This program assists low- and very-low-income applicants obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. The amount of assistance is determined by the adjusted family income.

A number of factors are considered when determining an applicant’s eligibility for Single Family Direct Home Loans. At a minimum, applicants interested in obtaining a direct loan must have an adjusted income that is at or below the applicable low-income limit for the area where they wish to buy a house and they must demonstrate a willingness and ability to repay debt. Applicants must: Be without decent, safe and sanitary housing Be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet Agree to occupy the property as your primary residence Have the legal capacity to incur a loan obligation Meet citizenship or eligible noncitizen requirements Not be suspended or debarred from participation in federal programs Properties financed with direct loan funds must: Not have market value in excess of the applicable area loan limit Not be designed for income producing activities Borrowers are required to repay all or a portion of the payment subsidy received over the life of the loan when the title to the property transfers or the borrower is no longer living in the dwelling.

Properties must be located in an eligible rural area.

The maximum loan amount an applicant qualifies for depends on their ability to repay a loan. Rural Development considers various factors, such as income, debts, assets and the amount of payment assistance the applicants is eligible to receive. Regardless of repayment ability applicants can never borrow more than the area loan limit (plus certain other costs eligible to be finance) in the county in which the property is located.

The interest rate is fixed and based on current market rates at loan approval or loan closing, whichever is lower Interest rate when modified by payment assistance, can be as low as 1% The payback period is 33 years- 38-year payback period for very low income applicants who can’t afford the 33 year loan term

No down payment is typically required. Applicants with assets higher than the asset limits may be required to use a portion of those assets.

Processing times vary depending on funding availability and program demand in the area in which an applicant is interested in buying and completeness of the application package.

The Housing Act of 1949 as amended, 7 CFR, Part 3550, HB-1-3550 - Direct Single Family Housing Loans Field Office Handbook

USDA Rural Development’s Section 502 Direct Loan Program provides a path to homeownership for low- and very-low-income families living in rural areas, and families who truly have no other way to make affordable homeownership a reality. Providing these affordable homeownership opportunities promotes prosperity, which in turn creates thriving communities and improves the quality of life in rural areas.