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USDA Rural Development
502 Direct Loan Program
RUPCO is an approved packager of the USDA Rural Development Section 502 Direct Loan Program. This loan product helps eligible low- and very-low-income applicants obtain decent, safe, and sanitary housing in eligible rural areas through interest rate subsidies allowing higher loan amounts or better affordability. This loan provides 100% financing and can include closing costs and home repair costs worked into the loan if the applicant is eligible. Interest subsidy assistance and eligible loan amount vary based on income, debt, and other factors. Ask a counselor about this loan product or learn more below.
Eligible Properties
- Generally, homes with 2,000 square feet or less
- Does not have market value above the applicable area loan limit
- Does not have in-ground swimming pools
- Property size below 5 acres and not sub-dividable
- Not designed for income-producing activities
Eligible Applicants
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. Loan applicants must demonstrate a willingness and ability to repay debt. Credit history and additional requirements apply.
Singles, family households, and unrelated partners may apply.
Applicants must
• Meet income eligibility for a direct loan
• Be unable to obtain a loan from other resources on terms and conditions that can reasonably be met
• Agree to occupy the property as primary residence
• Have the legal capacity to incur a loan obligation
• Meet citizenship or eligible noncitizen requirements
• Not be suspended or debarred from participating in a federal program
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 when the borrower is no longer living in the dwelling.
Questions regarding additional requirements can be directed to a counselor or found on the USDA website.
Frequently Asked Questions
- WHAT IS AN ELIGIBLE AREA?
Generally, rural areas with a population of less than 35,000 are eligible. Visit the USDA Income and Property Eligibility website for complete details.
- HOW MANY FUNDS CAN BE USED?
Loan funds may be used to assist low-income individuals or households with closing costs. Funds can be used to build, repair, renovate or relocate a home or purchase and prepare sites, including water and sewage facilities. The funding amount for the total loan is based on the ability to pay. Repair loans are provided to meet habitability conditions and eliminate health and safety issues and loan approval. A USDA Rural Development representative will inspect the house, provide an NYS-certified home inspection report, and indicate other testing required before approving the home.
- HOW MUCH CAN 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’s Loan Limits for the county in which the property is located.
- WHAT ARE THE INTEREST RATE AND PAYBACK PERIOD?
The interest rate is fixed and based on the market rates at loan approval or closing, whichever is lower. When modified by payment assistance, the interest rate can be as low as 1% with up to a 33-year payback period. A 38-year payback period may be applied for very low-income applicants who can’t afford the 33-year loan term. Each year USDA will require applicants to submit income to adjust subsidy to apply to payment for that year; otherwise, it will be reset at the fixed original base amount.
- HOW MUCH DOWN PAYMENT IS REQUIRED?
No down payment is typically required. Applicants with assets higher than the asset limits may be required to cover costs above their approved loan amount.
- IS THERE A DEADLINE TO APPLY?
Applications for this program are accepted through the local Rural Development office year-round.
- HOW LONG DOES AN APPLICATION TAKE?
The time to process an application may vary depending on funding availability, program demand in the area where the applicant is interested in buying, and the 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.
- WHY DOES USDA RURAL DEVELOPMENT DO THIS?
USDA Rural Development’s Section 502 Direct Loan Program provides a path to homeownership for low- and very-low-income families living in rural areas and families who truly have no other way to make affordable homeownership a reality. Providing these affordable homeownership opportunities promotes prosperity, creates thriving communities, and improves residents’ quality of life in rural areas.
