Together, America Prospers

Rural Home Loans (Direct Program)

What does this 

program do? 

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. 

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 meet

• Agree to occupy the property as

your primary 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 have in-ground swimming pools

• Not be designed for income

producing 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. Please contact your 

local RD office to ask for additional 

details about eligibility requirements.

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 maximum loan amount an 

applicant may qualify for will depend 

on the applicant’s repayment ability. 

The applicant’s ability to repay a loan 

considers various factors such as 

income, debts, assets, and the amount 

of payment assistance applicants 

may be eligible to receive. Regardless 

of repayment ability, applicants may 

never borrow more than the area loan 

limit (plus certain costs allowed to be 

financed) for the county in which the 

property is located.
Rural Home Loans (Direct Program)

What is the interest rate and 

payback period? 

• Fixed interest rate based on current

market rates at loan approval or loan

closing, whichever is lower.

• The monthly mortgage payment,

when modified by payment

assistance, may be reduced to as

little as an effective 1% interest rate.

• Up to 33 year payback period - 38 year

payback period for very low income

applicants who can’t afford the 33 year

loan term.

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. 

Is there a deadline to apply? 

Applications for this program are 

accepted through your local RD office

year round.

How long does an application take? 

Processing times vary depending on 

funding availability and program demand 

in the area in which an applicant is 

interested in buying and completeness 

of the application package. 

What governs this program? 

• The Housing Act of 1949 as

amended, 7 CFR, Part 3550

• HB-1-3550 - Direct Single Family

Housing Loans Field Office Handbook

NOTE: Because citations and other information may be subject to change, 

please always consult the program instructions listed in the section above 

titled “What Governs This Program?” You may also contact your local office for 

assistance. You will find additional forms, resources, and program information at 

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

Last Updated January 2020