Loan Guarantee Program (Section 502)
Under the Guaranteed Loan program, the Housing and Community Facilities Programs guarantees loans
made by private sector lenders. (A loan guarantee through HCFP means that, should the individual
borrower default on the loan, HCFP will pay the private financier for the loan.) The individual works with
the private lender and makes his or her payments to that lender.
Under the terms of the program, an individual or family may borrow up to 100% of the appraised value of
the home, which eliminates the need for a down payment. Since a common barrier to owning a home for
many low-income people is the lack of funds to make a down payment, the availability of the loan
guarantees from HCFP makes the reality of owning a home available to a much larger percentage of
Americans.
A Place to Live
Buying on Repairing a Home With Help From USDA's Single Family Housing Direct Loan Program
A Place to Live
Owning your own home is part of the American dream. But in rural areas, financing a home can be difficult.
Jobs often pay less than in more populated areas, and a large proportion of people are self-employed,
making it harder for them to obtain credit. Also, rural lenders generally require a large downpayment, and,
often, interest rates and construction costs are higher than in urban areas.
However, if you want to own a home in a rural area, U.S.Department of Agriculture (USDA) Rural
Development may be able to help.
USDA has been helping rural Americans become homeowners since 1949. It has invested well over $54
billion in helping people purchase or build their own homes. USDA Rural Development's Direct
Homeownership Loan program offers home loans to lower income individuals who are unable to obtain
credit elsewhere,with interest rates as low as 1 percent -- and no downpayment.
Buying a House With Help from USDA
Section 502 Direct Loan Program
The Direct Homeownership Loan program is available to lower income individuals and families who wish to
live in rural areas or rural cities or towns. Under the program, individuals or families receive a loan directly
from Rural Development. Payments are based on income, with no downpayment required. You must be
unable to obtain a homeownership loan from a bank or other conventional sources.
Loans under the Direct Homeownership Loan program are made to families with incomes below 80 percent
of the median income level of the communities in which they intend to live.
Almost half of these loans are made to families and individuals with very low incomes. Since Rural
Development is able to make loans to those who will not qualify for a conventional loan, the direct loan
program enables many people to buy homes who otherwise could not do so. Even if you have minor credit
problems, Rural Development may still be able to work with you.
Loans under this program may be made for the purchase of an existing home or to build a new home.
Other uses include purchasing and preparing sites -- including providing water and sewage facilities -- and
repairing or renovating a house being purchased.
No Downpayment
There is no required downpayment for a USDA direct housing loan. The standard term for a loan is 33
years for most borrowers. However, 38-year loans are available to those who cannot afford a 33-year
loan.
The interest rate for direct housing loans is set by Rural Development, and is based on your current
income. Your local USDA Rural Development office can estimate the interest rate you would pay.
For further information on the Single Family Housing Direct Loan program, and to learn if you are eligible
for assistance, contact the USDA Rural Development local office serving your area. Rural Development
employees will help you complete an application.
Guaranteed Loans
If your income is too high to qualify for a direct housing loan, you may qualify for a guaranteed loan. These
are loans made by other lenders, such as banks or credit unions, and are guaranteed by Rural
Development. This allows other lenders to make loans to people they would not otherwise be able to
serve. Guaranteed housing loans are available to applicants whose incomes are below 115 percent of the
median area income. Your Rural Development local office can give you more details about this program.
The Mutual Self-Help Housing Program
Many rural families have achieved the American dream of owning their own homes through USDA's Mutual
Self-Help Housing program.
Under this program, families 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 -- allowing many
people to purchase houses that otherwise would have been out of reach. Also,because it brings different
families together to work on each other’s houses, the program builds and strengthens the ties of
community.
Self-Help works in combination with a grant program to nonprofit organizations and the direct single family
lending program, although other home financing sources can be used. The nonprofits help families become
successful homeowners by providing technical assistance. This includes homeownership education, loan
packaging, and construction supervision.
The Mutual Self-Help Housing program has been in operation since 1971. It is active throughout the
country and helps some 1,500 rural families build their own homes each year. Your USDA Rural
Development local office can tell you if a Self-Help Housing effort is operating in the area in which you wish
to live.
Home Improvement and Repair Assistance
If you’re already a rural homeowner and your house needs repairs, or modifications to make it accessible
to a person with a disability, you may be eligible for home improvement or repair assistance through USDA
Rural Development.
Single-Family Housing Home Improvement Loans (Section 502)
In addition to providing loan funds for the purchase of a house, the Section 502 Single Family Housing
Direct Loan program can help lower income rural homeowners make vital improvements to their homes.
Section 502 loans are available to make substantial home repairs when other loan options are not
available.
Home Repair Loan and Grant Programs (Section 504)
For families and individuals with very low incomes, Rural Development makes loans for repairs, to improve
or modernize a home, make it safer or more sanitary, or to remove health hazards. For seniors 62 and
older who cannot afford a loan, grant funds are available for these repairs.
The most common types of repairs financed by the Section 504 program include fixing or replacing roofs,
modernizing heating and wiring systems, and making houses accessible to people with disabilities.
You can also apply for funds to install insulation and storm windows, put in a septic system, and install or
repair a bathroom.
The maximum amount you can borrow under the Section 504 Home Repair Loan program is $20,000. The
interest rate for these loans is 1 percent and is limited to very-low-income, rural residents whose incomes
fall below 50 percent of the area's median income.
For very-low-income homeowners 62 years old and older who can't afford to borrow the full amount
required to make necessary repairs, grant funds are available. Grants may be used to remove health or
safety hazards or to remodel dwellings or make them accessible to household members with disabilities.
Grants are limited to $7,500. They are often combined with loans to increase the amount available for
repairs.
Housing Preservation Grant Program
Under this program, nonprofit organizations, public bodies, and Native American tribes renovate
deteriorating homes and rental properties using grants from Rural Development. Grant funds are used to
repair and bring up to code properties occupied by families with low incomes. Your USDA Rural
Development local office can tell you if a Housing Preservation initiative is operating in your area.
The USDA is here to help you.
If you want to buy an affordable house in a rural area, USDA Rural Development employees want to help.
They can tell you about the various programs available through Rural Development and assist you in
applying for them.
Further information on all of USDA's housing programs is available at the USDA Rural Development office
serving your area. These are usually listed in telephone books under "United States Government,
Department of Agriculture." Information is also available on the USDA Rural Development website at http:
//www.rurdev.usda.gov/Housing Programs/index.html, or contact the Housing Programs at the following
address:
Housing Programs
USDA Rural Development
STOP 0701
1400 Independence Avenue, SW
Washington, DC 20515-0701
To be connected to your Rural Development state office, dial (202) 720-4323 and press 1.
Under the Guaranteed Loan program, the Housing and Community Facilities Programs guarantees loans
made by private sector lenders. (A loan guarantee through HCFP means that, should the individual
borrower default on the loan, HCFP will pay the private financier for the loan.) The individual works with
the private lender and makes his or her payments to that lender.
Under the terms of the program, an individual or family may borrow up to 100% of the appraised value of
the home, which eliminates the need for a down payment. Since a common barrier to owning a home for
many low-income people is the lack of funds to make a down payment, the availability of the loan
guarantees from HCFP makes the reality of owning a home available to a much larger percentage of
Americans.
A Place to Live
Buying on Repairing a Home With Help From USDA's Single Family Housing Direct Loan Program
A Place to Live
Owning your own home is part of the American dream. But in rural areas, financing a home can be difficult.
Jobs often pay less than in more populated areas, and a large proportion of people are self-employed,
making it harder for them to obtain credit. Also, rural lenders generally require a large downpayment, and,
often, interest rates and construction costs are higher than in urban areas.
However, if you want to own a home in a rural area, U.S.Department of Agriculture (USDA) Rural
Development may be able to help.
USDA has been helping rural Americans become homeowners since 1949. It has invested well over $54
billion in helping people purchase or build their own homes. USDA Rural Development's Direct
Homeownership Loan program offers home loans to lower income individuals who are unable to obtain
credit elsewhere,with interest rates as low as 1 percent -- and no downpayment.
Buying a House With Help from USDA
Section 502 Direct Loan Program
The Direct Homeownership Loan program is available to lower income individuals and families who wish to
live in rural areas or rural cities or towns. Under the program, individuals or families receive a loan directly
from Rural Development. Payments are based on income, with no downpayment required. You must be
unable to obtain a homeownership loan from a bank or other conventional sources.
Loans under the Direct Homeownership Loan program are made to families with incomes below 80 percent
of the median income level of the communities in which they intend to live.
Almost half of these loans are made to families and individuals with very low incomes. Since Rural
Development is able to make loans to those who will not qualify for a conventional loan, the direct loan
program enables many people to buy homes who otherwise could not do so. Even if you have minor credit
problems, Rural Development may still be able to work with you.
Loans under this program may be made for the purchase of an existing home or to build a new home.
Other uses include purchasing and preparing sites -- including providing water and sewage facilities -- and
repairing or renovating a house being purchased.
No Downpayment
There is no required downpayment for a USDA direct housing loan. The standard term for a loan is 33
years for most borrowers. However, 38-year loans are available to those who cannot afford a 33-year
loan.
The interest rate for direct housing loans is set by Rural Development, and is based on your current
income. Your local USDA Rural Development office can estimate the interest rate you would pay.
For further information on the Single Family Housing Direct Loan program, and to learn if you are eligible
for assistance, contact the USDA Rural Development local office serving your area. Rural Development
employees will help you complete an application.
Guaranteed Loans
If your income is too high to qualify for a direct housing loan, you may qualify for a guaranteed loan. These
are loans made by other lenders, such as banks or credit unions, and are guaranteed by Rural
Development. This allows other lenders to make loans to people they would not otherwise be able to
serve. Guaranteed housing loans are available to applicants whose incomes are below 115 percent of the
median area income. Your Rural Development local office can give you more details about this program.
The Mutual Self-Help Housing Program
Many rural families have achieved the American dream of owning their own homes through USDA's Mutual
Self-Help Housing program.
Under this program, families 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 -- allowing many
people to purchase houses that otherwise would have been out of reach. Also,because it brings different
families together to work on each other’s houses, the program builds and strengthens the ties of
community.
Self-Help works in combination with a grant program to nonprofit organizations and the direct single family
lending program, although other home financing sources can be used. The nonprofits help families become
successful homeowners by providing technical assistance. This includes homeownership education, loan
packaging, and construction supervision.
The Mutual Self-Help Housing program has been in operation since 1971. It is active throughout the
country and helps some 1,500 rural families build their own homes each year. Your USDA Rural
Development local office can tell you if a Self-Help Housing effort is operating in the area in which you wish
to live.
Home Improvement and Repair Assistance
If you’re already a rural homeowner and your house needs repairs, or modifications to make it accessible
to a person with a disability, you may be eligible for home improvement or repair assistance through USDA
Rural Development.
Single-Family Housing Home Improvement Loans (Section 502)
In addition to providing loan funds for the purchase of a house, the Section 502 Single Family Housing
Direct Loan program can help lower income rural homeowners make vital improvements to their homes.
Section 502 loans are available to make substantial home repairs when other loan options are not
available.
Home Repair Loan and Grant Programs (Section 504)
For families and individuals with very low incomes, Rural Development makes loans for repairs, to improve
or modernize a home, make it safer or more sanitary, or to remove health hazards. For seniors 62 and
older who cannot afford a loan, grant funds are available for these repairs.
The most common types of repairs financed by the Section 504 program include fixing or replacing roofs,
modernizing heating and wiring systems, and making houses accessible to people with disabilities.
You can also apply for funds to install insulation and storm windows, put in a septic system, and install or
repair a bathroom.
The maximum amount you can borrow under the Section 504 Home Repair Loan program is $20,000. The
interest rate for these loans is 1 percent and is limited to very-low-income, rural residents whose incomes
fall below 50 percent of the area's median income.
For very-low-income homeowners 62 years old and older who can't afford to borrow the full amount
required to make necessary repairs, grant funds are available. Grants may be used to remove health or
safety hazards or to remodel dwellings or make them accessible to household members with disabilities.
Grants are limited to $7,500. They are often combined with loans to increase the amount available for
repairs.
Housing Preservation Grant Program
Under this program, nonprofit organizations, public bodies, and Native American tribes renovate
deteriorating homes and rental properties using grants from Rural Development. Grant funds are used to
repair and bring up to code properties occupied by families with low incomes. Your USDA Rural
Development local office can tell you if a Housing Preservation initiative is operating in your area.
The USDA is here to help you.
If you want to buy an affordable house in a rural area, USDA Rural Development employees want to help.
They can tell you about the various programs available through Rural Development and assist you in
applying for them.
Further information on all of USDA's housing programs is available at the USDA Rural Development office
serving your area. These are usually listed in telephone books under "United States Government,
Department of Agriculture." Information is also available on the USDA Rural Development website at http:
//www.rurdev.usda.gov/Housing Programs/index.html, or contact the Housing Programs at the following
address:
Housing Programs
USDA Rural Development
STOP 0701
1400 Independence Avenue, SW
Washington, DC 20515-0701
To be connected to your Rural Development state office, dial (202) 720-4323 and press 1.
What is a USDA home loan?
A USDA Guaranteed Loan is Government insured 100%
purchase loan. These Loans are only offered in rural
area's and serviced by direct lenders that meet federal
guideline's.
A USDA Guaranteed Loan is Government insured 100%
purchase loan. These Loans are only offered in rural
area's and serviced by direct lenders that meet federal
guideline's.
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