Section 502 loans are primarily used to help low-income individuals or households purchase
homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or
to purchase and prepare sites, including providing water and sewage facilities.
Eligibility: Applicants for loans may have an income of up to 115% of the median income for
the area. Area income limits for this program are here.
Families must be without adequate housing, but be able to afford the mortgage
payments, including taxes and insurance. In addition, applicants must have reasonable credit histories.
under the Single Family Housing Guaranteed Loan program include:
- Any State housing agency;
- Lenders approved by:
- HUD for submission of applications for Federal
Housing Mortgage Insurance or as an issuer of Ginnie Mae mortgage backed securities;
- the U.S. Veterans Administration as a qualified
- Fannie Mae for participation in family mortgage
- Freddie Mac for participation in family mortgage
- Any FCS (Farm Credit System) institution with
direct lending authority;
- Any lender participating in other USDA Rural
Development and/or Farm Service Agency guaranteed loan programs.
Terms: Loans are for 30 years. The promissory note interest rate is set by the
There is no required down
payment. The lender must also determine repayment feasibility, using ratios of repayment
(gross) income to PITI and to total family debt.
Standards: Under the Section 502 program, housing must be modest in size, design, and cost.
Houses constructed, purchased, or rehabilitated must meet the voluntary national
model building code adopted by the state and HCFP thermal and site standards.
housing must be permanently installed and meet the HUD Manufactured Housing Construction
and Safety Standards and HCFP thermal and site standards. Existing
manufactured housing will not be guaranteed unless it is already financed
with an HCFP direct or guaranteed loan or it is Real Estate Owned (REO)
formerly secured by an HCFP direct or guaranteed loan.
Approval: Rural Development officials have the authority to approve most Section 502 loan
Basic Instruction:7 CFR Part 1980.