement Act" or the "Maine Indian Claims Settlement Act”. Additionally, lump sum or periodic payments received by an individual Indian pursuant to the Class Action Settlement Agreement in the case entitled Elouise Cobell et al. v. Ken Salazar et al., for a period of one year from the time of receipt of that payment as provided in the Claims Resolution Act of 2010. This exclusion also applies to assets. 7. Income and assets derived from certain sub-marginal land of the United States that is held in trust for certain American Indian tribes. 8. Payments and assets received by the Indian Claims Commission to the Confederated Tribes and Bands of the Yakima Indian Nation or the Apache Tribe of the Mescalero Reservation. 9. Payments, funds, or distributions authorized, established, or directed by the Seneca Nation Settlement Act of 1990. This exclusion also applies to assets. 10. Assistance payments or allowances made under the Department of Health and Human Services Low- Income Home Energy Assistance Program. 11. Assistance received under the Richard B. Russell School Lunch Act, and the Child Nutrition Act of 1966, including reduced-price lunches and food under the Special Supplemental Food Program for Women, Infants, and Children (WIC). 12. Payments received from the Job Training Partnership Act. 13. Income and assets derived from the disposition of funds of the Grand River Band of Ottawa Indians. 14. The first $2,000 of per capita shares received from judgment funds awarded by the National Indian Gaming Commission or the U.S. Claims Court, the interests of individual Indians in trust or restricted lands, and the first $2,000 per year of income received by individual Indians from funds derived from interests held in such trust or Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. restricted lands. This exclusion does not include proceeds of gaming operations regulated by the Commission. This exclusion also applies to assets. 15. Payments received from programs funded under Title V of the Older Americans Act of 1965. 16. Payments from any deferred U.S. Department of Veterans Affairs disability benefits that are received in a lump sum amount or in prospective monthly amounts. 17. Amounts of student financial assistance funded under title IV of the Higher Education Act of 1965, including awards under Federal work-study programs or under the Bureau of Indian Affairs student assistance programs. 18. The amount of any refund (or advance payment with respect to a refundable credit) issued under the Internal Revenue Code is excluded from income and assets for a period of 12 months from receipt. 19. Any allowance paid to children of Vietnam veterans born with spina bifida, children of women Vietnam veterans born with certain birth defects, and children of certain Korean and Thailand service veterans born with spina bifida is excluded from income and assets. 20. Any amount of crime victim compensation and assets that provides medical or other assistance (or payment or reimbursement of the cost of such assistance) under the Victims of Crime Act of 1984 received through a crime victim assistance program, unless the total amount of assistance that the applicant receives from all such programs is sufficient to fully compensate the applicant for losses suffered as a result of the crime. 21. Any amounts in an “individual development account” are excluded from assets and any assistance, benefit, or amounts earned by or provided to the individual development account are excluded from income, as provided by the Assets for Independence Act. 22. Federal assistance for a major disaster or emergency received by individuals and families under the Robert T. Stafford Disaster Relief and Emergency Assistance Act and comparable disaster assistance provided by States, local governments, and disaster assistance organizations. This exclusion also applies to assets. 23. Any amount in an Achieving Better Life Experience (ABLE) account, distributions from and certain contributions to an ABLE account established under the ABLE Act of 2014. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. 24. The value of any child care assistance provided or arranged (or any amount received as payment for such care or reimbursement for costs incurred for such care) under the Child Care and Development Block Grant Act of 1990. 25. Assistance and assets received by a household under the Emergency Rental Assistance Program pursuant to the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021. 26. Any other income which is exempted under Federal statute. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. ATTACHMENT 9-E INFORMATION FOR ANALYZING TAX RETURNS FOR SELF-EMPLOYED APPLICANTS Self-employed applicants must submit current documentation of the business’ income and expenses, including any applicable Federal tax returns that were filed with the IRS for the most recent two years in addition to year-to-date profit and loss and balance statements. Lenders are encouraged to use Fannie Mae Form 1084, Cash Flow Analysis, and Fannie Mae Form 1088, Comparative Income Analysis, to document a trend analysis for the applicant’s business. Lenders may use the Fannie Mae forms or any documentation that provides the same information. Regardless of the analysis method used, and the documentation prepared by the lender, the loan file must contain clear and sufficient support for the lender’s decision regarding the viability of the business and loan approval. A. Individual Tax Returns (IRS Form 1040) The amount shown on the IRS Form 1040 as “adjusted gross income” must be either increased or decreased based on the lender’s analysis of the individual tax returns and any related tax schedules. Particular attention must be paid to: x Wages, salaries, tips. If an amount is shown here, this may indicate the individual is a salaried employee of a corporation or has other sources of income. It may also indicate the spouse is employed, in which case the income must be subtracted from the adjusted gross income in the analysis. x Business income or loss (from Schedule C). The sole proprietorship income calculated on Schedule C is business income. Depreciation or depletion may be added back to adjusted gross income. x Rents, royalties, partnerships, etc. (from Schedule E). Any income received from rental properties or royalties may be used as income after adding back any depreciation shown on Schedule E. x Capital gain or loss (from Schedule D). This is generally a one-time transaction and should not be considered in determining repayment income. However, if the business has a constant turnover of assets resulting in gains or losses, the capital gain or loss may be considered in determining the income provided the applicants have at least two years’ tax returns evidencing capital gains. An example would include an individual who purchases old houses, remodels them, and sells them for a profit. x Interest and dividend income (from Schedule B). This income, both taxable and tax- exempt, may be added back to the adjusted gross income only if it has been Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. received for the past two years and is expected to continue. If the interest-bearing asset will be liquidated as a source of the cash investment, the lender must adjust accordingly. x Farm income or loss (from Schedule F). Any depreciation shown on Schedule F may be added back to the adjusted gross income. x IRA distributions, pensions and annuities, and social security benefits. The nontaxable portion of these items may be added back to the adjusted gross income if the income is expected to continue for the first three years of the mortgage. x Adjustments to income. Certain adjustments to income shown on the IRS Form 1040 may be added back to the adjusted gross income. Among these are IRA and Keogh retirement deductions, penalties on early withdrawal of savings, health insurance deductions, and alimony payments. x Employee business expenses. These are actual cash expenses that must be deducted from the applicant’s adjusted gross income, if applicable. B. U.S. Corporate Income Tax Returns (IRS Form 1120) Corporations are state chartered businesses owned by their stockholders. Compensation to its officers, generally in proportion to the percentage of ownership, is shown on the corporate tax returns and will appear on individual tax returns. If the applicant’s percentage of ownership is not shown, it must be separately obtained from the corporation’s accountant with evidence the applicants have the right to those funds. Once the adjusted business income is determined, it is to be multiplied by the applicant’s percentage of ownership in the business. In analyzing the corporate tax returns, lenders must adjust for the following: x Depreciation and depletion. The corporation’s depreciation and depletion must be added back to after-tax income. x Taxable income. This is the corporation’s net income before federal taxes. It must be reduced by the tax liability. x Fiscal year versus calendar year. If the corporation operates on a fiscal year that is different from the calendar year, an adjustment must be made by the lender to relate corporate income to the individual tax return. x Cash withdrawals. The applicant’s withdrawal of cash from the corporation may have a severe negative impact on the corporation’s ability to continue operating. Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. C. “S” Corporation Tax Returns An “S” corporation is generally a small, start-up business, with gains and losses passed onto stockholders in proportion to each stockholder’s percentage of business ownership. The income for the owners comes from W-2 wages and is taxed at the individual rate. The “compensation of officers” line on the IRS Form 1120-S is transferred to the applicant’s IRS Form 1040. Both depreciation and depletion may be added back to income in proportion to the applicant’s share of income. However, income must also be deducted proportionately by the total obligations payable by the corporation in less than one year. The applicant’s withdrawal of cash from the corporation may have a severe negative impact on the corporation’s ability to continue operating which must be considered in the analysis. D. Partnership Tax Returns A partnership is formed when two or more individuals form a business and share in profits, losses, and responsibility for running the company. Each partnership pays taxes on his or her proportionate share of the partnership income. Both general and limited partnerships report income on the IRS Form 1065, U.S. Return of Partnership Income, which must be reviewed by the lender to assess the viability of the business. The partner’s share of income is carried over to Schedule E of IRS Form 1040. Both depreciation and depletion may be added back to income in proportion to the applicant’s share of income. However, income must also be deducted proportionately by the total obligations payable by the partnership in less than one year. The applicant’s withdrawal of cash from the partnership may have a severe negative impact on the partnership’s ability to continue operating that must be considered in the analysis. E. LLC Corporation Tax Returns A limited liability corporation (LLC) can be formed by one or more individuals. Owners in an LLC are referred to as members. A member of an LLC normally has at risk, only his or her share of capital paid into the business. Members are not personally liable for the debts of the LLC. There are three ways in which an LLC is taxed: x Single-owner LLC. LLC owners are taxed on business profits each year on their individual income tax returns. The IRS treats the LLC as a sole proprietorship. Profits are reported on Schedule C of an individual 1040 tax return. x LLCs. The IRS treats the LLC as a partnership. The LLC prepares and files IRS Form 1065, U.S. Return of Partnership Income, each year. LLC profits are allocated to each of the owners according to the profit-sharing arrangement set up in the LLC Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. operating agreement. Each owner is given a Schedule K-1, which shows each owner’s share of LLC income. The owner then reports and pays taxes on this income on the owner’s 1040 income tax return. x Check-the-Box Corporate Tax Treatment. Under these rules, any eligible business can elect to be taxed as a corporation by filing IRS Form 8832, Entity Classification Election, and checking the corporate income tax treatment box on the form. After making this election, profits kept in the business are taxed at the separate income tax rates that apply to corporations. -(03-09-16) SPECIAL PN Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. sfh-gainingaccesstogusv2 pdf ATTACHMENT 9-F WORKSHEET FOR DOCUMENTING ELIGIBLE HOUSEHOLD AND REPAYMENT INCOME [AGENCY USE ONLY] Agency Instructions: Recalculate income in the circumstances noted below. Retain this worksheet as part of the permanent SFHGLP file, when applicable. If the reviewer agrees with the lender’s income calculation, check the box indicating agreement with the lender’s calculation; otherwise complete the recalculation of income in the space provided. Eligible Household Income: Recalculate the lender’s determination of eligible income if the lender’s adjusted annual income calculation is within 10 percent of the applicable published income limit for manually underwritten loans. The published income limits may be found at the public website: http://eligibility.sc.egov.usda.gov/eligibility/ Repayment Income: Recalculate the lender’s determination of repayment income for manually underwritten loans if the lender’s repayment ratios are within 10 percent of the published debt ratio limit found at §7 CFR 3555.151(h). Definition - Manually Underwritten Loan Files: 1) Loans submitted by lenders that are not supported by the automated underwriting system, GUS. 2) Loans submitted to GUS, that have received an underwriting recommendation of Refer or Refer With Caution. Accept and Accept with Full Documentation loans are not manually GENERAL INFORMATION Applicant(s): GLS Borrower ID: Lender: AGENCY WRITTEN ANALYSIS DOCUMENTING ELIGIBLE HOUSEHOLD INCOME Consider anticipated income for the next 12 months for all adult household members as described in 7 CFR §3555.152(b). Consider qualifying deductions as described in 7 CFR 3555.152(c). Website for instructions/technical handbook/notices: https://www.rd.usda.gov/resources/directives. Calculate and record how the calculation of each income source/type and deduction was determined in the space below. I have reviewed the lender’s calculation and compared it to income verifications. I agree with the lender’s calculation of eligible household income. $ By: Date: (Title) -(03-09-16) SPECIAL PN Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. sfh-gainingaccesstogusv2 pdf Applicant(s): GLS Borrower ID: Lender: $ By: Date: (Title) Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. ATTACHMENT 9-G OPTIONAL VERIFICATION OF INCOME FORMS VERIFICATION OF PENSIONS AND ANNUITIES REQUEST FOR INFORMATION APPLICANT IDENTIFICATION Name Social Security Number REQUESTED INFORMATION A. INCOME FROM ANNUITIES 1. $ Current monthly gross amount received. Will the applicant continue to receive this monthly amount for the next twelve months? Yes_____No If, no please explain. 2. Describe any deductions from the gross amount that are taken. B. VERIFICATION OF ASSETS 1. $ Current market value of assets held in the retirement or pension plan. 2. Can the applicants withdraw amounts from the retirement account without retiring or terminating employment? _______Yes_______No. If yes, explain the terms of the withdrawal, including any penalties. 3. Can the applicants borrow against amounts in the retirement account?_____Yes_____No (If yes, explain the terms (maximum amount, interest rate, repayment term, purposes, etc.) LENDER CERTIFICATION: Verifier must print their name, address and telephone number and certify to the accuracy of information recorded by executing below. Name: Title: Telephone Number: (Signature) WARNING: Knowingly and willingly making a false or fraudulent statement to any department of the United States Government is a felony punishable by fine and imprisonment (Title 18, Section 1001, U.S. Code) Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. VERIFICATION OF STUDENT INCOME AND EXPENSES REQUEST FOR INFORMATION APPLICANT IDENTIFICATION Name Social Security Number REQUESTED INFORMATION 1. Describe any financial assistance the above-reference student receives. Amount Source Purpose for Which Funds May Be Used 2. Describe any expenses the above-referenced student has for: $ Tuition $ Housing $ Books $ Supplies and Equipment $ Transportation $ Misc. Personal Expenses $ Total LENDER CERTIFICATION: Verifier must print their name, address and telephone number and certify to the accuracy of information recorded by executing below. Name: Title: Telephone Number: (Signature) WARNING: Knowingly and willingly making a false or fraudulent statement to any department of the United States Government is a felony punishable by fine and imprisonment (Title 18, Section 1001, U.S. Code) Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. VERIFICATION OF MEDICAL EXPENSES REQUEST FOR INFORMATION APPLICANT IDENTIFICATION Name Social Security Number REQUESTED INFORMATION 1. Please list the purpose of any accumulated medical bills, identify to whom the amount is owed, and provide the amount to be paid during the coming 12 months. Amount Owed To Medical Expenses for 2. Medical Insurance Premiums $ Amount Paid Payment Period: per month, per year Medical Insurance Premiums $ Amount Paid Payment period: per month, per year 3. List other anticipated medical expenses LENDER CERTIFICATION: Verifier must print their name, address and telephone number and certify to the accuracy of information recorded by executing below. Name: Title: Telephone Number: (Signature) WARNING: Knowingly and willingly making a false or fraudulent statement to any department of the United States Government is a felony punishable by fine and imprisonment (Title 18, Section 1001, U.S. Code) Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. VERIFICATION OF SOCIAL SECURITY BENEFITS REQUEST FOR INFORMATION APPLICANT IDENTIFICATION Name Social Security Number REQUESTED INFORMATION Social Security Data Date of Birth Gross Monthly Social Security Benefit Amount, Type of Benefit ______________________ Gross Monthly Supplemental Security Income Payment Amount (including State Supplement) Type of Benefit Amount of Monthly Deductions for Medicare Paid by the Applicants LENDER CERTIFICATION: Verifier must print their name, address and telephone number and certify to the accuracy of information recorded by executing below. Name: Title: Telephone Number: (Signature) WARNING: Knowingly and willingly making a false or fraudulent statement to any department of the United States Government is a felony punishable by fine and imprisonment (Title 18, Section 1001, U.S. Code) Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. VERIFICATION OF PUBLIC ASSISTANCE REQUEST FOR INFORMATION APPLICANT IDENTIFICATION Name Social Security Number REQUESTED INFORMATION Number in Family: Rate Per Month Aid to Families with Dependent Children $ General Assistance $ Does this amount include Court Awarded Support Payments Yes No Amount Specifically Designated for Shelter and Utilities $ Other Assistance - Type: $ Total Monthly Grant $ Other Income - Source: $ *Maximum Allowance for Rent and Utilities $ Amount of Public Assistance given during the past 12 months $ LENDER CERTIFICATION: Verifier must print their name, address and telephone number and certify to the accuracy of information recorded by executing below. Name: Title: Telephone Number: (Signature) WARNING: Knowingly and willingly making a false or fraudulent statement to any department of the United States Government is a felony punishable by fine and imprisonment (Title 18, Section 1001, U.S. Code) Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. VERIFICATION OF CHILD/DEPENDENT CARE REQUEST FOR INFORMATION APPLICANT IDENTIFICATION Name Social Security Number REQUESTED INFORMATION Name of Person or Agency Providing Care: Address: Name(s) of person or Persons Cared for: Specify Hours and Days of Care. Average Amount Paid for Care: $ ܆ Week ܆Month Estimated Amount to be Paid in coming 12 months (including full-time summer care of school children, if applicable):$ _______ Will any amount of this expense be reimbursed by an outside source: ☐ Yes ☐No LENDER CERTIFICATION: Verifier must print their name, address and telephone number and certify to the accuracy of information recorded by executing below. Name: Title: Telephone Number: (Signature) WARNING: Knowingly and willingly making a false or fraudulent statement to any department of the United States Government is a felony punishable by fine and imprisonment (Title 18, Section 1001, U.S. Code) Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. VERIFICATION OF UNEMPLOYMENT BENEFITS REQUEST FOR INFORMATION APPLICANT IDENTIFICATION Name Social Security Number REQUESTED INFORMATION 1. Are benefits being paid now? ܆ Yes ܆ No 2. If yes, what is Gross Weekly payment? $ 3. Date of Initial Payment 4. Duration of Benefits 5. Is claimant eligible for future benefits? ܆ Yes ܆ No 6. If yes, how many weeks? 7. If no, what is termination date of benefits? LENDER CERTIFICATION: Verifier must print their name, address and telephone number and certify to the accuracy of information recorded by executing below. Name: Title: Telephone Number: (Signature) WARNING: Knowingly and willingly making a false or fraudulent statement to any department of the United States Government is a felony punishable by fine and imprisonment (Title 18, Section 1001, U.S. Code) _____________________________________________________________________________ Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. VERIFICATION OF BUSINESS EXPENSES REQUEST FOR INFORMATION APPLICANT IDENTIFICATION Name Social Security Number REQUESTED INFORMATION Based on business transacted during 20 , to 20 1. Gross Income $ 2. Expenses: (a) Interest on Loans $ b) Cost of Goods/Materials $ (c) Rent $ (d) Utilities $ (e) Wages/Salaries $ (f) Employee Contributions $ (g) Federal Withholding Tax $ (h) State Withholding Tax $ (i) FICA $ (j) Sales Tax $ (k) Other $ (l) Straight Line Depreciation $ Total Expenses $ 3. Net Income $ LENDER CERTIFICATION: Verifier must print their name, address and telephone number and certify to the accuracy of information recorded by executing below. Name: Title: Telephone Number: (Signature) WARNING: Knowingly and willingly making a false or fraudulent statement to any department of the United States Government is a felony punishable by fine and imprisonment (Title 18, Section 1001, U.S. Code) _____________________________________________________________________________ Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. VERIFICATION OF SUPPORT PAYMENTS REQUEST FOR INFORMATION APPLICANT IDENTIFICATION Name: _____________________________________________ Social Security Number: ____________ REQUESTED INFORMATION Name of Person Paying Support: _________________________________________________________________ Address: ____________________________________________________________________________________ ____________________________________________________________________________________________ For ( ) Former Spouse ( ) Children Children Names are: ______________________________________________________________________________________________________________ ______________________________________________________________________________________________________________ ______________________________________________________________________________________________________________ ______________________________________________________________________________________________________________ Amount of Support : $_________________________ ܆Weekly ܆ Monthly ܆Yearly LENDER CERTIFICATION: Verifier must print their name, address and telephone number and certify to the accuracy of information recorded by executing below. Name: Title: Telephone Number: (Signature) WARNING: Knowingly and willingly making a false or fraudulent statement to any department of the United States Government is a felony punishable by fine and imprisonment (Title 18, Section 1001, U.S. Code) _____________________________________________________________________________ Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts. RECORD OF ORAL VERIFICATION OF EMPLOYMENT APPLICANT INFORMATION Applicant Name of Applicant/Co-Applicant: Co-Applicant EMPLOYMENT INFORMATION VERIFIED Present Previous Employment Company: Name and Title of Person Contacted: Telephone Number: Date: Source of Telephone Number: Date of Employment: Position: Probability of Continued Employment: Salary: Probability of continued bonus and/or overtime is likely to continue: ADDITIONAL INFORMATION VERIFIED Signature of Person Receiving Verification Date and Time WARNING: Knowingly and willingly making a false or fraudulent statement to any department of the United States Government is a felony punishable by fine and imprisonment (Title 18, Section 1001, U.S. Code) _____________________________________________________________________________ Guidance documents lack the force and effect of law, unless expressly authorized by statute or incorporated into a contract. USDA may not cite, use, or rely on any guidance that is not available through their guidance portal, except to establish historical facts.

Source: USDA HB-1-3555, Chapter 9, § 9.11 — Education · source URL · snapshot 0466acd1ea2d17a4