APlace To Live

Buying or Repairing a Home With

Help From USDA'sSingle Family

Housing Direct Loan Programs

USDA Rural Development

Rural Housing Service
A Place To Live

Owning your own home is part of the American

dream. But in rural areas, financing a home can be difficult. Jobs often pay less than in more populated

areas, and a large proportion of people are selfemployed, making it harder for them to obtain credit.

Also, rural lenders generally require a large downpayment, and, often, interest rates and construction costs

are higher than in urban areas.

However, if you want to own a home in a rural area,

U.S. Department of Agriculture (USDA) Rural

Development may be able to help.

USDAhas been helping rural Americans become

homeowners since 1949. It has invested well over $54

billion in helping people purchase or build their own

homes. USDARural Development's Direct

Homeownership Loan program offers home loans to

lower income individuals who are unable to obtain

credit elsewhere, with interest rates as low as 1 percent

– and no downpayment. 
Buying a House 

With Help from USDA

Section 502 Direct Loan Program

The Direct Homeownership Loan program is available to lower income individuals and families who

wish to live in rural areas or rural cities or towns.

Under the program, individuals or families receive a

loan directly from Rural Development. Payments are

based on income, with no downpayment required.

You must be unable to obtain a homeownership loan

from a bank or other conventional sources.

Loans under the Direct Homeownership Loan program are made to families with incomes below 80

percent of the median income level of the communities in which they intend to live. 

Almost half of these loans are made to families and

individuals with very low incomes. Since Rural

Development is able to make loans to those who will

not qualify for a conventional loan, the direct loan

program enables many people to buy homes who 

otherwise could not do so. Even if you have minor

credit problems, Rural Development may still be able

to work with you. 

Loans under this program may be made for the purchase of an existing home or to build a new home. 

Other uses include purchasing and preparing sites --

including providing water and sewage facilities -- and

repairing or renovating a house being purchased.
No Downpayment 

There is no required downpayment for a USDA

direct housing loan. The standard term for a loan is 33

years for most borrowers. However, 38-year loans are

available to those who cannot afford a 33-year loan.

The interest rate for direct housing loans is set by

Rural Development, and is based on your current

income. Your local

USDARural

Development office

can estimate the interest rate you would pay.

For further information on the Single

Family Housing Direct

Loan program, and to

learn if you are eligible

for assistance, contact

the USDARural

Development local

office serving your area. Rural Development employees will help you complete an application.

Guaranteed Loans

If your income is too high to qualify for a

direct housing loan, you may qualify for a

guaranteed loan. These are loans made by

other lenders, such as banks or credit

unions, and are guaranteed by Rural

Development. This allows other lenders to

make loans to people they would not otherwise be able to serve. Guaranteed housing

loans are available to applicants whose

incomes are below 115 percent of the median area income. Your Rural Development

local office can give you more details about

this program.
The Mutual Self-Help 

Housing Program

Many rural families have

achieved the American dream of

owning their own homes through

USDA's Mutual Self-Help

Housing program. 

Under this program, families

provide a substantial portion of

the labor involved in building their own homes. This

"sweat equity" contribution reduces the total cost of

purchasing a home – allowing many people to purchase houses that otherwise would have been out of

reach. Also, because it brings different families together to work on each other’s houses, the program builds

and strengthens the ties of community.

Self-Help works in combination with a grant program to nonprofit organizations and the direct single

family lending program, although other home financing sources can be used. The nonprofits help familes

become successful homeowners by providing technical assistance. This includes homeownership education, loan packaging, and construction supervision.

The Mutual Self-Help Housing program has been in

operation since 1971. It is active throughout the country and helps some 1,500 rural families build their own

homes each year. Your USDARural Development

local office can tell you if a Self-Help Housing effort is

operating in the area in which you wish to live.
Home Improvement 

and Repair Assistance

If you're already a rural homeowner and your house

needs repairs, or modifications to make it accessible to

a person with a disability, you may be eligible for

home improvement or repair assistance through

USDARural Development.

Single-Family Housing Home

Improvement Loans (Section 502)

In addition to providing loan funds for the purchase

of a house, the Section 502 Single Family Housing

Direct Loan program can help lower income rural

homeowners make vital improvements to their homes.

Section 502 loans are available to make substantial

home repairs when other loan options are not available.

Home Repair Loan and Grant 

Programs (Section 504)

For families and individuals with very low incomes,

Rural Development makes loans for repairs, to

improve or modernize a home, make it safer or more

sanitary, or to remove health hazards. For seniors 62

and older who cannot afford a loan, grant funds are

available for these repairs. 

The most common types of repairs financed by the

Section 504 program include fixing or replacing roofs,
modernizing heating and wiring systems, and making

houses accessible to people with disabilities. 

You can also apply for funds to install insulation and

storm windows, put in a septic system, and install or

repair a bathroom.

The maximum amount you can borrow under the

Section 504 Home Repair Loan program is $20,000.

The interest rate for these loans is 1 percent and is limited to very-low-income, rural residents whose

incomes fall below 50 percent of the area's median

income.

For very-low-income homeowners 62 years old and

older who can't afford to borrow the full amount

required to make necessary repairs, grant funds are

available. Grants may be used to remove health or

safety hazards or to remodel dwellings to make them

accessible to household members with disabilities.

Grants are limited to $7,500. They are often combined

with loans to increase the amount available for repairs.

Housing Preservation Grant Program

Under this program, nonprofit organizations, public

bodies, and Native American tribes renovate deteriorating homes and rental properties using grants from

Rural Development. Grant funds are used to repair

and bring up to code properties occupied by families

with low incomes. Your USDARural Development

local office can tell you if a Housing Preservation initiative is operating in your area.
We're Here To Help

If you want to buy an affordable house in a rural

area, USDARural Development employees want to

help. They can tell you about the various programs

available through Rural Development and assist you

in applying for them. 

Further information on all of USDA's housing programs is available at the USDARural Development

office serving your area. These are usually listed in

telephone books under "United States Government,

Department of Agriculture." Information is also available on the USDARural Development website at

http://www.rurdev.usda.gov/rhs/index.html, or contact

the Rural Housing Service at the following address:

Rural Housing Service 

USDARural Development

STOP 0701

1400 Independence Avenue, SW

Washington, DC 20515-0701

To be connected to your Rural Development state

office, dial (202) 720-4323 and press 1.

September 2000

PA-1674 

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin,

sex, religion, age, disability, political beliefs, sexual orientation or marital or family status. (Not all

prohibited bases apply to all programs). Persons

with disabilities who require alternative means for

communication of program information (Braille,

large print, audio tape, etc.) should contact

USDA's TARGET Center at 202-720-2600 (voice

and TDD).

To file a complaint of discrimination, write: USDA,

Director, Office of Civil Rights, Room 326-W,

Whitten Building, 14th and Independence

Avenue, SW, Washington D. C. 20250-9410 or

call 202-720-5964 (voice and TDD). USDA is an

equal opportunity provider and employer.