How do pastors, clergy, or ministers qualify for a USDA loan?
How do you qualify for a USDA loan with pastor, clergy, or ministry income?
Can housing or parsonage income be considered for USDA loan qualifying?
These are both great questions which seem to generate much confusion, and in today’s video we will break down the details and explain how to calculate pastor, clergy, or ministry income for USDA loan qualifying.
Remember, if you need help or have a question that is what we are here for, so just call or email to discuss your scenario because we are known for returning calls, replying to emails, and responding to your messages. Now, wouldn’t it be nice if everyone did that!
How do pastors, clergy, or ministers qualify for a USDA loan?
Background
As a starting point, the IRS provides for the following: “A minister’s housing allowance (sometimes called a parsonage allowance or a rental allowance) is excludable from gross income for income tax purposes but not for self-employment tax purposes.” (Click here to view the entire IRS FAQ)
Do USDA Loans have guidelines for pastor, clergy, or minister employment?
Now, while USDA guidelines do not have any specific requirements for pastor, clergy, or minister employment, it does state the following with regards to general income qualifying: “The anticipated amount of income, and likelihood of its continuance, must be established to determine the applicant’s capacity to repay the loan. The determination of stable and dependable income remains the lender’s responsibility”.
It further confirms, “Stable monthly income is the applicant’s verified gross monthly income from all acceptable and verifiable sources that can reasonably be expected to continue for at least the next three years.”
This is also consistent with Fannie Mae guidelines that do specifically reference income for pastors, clergy, or ministers as follows: “Housing or Parsonage Income may be considered qualifying income if there is documentation that the income has been received for the most recent 12 months and the allowance is likely to continue for the next three years. The housing allowance may be added to income but may not be used to offset the monthly housing payment.”
What documentation should you be prepared for?
Now that we have a better understanding, what could be required for documentation?
Parsonage, housing, or honorarium income may be documented by reporting it on filed tax return
s for qualifying income, but it may not be recognized solely through a verification of employment.
However, if the parsonage or honorarium income is not reported on the filed returns, but is reflected in box 14 of the W2 or box 3 of the 1099, the income can be used for qualifying purposes
Summary
In summary, it is possible to qualify for a USDA loan with pastor, clergy, or ministry income, but having an experienced lender combined with the proper documentation is critical to success.
Just call or email to discuss your scenario and let us show you the “Metroplex” difference.
(800) 806-9836 X 280
SeanS@MPLX.org
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