USDA Mortgage 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.

Eligibility: Applicants for loans may have an income of up to 115% of the median income
for the area. Area income limits for this program are here. 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. New Manufactured
housing must be permanently installed and meet the HUD Manufactured Housing Construction
and Safety Standards and HCFP thermal and site standards. Existing manufactured housing
will not be guaranteed unless it is already financed with an HCFP direct or guaranteed loan or
it is Real Estate Owned (REO) formerly secured by an HCFP direct or guaranteed loan.

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

USDA Mortgage Loans