Single Family Housing Loans
(Section 502 Loans)

Rural Development provides loans in rural areas to assist very low, low and moderate-income rural families in obtaining decent, safe, and sanitary housing. Rural areas include open country and places with population of 10,000 or less and under certain conditions, towns and cities between 10,000 and 20,000 population. View a list of New Jersey's eligible areas -- this is a 9 Kb PDF file or determine property eligibility.

The loans may be used for construction, repair, or purchase of housing in rural areas. Dwellings financed must be modest in size, design and cost. The following types of construction are allowable:

• Stick Built
• Modular
• Manufactured Housing, which meets the Federal Manufactured Home Construction and Safety Standards (FMHCSS) from Rural Development approved Builders/Dealers.

The value of dwelling financed cannot exceed the area loan limits established for a given locality. Loans shall not be approved for dwellings containing in-ground swimming pools or structures designed for income-producing facilities or purposes.

Anyone interested in applying must
- be without decent, safe and sanitary housing
- be unable to obtain a loan from private lenders on terms and conditions that they can reasonably be expected to meet
- have sufficient income to pay house payments, insurance premiums and taxes, and necessary living expenses
- possess the legal capacity to incur the loan obligation
- be a citizen of the United States or reside in the United States after having been legally admitted for permanent residence
- possess the ability to carry out the undertakings and obligations required in connection with the loan.

Applicants must meet the very low, low, and moderate-income limits, which are based on the size of the household. These limits are established by the Department of Housing and Urban Development for the county and metropolitan statistical areas where the property is or will be located. View the income limits for New Jersey or determine property eligibility.

Subsidized Funds

Payment Assistance is available to applicants meeting the very low and low income limits. Payment Assistance is granted annually which reduces the effective interest rate to a rate equivalent to that relating to the borrower's income range or the amount of principal and interest due based on a minimum percentage of the borrower's adjusted income ranging from 22 to 26 percent determined at the equivalent interest rate, whichever is greater, depending on the loan amount and the size and income of the family. Payment Assistance is subject to recapture upon sale or transfer of the property.

Nonprogram Loans

A nonprogram loan is an extension of credit to a borrower who does not qualify for program credit, or an extension of credit to allow a buyer to purchase a property that does not qualify as a program property. The Agency will make nonprogram loans to:

• Allow the assumption of an existing program loan on new rates and terms; or
• Expedite the sale of a Real Estate Owned (REO) property.

Nonprogram applicants are not subject to the income eligibility, asset, citizenship, or occupancy requirements described for program borrowers. They may own other properties and are not required to first seek private sources of financing.

Nonprofit organizations and State and local governments are not required to contribute a down payment. Other nonprogram applicants are required to make a down payment. Nonprogram borrowers who intend to occupy the property must contribute 2 percent of the purchase price. Nonprogram borrowers who do not intend to occupy the property must contribute 5 percent of the purchase price.

The interest rate charged for nonprogram loans is the nonprogram rate in effect at the time of loan approval.

For nonprogram applicants who intend to personally occupy the property, the maximum loan term is 30 years. For nonprogram applicants who do not intend to personally occupy the property, the maximum loan term is 10 years. If more favorable terms are necessary to facilitate the sale, the loan may be amortized over a period of up to 20 years, with payment in full due not later that 10 years from the date of closing. Unlike applicants for program loans, applicants for nonprogram credit must submit a nonrefundable $100 application fee. The application fee is waived for applicants who are public bodies or nonprofit organizations.