This program, also known as the “Section 502 Direct Home Loan Program” can help assist low income families obtain housing in eligible rural areas while also providing payment assistance to increase a borrower’s ability to repay the loan. Payment assistance can reduce the mortgage payment for a short extended period of time. The amount of assistance is usually determined by the family’s adjusted income.
Who Can Apply For This Program?
Well there are a number of factors that have to be considered in determining a borrower’s eligibility for a single family direct home loan. Borrowers who are interested in obtaining a direct loan must have an income that is at or below the income median for their specific area or the area in which they wish to buy their home. They must also demonstrate a willingness and ability to repay their loan.
Borrowers interested in this program must adhere to the following requirements:
- Be without safe, sanitary, and decent housing
- Be unable to obtain a loan from other resources
- Agree to live in the home as their primary residence
- Have the legal capacity to obtain a loan obligation
- Meet citizenship requirements
- Not be barred from participation in a federal program
Properties financed with direct loan funds must adhere to the following:
- House must be 1800sqft or less
- Market value lower than the area loan limit
- Does not include an in-ground swimming pool
- Not designed for income producing activities
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Borrowers are required to repay all or a portion of the loan when the title to the property is either transferred or the borrower is no longer living in the home. Borrowers must also meet income eligibility for a direct loan. Rural areas that have a population less than 35k are eligible for a USDA home loan. There is a borrowing limit to the USDA home loan, the maximum loan amount that a borrower qualifies for will depend on the borrower’s ability to repay the loan, but regardless of repayment ability, and a borrower cannot borrow more than their area’s loan limit. Funds from a USDA home loan program can be used to help low income families buy a house, build a new one or renovate their existing home.
Interest Rates and Payback Periods
Fixed interest rates are based on the current market rates at the time of loan approval or loan closing, whichever is lower. Interest rates can be as low as 1%, usually when they are that low, however, it’s because of a modification by payment assistance. USDA loans offer up to 33 years to pay back the loan, and 38 years for extremely low income borrowers who can’t afford the 33 year loan and no down payment is required, however applicants who have more assets than the asset limit persists may be required to use a portion of those assets.
Application Process and Lenders
Applications for a USDA home loan are accepted year round, and the processing time will vary depending on the funding availability and program demand for the area the borrowing is buying in. If you’re ready to take the next step in the USDA home loan process, contact a USDA qualified lender, you can do so by clicking the link below and within minutes you’ll be matched with a qualified lender eager to help you with your USDA home loan program needs, and answer any questions you may have.
