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Direct Housing Loans (Section 502)

USDA Rural Development provides Single Family Housing loans in rural areas to eligible moderate, low, and very low income applicants who are unable to obtain credit elsewhere.  The loan may be to purchase and/or repair existing housing, purchase a building site and construct a dwelling, purchase a newly constructed dwelling, or new manufactured housing.  These homes must be owned and occupied by the borrower.  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 25,000 population. 

Direct Loans With Leveraged Participation

This program provides more opportunities to low and very low income applicants by leveraging agency resources.  A leveraged loan is a Rural Development loan that is supplemented by a loan or grant of at least 20% from another funding source.  The additional funding source may be a private lender, State or Local government, or non profit organization.  Financing can be up to 100% of the market value with no down payment.  The Rural Development loan payments are subsidized. The amount of Rural Development subsidy varies based on an annual review of household income.   Loans that are leveraged with other funding sources receive a processing priority.

Direct Loans With Self-Help Technical Assistance

Under this program, low and very low income applicants provide a substantial portion of the labor involved in building their own homes.  This sweat equity contribution reduces the total cost of purchasing a home.  Non profit organizations, funded through a Rural Development grant program, help the families become successful homeowners by providing technical assistance including homeownership education, loan packaging, and construction supervision.  Rural Development provides financing to the individual homeowners through the 502 subsidized loan program.  The local Rural Development office can provide you information regarding the availability of this program in your area and who to contact.

Government Owned Homes and Assumption of Existing Direct Loans

Priority is given to qualified low and very low income applicants to purchase government owned homes or purchase existing homes financed through the 502 direct loan program.  Rural Development may also provide financing for repairs and closing costs in conjunction with these types of  purchases.  This financing can be up to 100% of the market value with no down payment.  The local Rural Development office can provide a list of government owned homes that are available. 

Direct Loans - General

Under this program, low and very low income applicants may obtain 100% Rural Development direct financing to purchase and/or repair a home.  The amount of Rural Development subsidy varies based on an annual review of household income.  Because availability of funds for this program is limited, priority is given to those in targeted areas or those who have a hardship situation such as substandard housing or overcrowding. 

Eligibility Requirements

All Rural Development loans have certain eligibility requirements that must be met.  Some of these requirements are listed below:

       Household income cannot exceed an adjusted income limit based on household size (refer to charts below).

       Must have a satisfactory credit history.

       Must have reliable and dependable income.

       Must show repayment ability including the loan payments, real estate taxes, homeowners insurance and current debt obligations.

       Must be a U.S. Citizen or legally admitted U.S. resident.

       Must be 18 years of age or older and able to enter into a binding contract. 

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USDA Rural Development is an Equal Opportunity Lender, Provider and Employer.

Complaints of Discrimination should be sent to:

USDA, Director, Office of Civil Rights, Washington D.C. 20250-9410

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 Last modified: February 16, 2006