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Also known as the Section 502 Direct Loan Program, 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.
Who may apply for this program?
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.
Properties financed with direct loan funds must:
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.
Applicants must meet income eligibility for a direct loan.
What is an eligible area?
Generally, rural areas with a population less than 35,000 are eligible. Visit the USDA Income and Property Eligibility website for complete details.
How may funds be used?
Loan funds may be 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.
How much may I borrow?
The amount that can be borrowed depends on many factors. These include the number of people in the household, monthly income, monthly debts, property location, estimated property taxes, and property insurance.
What is the interest rate and payback period?
How much down payment is required?
No down payment is typically required. Applicants with assets higher than the asset limits may be required to use a portion of those assets.
View the USDA's Program Fact Sheet.
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