source:
  type: guide
  id: usda-hb-3555-9.2
  authority: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶9.2 —
    Overview
  description: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶9.2
    — Overview.
  coverage_tier: operative
obligations:
- id: usda-hb-3555-9.2-full
  canonical_id: usda-hb-3555-9.2-full
  section: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶9.2 — Overview
  type: do
  tags:
  - regulator-direct
  - usda
  - usda-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: USDA SFH Guaranteed Loan Program Technical Handbook HB-1-3555 ¶9.2
      — Overview
    source_class: usda-handbook
    source_url: https://www.rd.usda.gov/sites/default/files/hb-1-3555_consolidated.pdf
    snapshot_id: 0466acd1ea2d17a4
    fetched_at: '2026-05-25T14:10:13Z'
    content_hash: sha256:22ac6f998ff72578e318fca138ebe80fb18ae2fc701eb5936172f1842679a13a
    paragraph_quote: '9.2 OVERVIEW The SFHGLP assists very-low, low, and moderate-income
      households. Therefore, the lender must certify that any household that requests
      a loan guarantee does not exceed the adjusted annual income threshold for the
      applicable state and county where the dwelling is located. Additional information
      on income limits can be found in Appendix 5 of this Handbook. This section assists
      lenders in analyzing income types, completing income calculations (annual, adjusted
      annual, and repayment), and documenting the income with acceptable verifications.
      Documentation of income calculations are recorded on Attachment 9-B, Worksheet
      for Documenting Eligible Household and Repayment Income, FNMA Form 1008 or Freddie
      Mac Form 1077, Uniform Underwriting and Transmittal Summary, or an equivalent
      lender income worksheet. Attachment 9-C provides a case study to illustrate
      how to properly complete the income worksheet. A public website is available
      to assist in the calculation of annual and adjusted annual income at: https://eligibility.sc.egov.usda.gov/eligibility/incomeEligibilityAction.do?pageAction=state.
      9.3 ANNUAL INCOME [7 CFR 3555.152(b)] Annual income includes all eligible income
      sources from all adult household HB-1-3555 (03-09-16) SPECIAL PN 9-2 Revised
      (08-05-25) PN 649 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. members, not just parties to the
      loan note. The annual income for the household will be used to calculate the
      adjusted annual household income. The adjusted annual income determines if the
      household is eligible for a guaranteed loan. A. Income that is Never Counted
      7 CFR 3555.152(b)(5) lists income sources that are never included in the annual
      income calculation. Refer to Attachment 9-A to review income and asset types,
      guidance for annual and repayment purposes, and documentation options acceptable
      to verify the income or asset source. B. Calculation of Annual Income Annual
      income is calculated for the ensuing 12 months, based on income verifications,
      documentation, and household composition. Lenders must examine all evidence
      to ensure the calculation is supported. In addition to 7 CFR 3555.152(b) and
      Attachment 9-A, lenders must consider the following to calculate annual income:
      x Use the gross amount, before any payroll deductions, of base wages and salaries,
      overtime pay, commissions, fees, tips, bonuses, housing allowance, and other
      compensations for personal services of all adult members of the household, unless
      they meet the exclusion criteria of 7 CFR 3555.152(b)(5) and Attachment 9-A.
      Documented cost of living allowances or wage increases that will be effective
      on or before loan closing must be included in the annual income calculation.
      x Include the first $480 of earned income from adult full-time students who
      are not an applicant, or a spouse of an applicant. x Include the income of an
      applicant’s spouse, unless the spouse has been living apart from the applicant
      for at least three months (for reasons other than military or work assignment),
      or court proceedings for divorce or legal separation have been commenced. Evidence
      to support living apart for three months may include, but is not limited to,
      an apartment lease, bills, or bank statements in their name alone delivered
      to a different address, etc. This guidance applies to domestic partners, significant
      others, and fiancée’s that are currently living with the applicant as a household/family
      unit. This guidance does not apply to adult HB-1-3555 (03-09-16) SPECIAL PN
      9-3 Revised (08-05-25) PN 649 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. dependents age
      18 and up. x An adult household member that is currently unemployed but is seeking
      new employment must have their previous earnings included in annual income.
      The previous earnings are not required to be included when there is documented
      evidence to support they are not seeking to be reemployed, such as a tendered
      resignation, official termination from previous employer, or a signed statement
      from the adult household member that they do not plan to pursue new employment.
      x Income verifications provided by applicants that do not currently support
      historical earnings with the same employer (e.g. less hours worked, less overtime,
      less bonus, declining self-employment income, etc.) must be carefully reviewed
      to determine appropriate calculations. x Verified changes of income amounts
      or sources in the ensuing 12 months must be documented. Examples include, but
      are not limited to, pending retirement, resignation tendered, documented raise
      that will occur prior to loan closing, etc. x When an income source will not
      be received for the entire year, the amount anticipated to be received within
      the ensuing 12 months must continue to be included in annual income unless excluded
      under 7 CFR 3555.152(b)(5). Examples include, but are not limited to, child
      support, alimony, maintenance, Social Security, etc. Annual income is the total
      of all income sources for a 12- month timeframe. Income calculations must state
      the income source, the number of months receipt remaining for the ensuing 12-
      month timeframe, and the total amount to be received. Lenders are responsible
      for accurately calculating annual household income. The calculation should be
      logical based on the history of income and documentation provided. Training
      is available on the USDA LINC Training and Resource Library website, located
      at https://www.rd.usda.gov/resources/usda-linc-training-resource-library/lender-training.
      Annual income calculations will typically vary from adjusted annual and repayment
      income. C. Income of Temporarily Absent Household Members A household member
      is defined as all persons routinely living in the dwelling as a HB-1-3555 (03-09-16)
      SPECIAL PN 9-4 Revised (08-05-25) PN 649 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. principal
      residence, except for live in aides, foster children, and foster adults (7 CFR
      3555.10). If a member of the household that will make the dwelling their principal
      residence is temporarily absent, their income must be included. D. Applicant
      Assets Income earned from non-retirement assets may be required to be included
      in the annual income calculation, as applicable. Refer to paragraph 9.4 for
      guidance. E. Verification Requirements Lenders must verify income and asset
      documentation provided by applicants and other adult household members. Lenders
      will verify the income for each adult household member for the previous 2 years.
      The following guidance will assist: x Written, oral, or electronic verifications,
      and documents provided or prepared by a third-party verification (TPV) vendor
      are acceptable, unless otherwise specified. These verifications must be provided
      directly to the lender. x Lenders may not accept verifications or documents
      transmitted by, or passed through, an interested third party such as builders,
      real estate professionals, or sellers. x Facsimiles, photocopies, digital images,
      and computer-generated documents may be accepted in lieu of original forms,
      unless otherwise specified. x The lender is responsible for the integrity and
      accuracy of the information in the mortgage underwriting file. Regardless of
      the type of documentation used to support the loan application, the documents
      must be legible and free of any alterations, erasures, “white-outs,” or similar
      indications that changes have been made. x Verification documentation of household
      annual, adjusted annual, and repayment income will be retained in the lender’s
      permanent case file. x Paystubs/earning statements must include adequate information
      to calculate income and include year-to-date earnings. The lender must utilize
      paystub(s)/earning statement(s) that are dated no earlier than 30 days prior
      to the HB-1-3555 (03-09-16) SPECIAL PN 9-5 Revised (08-05-25) PN 649 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. initial loan application date. x W-2 forms must include the most recent
      one or two years, as applicable. W-2s must clearly identify the applicant and
      employer. x Lenders must obtain one of the following documents to verify previous
      employment: W-2, written VOE, electronic VOE, third-party verification, or evidence
      of applicable education or military service. Lenders may require additional
      documentation for previous employment when they determine it is needed to support
      their income calculations. x Tax returns for self-employed borrowers must be
      copies of the original returns filed with the IRS and include all supporting
      schedules. Lenders may substitute IRS transcripts obtained directly from the
      IRS with all supporting schedules. The most recent tax return refers to the
      last return filed as determined by IRS schedule/deadlines. Lenders must continue
      to obtain the most recent two years of returns, as applicable. Applicants must
      not be delinquent on federal taxes as determined by the IRS. x Applicants with
      an approved IRS extension for the current tax year may continue to be eligible
      if they are not delinquent on taxes owed, as determined by the IRS. Evidence
      of tax payments made, if applicable, must be retained in the lender’s permanent
      loan file in accordance with Chapter 10 of this Handbook. x Income and asset
      documents and verifications cannot be greater than 120 days old at time of loan
      closing. Divorce decrees, income tax returns, and other documents that do not
      expire will continue to have the most recent or filed copy accepted. x Applicable
      income and asset documents greater than 120 days old at the time of loan closing
      must be updated or re-verified to support applicant/household eligibility. For
      all loan types, lenders must verify the income for all applicants and adult
      household members (excluding eligible full- time students ages 18 and above)
      through one of the following documentation methods. Refer to Attachment 9-A
      for documentation and verification options that are acceptable to support income
      types. 1. Full Income Documentation – Non-Self-Employed HB-1-3555 (03-09-16)
      SPECIAL PN 9-6 Revised (08-05-25) PN 649 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. x W-2 forms
      for the most recent two tax years, which may be electronically generated or
      provided in paper format, or IRS Wage and Income transcripts; x Paycheck stubs
      or payroll earning statements that report the most recent four weeks of earnings;
      and x Prior to loan closing, a Verbal Verification of Employment (VVOE) must
      be obtained for all applicants within 10 business days of loan closing. A written
      verification or email confirmation (other than a paystub), that confirms the
      applicant’s current employment status within this time frame is also acceptable.
      The documentation must include the name and title of the person who completed
      the verification for the employer. This verification will be retained in the
      lender’s permanent loan file. Adverse changes to the applicant’s employment
      may render the loan ineligible. 2. Alternative Income Documentation – Non-Self-Employed
      x Written Verification of Employment (VOE): Electronically generated verifications
      from the employer or a verification service utilized by the employer, Form RD
      1910-5, Request for Verification of Employment, or an equivalent HUD, VA, Fannie
      Mae, or Freddie Mac form may be utilized to verify the current year-to-date
      (YTD) and previous year’s employment earnings. This verification must confirm
      base income/wages, bonus, overtime, commissions, and other income sources earned,
      as applicable; x Recent paycheck/earnings statement: Lenders must compare a
      recent paystub that includes YTD earnings and employment information to the
      VOE to confirm these two documents reasonably agree; and x Prior to loan closing,
      a Verbal Verification of Employment (VVOE) must be obtained for all applicants
      within 10 business days of loan closing. A written verification or email confirmation
      (other than a paystub), that confirms the applicant’s current employment status
      within this time frame is also acceptable. The documentation must include the
      name and title of the person who completed the verification for the employer.
      This verification will be retained in the lender’s permanent loan file. Adverse
      changes to the applicant’s employment may render the loan ineligible. HB-1-3555
      (03-09-16) SPECIAL PN 9-7 Revised (08-05-25) PN 649 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. Self-Employed Income Documentation Applicants or household members are considered
      self-employed when they have a 25 percent or greater ownership interest in a
      business. If the ownership interest is less than 25 percent, neither the “Business
      Owner” or “Self-Employed” options should be selected in GUS. Federal Income
      Tax Returns for the business will be required when ownership is 25 percent or
      greater. The lender must analyze the most recent two-year history of the business
      earnings. Sharp increases or decreases in self-employment income may require
      the lender to review additional documentation to support their calculation of
      annual, adjusted annual, and repayment income. Sharp increases or decreases
      are defined as a 20 percent or greater variance for income earnings from the
      previous 12 months. The lender’s permanent file must contain the following,
      as applicable: x Federal Income Tax Returns (filed and signed) for the most
      recent two consecutive years with all schedules, or IRS transcripts that include
      all applicable schedules; x Federal Income Tax Returns for the business (filed
      and signed) for the most recent two consecutive years with all schedules, or
      IRS transcripts that include all applicable schedules, if required for the ownership
      interest/business type; x Recent profit and loss statement (not required to
      be audited); and x Confirmation the business is operational, obtained within
      30 days of the loan closing. Documentation may include evidence of a website,
      additional internet documentation, licensing bureau certification, etc. Adverse
      changes to the business may render the applicants ineligible. Lenders may utilize
      Fannie Mae Form 1084, Cash Flow Analysis, Fannie Mae Form 1088, Comparative
      Income Analysis, or a comparable self-employment evaluation form(s), and Attachment
      9-E to assist in the calculation of self- employment income. A business (full
      time or part-time) that is closed may be removed from consideration for annual
      income when the applicants provide a letter of explanation HB-1-3555 (03-09-16)
      SPECIAL PN 9-8 Revised (08-05-25) PN 649 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. and documentation
      to the lender which details: 1. When the business was closed; 2. Why the business
      was closed; 3. How the business was closed; and 4. Evidence, satisfactory to
      the lender, to support the closure of the business. REMINDER: Refer to Attachment
      9-A for documentation options and verification requirements of additional income
      and asset types that may apply to the household. If a specific income or asset
      type is not listed, refer to 7 CFR 3555.152. All income and asset types must
      be documented and verified. The lender must retain all documentation and calculations
      in their permanent loan file. 4. IRS Transcripts: Verification of Income IRS
      transcripts are required for all required household members in addition to the
      documentation option selected by the lender. Lenders must require each adult
      household member, as applicable, to complete and sign IRS Form 4506-T, Request
      for Transcript of Tax Return, IRS Form 4506-C, IVES Request for Transcript of
      Tax Return, or IRS Form 8821, Tax Information Authorization, for the previous
      two tax years at the time of submission to the Agency. The 4506-T/4506-C/8821
      must be used to request full transcripts with all schedules. Full time students
      ages 18 and up that are not the applicant, co-applicant, or spouse of an applicant
      are not required to sign the 4506-T/4506-C/8821 or have transcripts provided.
      Guaranteed loans cannot be made to a household that exceeds the applicable adjusted
      annual income limit. The transcripts provide a quality control measure to ensure
      all income and asset earnings reported to the IRS have been disclosed to the
      lender. Lenders must obtain and review available transcripts prior to loan closing
      and retain them in their permanent loan file. Previously unknown/undisclosed
      income or asset sources that are identified by the transcripts will require
      additional review by the lender and may render a loan file ineligible. The lender
      is responsible for requesting tax transcripts in the early stages of the application
      process. When the lender is unable to obtain transcripts from the IRS for the
      applicants or required household members, they may document their HB-1-3555
      (03-09-16) SPECIAL PN 9-9 Revised (08-05-25) PN 649 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.
      correspondence to and from the IRS in the permanent loan file to support the
      omission. The loan file will be considered complete when the explanation is
      documented. Loan closings will not be delayed due to obstacles in obtaining
      the tax transcripts. 9.4 CALCULATING INCOME FROM ASSETS [7 CFR 3555.152(d)]
      Household members with cumulative net family assets (non-retirement) of $50,000
      or greater, must have those assets reviewed for annual income purposes, as indicated
      in 7 CFR 3555.152(d). Lenders must review the most recent asset information
      provided by applicants and household members at the time of loan application.
      Net family assets with actual earnings will use the stated rate of interest
      to calculate annual income. Net family assets that do not earn interest will
      use a current passbook savings rate (verified through the lender’s personal
      banking rates, online website, etc.) to calculate annual income. If the applicants
      have ownership in a business, or are self-employed, the lender should closely
      review the asset accounts to verify assets are not transferred between a personal
      account and a business account and vice versa. These accounts should function
      as two separate financial tools, one for personal transactions and one for business
      transactions. In the event the assets from the business account and personal
      account are co-mingled, the co-mingled assets would need to be included in the
      calculation of net family assets. Refer to the Asset section in Attachment 9-A
      for individual asset types and options for documentation/verification. 9.5 ADJUSTED
      ANNUAL INCOME [7 CFR 3555.152(c)] The adjusted annual income calculation will
      determine if the household is eligible for the guaranteed loan program. Adjusted
      annual income is calculated by using the annual income calculation and subtracting
      any of the eligible deductions in 7 CFR 3555.152(c) for which the household
      may qualify. Attachment 9-C provides an example of using deductions. Refer to
      Attachment 9-A for information and documentation options to support these eligible
      deductions: x Dependents HB-1-3555 (03-09-16) SPECIAL PN 9-10 Revised (08-05-25)
      PN 649 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. x Child Care Expenses x Elderly Household
      x Care of Household Members with Disabilities x Medical Expenses'
  judgment: false
