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Metropolitan Statistical Area (MSA).
MSA is a county or group of counties of 50,000 people or more, or "twin cities" with a combined population of at least 50,000. In addition to the county containing such a city, contiguous counties are included in a metro area according to commuting patterns. In New England states, metro areas consist of towns and cities instead of counties, otherwise the rules are similar.


Number in Family.
The applicant, co-applicant, and all other persons who will make the applicant's dwelling their primary residence for all or part of the next 12 months. The temporary absence of a child from the home due to placement in foster care shall not be taken into account in considering family composition and size. Foster children placed in the borrower's home and live-in aides shall not be counted as members of the household.

Example: Family of four could consist of the following: John Doe (applicant), Mary Doe (co-applicant), Kaitlyn Doe (daughter) and Juanita Sweat (John Doe's mother)


Residents Under 18 Years Old, Disabled, or Full Time Students.
A deduction of $480 for each member of the family residing in the household, other than the applicant, spouse, or co-applicant, who is;
  1. under 18 years of age
  2. 18 years of age or older "and" is disabled as defined in RD Instruction 1980-D, Section 1980.302 (a) or
  3. a full-time student ages 18 or older


Child Care Deduction (Annual Amount Paid for Childcare).
A deduction for the care of minors 12 years of age or under, to the extent necessary to enable a member of the applicant/borrowers's family to be gainfully employed or to further his or her education.

Payment for these services may not be made to persons whom the applicant/borrower is entitled to claim as dependents for income tax purposes.

A full "written" justification for this deduction must be recorded detail in the loan docket.


Elderly Family.
An elderly family consists of one of the following:
  1. A person who is the head, spouse, or sole member of a family and who is 62 years of age or older, or who is disabled, and is an applicant or borrower; or
  2. Two or more persons who are living together, at least one of whom is age 62 or older, or disabled, and who is an applicant or borrower; or
  3. In the case of a family where the deceased borrower or spouse was at least 62 years old or disabled, surviving household members shall continue to be classified as an elderly family for the purpose of determining adjusted income, even though the surviving members may not meet the definition of elderly family on their own, provided:
    1. They occupied the dwelling with the deceased family member at the time of the death;
    2. If one of the surviving family members is the spouse of the deceased family member, the family shall be classified as an elderly family only until the remarriage of the surviving spouse; and
    3. At the time of the death of the deceased family member, the dwelling was financed under title V of the Housing Act of 1949.


Elderly Family Medical Expenses Deduction.
Medical expenses for any "Elderly Family" as defined in
RD Instruction 1980-D, Section 1980.302 (a). This includes medical expenses for any household member the applicant/borrower anticipates incurring over the ensuing 12 months "and" which are not covered by insurance. Examples of said expenses are: dental expenses, prescription medications, medical insurance premiums, eyeglasses, hearing aids, home nursing care, monthly payments on accumulated major medical bills and full time nursing or institutional care which "cannot" be provided in the home for the member of the household.

The deduction is the amount by which the aggregate allowable medical expenses of the household, combined with eligible disability expenses of the household, exceeds 3 percent of the qualifying household members Gross Annual Income (GAI).

Example: Qualifying household medical expenses are $3,200. GAI is $15, 500. 3% of GAI is $465. Allowable deduction is $2,735 ($3,200 minus $465)


Base Income.
Includes a projected income anticipated for the next 12 months including full and part-time employment and seasonal work. Historical data based on the past 12 months or previous fiscal year may be used if a determination cannot be logically made.

Example: Current hourly income is $10/hour, and applicant works 40 hours/week. Monthly income would be $10*40*52=$20,800/year. The yearly income of $20,800 divided by 12 months=$1,733/month.


Overtime Income.
Overtime income is income that is more than the base wages. Overtime for Rural Development eligibility purposes should be verifiable and dependable. The applicant should have a history of working overtime for overtime to be considered. Typically a 12-month history of working overtime would be a good indicator that overtime will continue unless the employer indicates it will not continue. Averaging overtime over the last 12-24 months would be an acceptable method to determining projected overtime.


Bonus Income.
Bonus income is income that is more than the base wages. Bonus income for Rural Development eligibility purposes should be verifiable and dependable. The applicant should have a history of bonus income for it to be considered. Typically a 12-month history of receiving a bonus would be a good indicator that bonus income will continue unless the employer indicates it will not continue. Averaging bonus income over the last 12-24 months would be an acceptable method to determining projected bonus income.


Commission Income.
Commission income is income that is more than the base wages. Commission income for Rural Development eligibility purposes should be verifiable and dependable. The applicant should have a history of commission income for it to be considered. Typically a 12-month history of receiving a commission would be a good indicator that commission income will continue unless the employer indicates it will not continue. Averaging commission income over the last 12-24 months would be an acceptable method to determining projected commission income.


Other Income.
Other income would include types of income such as tips, unemployment income, seasonal employment, part-time employment, National Guard, supplemental income (i.e. coaching contract), child support, alimony, social security, pensions, annuities, insurance policies, etc.

Other income needs to be verifiable and dependable.

Note: Do not include income from minors, food stamps, care of foster children, lump- sum payments, inheritances, insurance payments or other types of income that are typically not received on a routine basis.


Other Household Income.
Eligibility for Rural Development loans is based on all household income. In some instances, there may be income in the household from an adult family member who is not applying for the proposed loan.

The income from all adult members of the household, even though they may not be a party to the loan transaction, must be disclosed for eligibility purposes. The income needs to be verifiable and dependable. It should meet the same criteria as listed above in order to be considered. Further information concerning program eligibility and calculating income for program eligibility is available in
RD Instruction 1980-D, Section 1980.347.


Self-Employment Income.
Net income from self-employment shall be based on the previous two years Federal tax returns in addition to, if available, current years income and expenses. Self-employment income can be calculated as follows:

A two year average of the net profit (item # 31 on 1040 Schedule C or item # 36 on 1040 Schedule F) typically serves as self-employment income for loan purposes. In addition, it is permissible to add back to the net profit certain deductible items, specifically:


Dividends/Interest.
Dividends and Interest income are also included in determining eligibility. This includes interest from checking and savings accounts, dividends, income received by adult members of the household from a trust fund, etc. See
RD Instruction 1980-D, Section 1980.347(d)(3) for further clarification.


Net Rental Income.
The net amount of income derived from rental property. This is calculated taking 75% of the gross rent from the lease agreements and subtracting the monthly payment (principal, interest, taxes, insurance). If this yields a positive number, it is included as monthly income. If it is negative, do not include as monthly income for eligibility determination. The additional 25% of the gross rent is considered as being absorbed by vacancy losses and ongoing maintenance expenses.


Disability Expense.
Reasonable expenses for the care of an individual with disabilities in excess of 3% of the annual income, when combined with eligible medical expenses, may be deducted from annual income if the expenses: Typical disability expenses include: