Section 502
Direct Loan Program-Fact Sheet
HOW TO APPLY:
Click here for a list of Rural Development Area Offices. Basic
information can be provided over the telephone, and an application will be mailed to you
to be completed and returned to the office; or an appointment will be scheduled.
PROPERTIES:
Modest single family dwellings located
in rural areas of Maine. Rural Development is restricted to financing in rural areas and
therefore there are some ineligible areas. Click here
to access interactive website.
LOAN PURPOSES:
New construction or occupied less than one
year. Plans must be certified by an authorized official. Construction Phase
Inspection Reports are required (foundation, shell, and final inspections). Note, if
the builder provides an insured 10-year warranty plan acceptable by Rural
Development, the builder can self-certify plans and only a final inspection is needed.
Purchase or purchase and improve/repair an existing
dwelling (occupied for more than one year).
Finance approved new manufactured homes.
Click
Here for a list of Approved Dealer/Contractors.
Pay fees for legal services, title clearance, loan
closing, appraisal, survey, processing and other fees typical for the area.
REFINANCING:
Refinancing for an existing home at risk of
foreclosure.
Refinancing for an existing home in need of repairs.
Refinancing for a site without a dwelling
(if loan includes funds to construct a dwelling on the site).
LOT SIZE:
Modest lot not to exceed 30% of the appraised value;
and, which cannot be subdivided to make another house lot.
PROHIBITED FEATURES:
In-ground swimming pools.
Income producing properties.
DOWN PAYMENT:
In most cases none required.
INCOME LIMITS:
HUD very low, low and 38-year term Limits –
available in any Rural Development office. Based on Adjusted Family Income as defined in
Rural Development regulations.
Click
Here for Income Limits.
INCOME REQUIREMENTS AND
VERIFICATION:
The family's adjusted income may not
exceed the applicable limit based on household size.
Income must be dependable and
adequate.
Generally, all adult household income
must be counted including base pay, overtime, bonuses, commissions, social security, AFDC,
support, etc. Also, all adult income in the household is counted regardless of
whether the individual signs the promissory note. Only income received by individuals
signing the promissory note is considered in ratio determinations.
OTHER ELIGIBILITY REQUIREMENTS:
Generally, applicants who own
dwellings are not eligible.
Applicants must be unable to obtain
credit on terms and conditions they can fulfill.
Applicants must agree to personally
occupy the dwelling on a permanent basis.
Applicants must be considered adults
under state law and must have legal capacity to incur the loan obligation.
Applicants must not have been
suspended or debarred from participation in Federal programs.
Applicants must be U.S. Citizens or
provide acceptable evidence or eligible immigration status.
Applicants must provide truthful
information.
DEBTS AND CREDIT:
Must Count:
Long-term obligations/debts that have
an outstanding repayment period of more than six months including loans, alimony, and
child support.
Co-signed loans or liabilities on
previous mortgages (divorce situations) unless evidence can be provided that payments have
not been made by the applicant in past 12 months.
Deferred loans and balloon payments
that come due in the next 12 months.
Short term debts (6 months or less)
that have a significant impact on repayment ability, such as large medical bills, car
payments or other credit payments.
Do Not Need To Count:
Child Care Expenses
Credit History:
Must have a credit history that
indicates a reasonable ability and willingness to meet obligations as they come due.
Co-signers must meet the same credit
worthiness requirements as applicants.
FEES:
Credit Report $30.00 for individual and $40.00 for
joint reports.
Appraisal fee $325.00.
Tax service fee $110.00.
Appraisal fee and tax service fee can usually be
included in the loan.
RATIOS:
Principal, Interest, Taxes and Insurance (PITI)
– very low-income applicants not to exceed 29% of gross monthly income; low-income
applicants not to exceed 33% of gross monthly income.
Total Debt (TD) for all income categories not to
exceed 41% of gross monthly income.
MAXIMUM FINANCING:
100% of appraised value not to exceed loan limit for
the county.
Click
here for a list of maximum loan limits.
MAXIMUM TERM:
Manufactured homes.
- 30 years.
Single family dwellings.
- Ordinarily 33 years.
- In some cases 38 years, if applicant is income
eligible and ratios require longer term.
INTEREST RATE:
Low competitive rates,
with subsidy available to qualified applicants. Minimum interest rate is 1%
with subsidy paid by Rural Development.
OTHER CREDIT:
Must not be able to obtain other credit through
conventional sources, including a Rural Development guaranteed loan.
SUBSIDY RECAPTURE:
If payments are subsidized through a reduction in the
interest rate, some of the subsidy granted may have to be paid back when the property is
sold, or title is otherwise transferred.
AVAILABILITY OF FUNDING:
Funding is allocated to each state in October of each
year by Congress and is typically limited. Priority is given to:
- Rural Development assumable mortgages
- Hardship situations
- Properties owned by Rural Development (in government
inventory)
- Loans with a significant portion of leveraged funds
from other sources (usually 20 percent or more)
FINDING PROPERTY:
Contact local real estate agents, check newspaper ads
and private listings.
Contact your Rural Development Area Office for
information on Government owned properties.
WHO CAN ASSIST IN COMPLETING
APPLICATIONS:
RD employees.
Many real estate agents and brokers.
Most local Community Action Program agencies.
 Click here to
obtain more information
on our 502 loan program, or to request an
application.
If you would like to review USDA
Regulations, Procedures, Notices, RD Forms, or RD Handbooks,
Click Here.
Return to Single
Family Housing Loans and Grants.
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