3 Rules That Decide Whether SNAP Counts on a USDA Loan
Three rules decide whether Sophia's SNAP benefits count toward a USDA loan, and the first one is a number: 20 percent. That is the cap on how much SNAP can count toward your repayment income. Most buyers, and plenty of lenders, never look at it.
Meet Sophia
Sophia is a fictional buyer near Edgefield, SC. I use her as an illustration of a situation that comes up often. She works, and her household receives SNAP benefits. She assumed SNAP was off the table when it came to qualifying for a mortgage, so she never asked anyone about it.
That assumption is common. Many buyers think benefits and mortgage qualification do not mix. On a USDA loan, the guideline says something different.
What the USDA guideline says
USDA guideline Paragraph 4.3.B.10 covers SNAP benefits as repayment income. Here is the text:
Income from the Supplemental Nutrition Assistance Program (SNAP) may be considered to calculate repayment income in an amount not to exceed 20 percent of the total repayment income. Only SNAP benefits attributable to the note signers can be considered. Only the lesser of the not-to-exceed amount or the actual SNAP benefits can be included. This is unique to USDA and not available under VA or FHA.
There are three rules packed into that paragraph. Let me break them out the way I would for Sophia.
Rule one: the 20 percent cap
SNAP may be considered as repayment income, but the amount cannot exceed 20 percent of the total repayment income. It is a ceiling. The rule does not say SNAP is unlimited, and it does not say SNAP is excluded. It says SNAP can count up to a limit.
Rule two: note signers only
Only SNAP benefits attributable to the note signers can be considered. If a household receives benefits that are attributable to someone who is not signing the note, those benefits are not part of the picture. This is why documentation matters. The paperwork needs to show who the benefits are for.
Rule three: the lesser of the cap or the actual benefits
Only the lesser of the not-to-exceed amount or the actual SNAP benefits can be included. If the actual benefits are below the cap, the actual benefits are what count. If the actual benefits are above the cap, the cap is what counts. You always use the smaller of the two.
Why this is a USDA-only tool
The guideline closes with a line worth remembering: this is unique to USDA and not available under VA or FHA. If SNAP is part of your household income and you are weighing loan options, that is a real difference between programs. Whether USDA is the right fit for you depends on your full situation, and this one rule does not settle it by itself. But it should be part of the conversation.
What Sophia can do today
Here is the practical piece. Sophia can do two things.
First, she can ask her lender this exact question: "Are you considering the SNAP benefits attributable to the note signers as repayment income under USDA Paragraph 4.3.B.10, up to the 20 percent limit?"
Second, she can bring current SNAP benefit documentation showing the benefit amount and who the benefits are for. That one document speaks directly to rule two and rule three. It shows which benefits are attributable to the note signers, and it shows the actual benefit amount to compare against the cap.
A clear question and the right paperwork put the guideline on the table instead of leaving it to chance.
Where I come in
I am Jason Sharon, a licensed mortgage broker with Home Loans Inc. My job is to find the path for buyers, and sometimes the path starts with a rule most people never knew existed. If your household income includes SNAP and you are considering a USDA loan, I am glad to walk through it with you. Call me at 843-LOW-RATE.
Home Loans Inc - Jason Sharon, Mortgage Broker. Company NMLS #1728740, Jason Sharon NMLS #1281448. Equal Housing Opportunity.
Learn more about this loan program: 3 Rules That Decide Whether SNAP Counts on a USDA Loan
