USDA GUARANTEED RURAL HOUSING LOANS

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.  This program is very attractive to buyers as it is 100% financing and it does not limit the amount of reasonable closing costs that the seller can pay.

Eligibility: Applicants for loans may have an income of up to 115% of the median income for the area. The entire household income is annualized to determine the qualifying figure. The income for Jefferson, Orange, and Hardin Counties cannot exceed $73,600 per year.  However, children count as a deduction and the income is reduced by $480 per child.

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.

Terms: Loans are for 30 years.  The promissory note interest rate is set by the lender.

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.

Approval: Rural Development officials have the authority to approve most Section 502 loan guarantee requests.

Cost of the Program

            There is a 2% Guarantee fee paid at the time of closing.  This fee can be financed into the loan above the appraisal amount.  There is no monthly fee or Private Mortgage Insurance cost.

To determine if a property is eligible for this program contact our office we will input the address into the USDA’s approval system.