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Rural housing loans are offered by the USDA, Office of
Rural Development. These Section 502 loans are for people
on rural areas who need access to affordable capital. The
RHS (Rural Housing Service) Community Facilities program
works primarily with low-income families offering favorable
lending rates.
The RHS service not only provides rural housing loans for
families but also provides needed capital for services such
as police, fire department, rescue squads, schools, health
care facilities, elderly care and child care facilities
in outlying areas. Some other uses for the RHS program include
funding for community centers, group homes, vocational and
medical rehabilitation centers, cultural facilities, and
public transportation.
For those simply in need of low-cost housing loans, the
502 rural housing loans can be used to help build, repair,
renovate or relocate a home. The 502 rural housing loan
can also be used to prepare a site for housing, providing
water and sewage facilities.
For those families to qualify for rural housing loans they
must:
" Willing to buy a home in a qualified rural area
" Be able to afford the mortgage payments including
taxes and insurance
" Have reasonable credit histories
Typical loans are for 30 years and require no down payment.
The approved lender sets the promissory note interest rate.
It is the lender's responsibility to also determine repayment
feasibility, using ratios of repayment (gross) income to
PITI and to total family debt.
The Section 502 Program states, "Housing must be modest
in size, design, and cost … new manufactured housing
must be permanently installed and meet the HUD Manufactured
Housing Construction and Safety Standards and RHS thermal
and site standards."
Rural Housing Direct Loans (502 Direct Loans) are funded
directly by the Government rather than through an approved
lending institution. Rural Housing Direct Loans are available
to those with low and very low incomes (below 50-percent
of the area median income). Elderly and disabled persons
may have incomes up to 80 percent of area median income
when applying. These loans may be used to purchase a site
on which to construct a home or to purchase a home in a
rural area.
These rural housing loans are available in 100-percent
financing and based upon the household's adjusted income.
Applicants must have low income but are able to pay their
mortgages with mortgage payments typically based upon 22
to 26-percent of an applicant's income. Loan terms are typically
between 30 - 38 years.
Other loans available from the RHS
Community Facilities program include Housing Repair
and Rehabilitation Loan, Housing Repair and Rehabilitation
Grant, Rural Housing Site Loans, Mutual Self Help Loans,
Rural Rental Housing and Rental Assistance programs.
If you live in a rural area and need a loan, it is wise
to check out what the USDA has to offer. You may be surprised
at how cheaply you can get into a home in your area.
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