Together, America Prospers

Rural Home Loans (Direct Program)

What does this 

program do?

Also known as the Section 

502 Direct Loan Program, 

this program helps low- and 

very-low-income applicants 

buy decent, safe, and sanitary 

housing in eligible rural 

areas by providing payment 

assistance to increase their 

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 can apply for this program? 

A number of factors are considered 

when determining eligibility for 

Single Family Direct Home Loans. At 

a minimum, applicants must have an 

adjusted income that is at or below 

the applicable low-income limit for the 

area in which they wish to buy a house 

(an income limit map is available at 

this link: https://go.usa.gov/xzcfb). They 

must also demonstrate a willingness 

and ability to repay debt.

Applicants must:

• Be without decent, safe, and 

sanitary housing

• Be unable to obtain a loan from 

other resources on terms and 

conditions that can reasonably be 

expected to be met

• Agree to occupy the property as 

their principal residence

• Have the legal capacity to incur a 

loan obligation

• Meet citizenship or eligible 

noncitizen requirements

• Not be suspended or debarred from 

participation in federal programs

Properties financed with direct loan 

funds must:

• Be modest in size for the area

• Not have market value in excess of 

the applicable area loan limit

• Not be designed for incomeproducing activities

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. You can 

visit the USDA Income and Property 

Eligibility website (available at this link: 

https://go.usa.gov/xzcdM) for complete 

details. Or, contact your local Rural 

Development office (a map is available 

at this link: https://www.rd.usda.gov/

browse-state) to learn more. 

What is an eligible area?

Properties must be located in an 

eligible rural area. Visit the USDA 

Income and Property Eligibility 

website (available at this link: 

https://go.usa.gov/xzcdM) for details.

How can funds be used?

Loan funds can be used to help 

low-income people or households 

buy 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 waste treatment equipment.

How much can I borrow?

The maximum loan amount an 

applicant qualifies for depends on 

their ability to repay a loan. Rural 

Development considers various factors, 

such as income, debts, assets, and 

the amount of payment assistance 

the applicant is eligible to receive. 

Regardless of repayment ability, 

applicants can never borrow more 

than the area loan limit (plus certain 

other costs eligible to be financed) 

in the county in which the property is 

located (information is available at this 

link: https://go.usa.gov/xzcGB - PDF)
Rural Home Loans (Direct Program)

What is the interest rate and 

payback period?

• The interest rate is fixed, and based 

on current market rates at loan 

approval or closing, whichever is lower.

• When modified by payment 

assistance, the monthly mortgage 

payment can be reduced to a low as 

an effective 1 percent interest rate.

• The payback period is 33 years 

(38 years for very-low-income 

applicants who can’t afford a 

33-year loan term).

How much down payment 

is required?

Down payments are not typically 

required, but applicants with assets 

higher than the asset limit can be 

required to use a portion of those assets. 

Is there a deadline to apply?

Applications are accepted year-round 

through your local Rural Development 

office. A map is available at this link: 

https://www.rd.usda.gov/browse-state.

How long does an application take? 

Processing times vary depending 

on funding availability and program 

demand in the area in which the 

applicant is interested in buying. 

Processing times also are dependent 

upon the completeness of the 

applicant’s package.

What governs this program?

• The Housing Act of 1949 as amended; 

7 CFR, Part 3550 (available at this 

link: https://go.usa.gov/xzcvG)

• HB-1-3550 - Direct Single Family 

Housing Program Field Office 

Handbook (available at this link: 

https://go.usa.gov/xzcvM - PDF)

NOTE: Because citations and other information are subject to change, always consult the 

program instructions listed in the section above titled “What Governs This Program?” 

You can also contact your local office for assistance (a list is available at this link: 

https://go.usa.gov/xzjP7). You will find additional forms, resources, and program 

information at rd.usda.gov. USDA is an equal opportunity provider, employer, and lender.

Last Updated March 2022