Rural Housing Programs
Section 502 Direct Single Family Housing Loans

PROGRAM DESCRIPTION:  Housing loans designed for low to very low income families (80% or less of county median income).

TYPE OF ASSISTANCE:  Homeownership loans may be used to buy, build, improve, or repair rural homes.

ELIGIBILITY REQUIREMENTS:  Property to be financed must be located in an area designated as rural.  Generally this includes towns with populations of 10,000 or less, or in certain conditions, a town of 20,000 or less that is not contained in a Metropolitan Statistical Area (MSA).  Families must not already own adequate housing, be unable to obtain all of their needed credit from other sources, and have sufficient income to cover house payments, taxes, insurance and necessary living expenses.

FUND AVAILABILITY AND MAXIMUM AMOUNTS:  Funding is based upon an annual appropriation.  Loans may be made for up to 100% of the appraised value.  Loans may be made in combination with another lender contributing at least 20% or more of the loan amount on a first mortgage basis, with the balance from USDA Rural Development on a second mortgage.  The USDA Rural Development loan or portion of the loan may be subsidized based on financial need in order to show repayment ability.

INTEREST RATE:  Current interest rate is used.  When subsidy is in effect, the interest rate may be reduced to as low as 1% A.P.R. on USDA Rural Development's loan or portion of the loan.

TERMS AND COLLATERAL:  Maximum repayment period is typically 33 years, under certain conditions a 38 year term is available.  Collateral is mortgage on real estate financed.

FEES:  Applicant pays the credit report fee, and if a loan is made, the cost of a real estate appraisal and loan closing costs.

CREDIT REQUIREMENTS:  A credit history that indicates a reasonable ability and willingness to meet obligations as they become due.

CONTACT:  For assistance, please contact the Area Office that serves the county in which you are interested.

       Please send comments or suggestions to:  beverly.helton@al.usda.gov