Catalog of Federal Domestic Assistance

Program Descriptions


10.410:  Very Low to Moderate Income Housing Loans

Popular Name:  Section 502 Rural Housing Loans

Objectives:  To assist very low and low-income families through direct loans to buy, build, rehabilitate, or improve and to provide the customer with modest, decent, safe, and sanitary dwellings and related facilities as a permanent residence in rural areas. Subsidized funds are available on direct loans only for low and very low-income applicants. Nonsubsidized funds (loan making) are available for very low and low-income applicants who are otherwise eligible for subsidy, but at the present time, the subsidy is not needed. Loan guarantees are also available to assist low and moderate income rural families in home acquisition.



Applicant Eligibility:  Applicants must be without adequate resources to obtain housing, or related facilities. The applicants must be unable to secure the necessary credit from other sources at prevailing terms and conditions for residential type financing; be a natural person (individual) who resides as a citizen in the United States or its Territories after having been legally admitted for permanent residence or on indefinite parole; have adequate and dependable available income to meet family living expenses, including taxes, insurance and maintenance, and repayments on debts including the proposed loan. For direct loans, applicants must be eligible for payment assistance and income may not exceed the low-income limits set forth in RD Instructions. The income limits are according to the size of household as is established by the Department of Housing and Urban Development (HUD) for the county or MSA where the property is or will be located. For a guaranteed loan the applicant's income may not exceed the moderate income limit which is generally 115 percent of the median income for the area.

Beneficiary Eligibility:  Applicants and borrowers are the direct beneficiaries of the program and must meet applicant eligibility requirements.

Credentials/Documentation:  Applicants may need to submit evidence of inability to obtain credit elsewhere, verification of income and debts, plans, specifications, and cost estimates. This program is excluded from coverage under OMB Circular No. A-87.


Preapplication Coordination:  None. This program is excluded from coverage under OMB Circular No. A-102 and E.O. 12372.

Application Procedure:  For direct loans, applicants must file loan applications at the Rural Development field office serving the county where the dwelling is or will be located. For guaranteed loans, applicants must contact a local lender. This program is excluded from coverage under OMB Circular No. A-110.

Award Procedure:  Delegated to Community Development Manager.

Deadlines:  None.

Range of Approval/Disapproval Time:  From 30 to 60 days subject to availability of funds, from the time the application is filed if no backlog of applications exists.

Appeals:  Agency regulations providing customers with the rights for an informal review, mediation or alternative dispute resolution (ADR), or appeal to the National Appeals Division (NAD) are contained in 7 CFR Part 3550. NAD regulations are found at 7 CFR Part 11. Requests for an informal review, mediation and ADR must be received within 30 days from the date of the adverse decision. Requests for an appeal to NAD must be received within 30 days of receipt of the adverse decision.

Renewals:  Applicants may reapply at any time.

Criteria for Selecting Proposals:  Not applicable.

Examples of Funded Projects:  Not applicable.

Range and Average of Financial Assistance:  From $1,000 to $105,000; an average of $68,168 for new construction, and $48,692 for existing cost. Loans in high cost areas may be higher.


  • 10.405 Farm Labor Housing Loans and Grants;
  • 10.411 Rural Housing Site Loans;
  • 10.417 Very Low-Income Housing Repair Loans and Grants;
  • 10.420 Rural Self-Help Housing Technical Assistance.


In fiscal year 1999, 15,797 new direct loans and 39,752 guaranteed loans were made.



Type of Assistance:  Direct Loans; Guaranteed/Insured Loans.

Obligations:  (Direct Loans) FY 99 $964,587; FY 00 est $1,100,000; and FY 01 est $1,300,000 (Guaranteed loans) FY 99 $2,976,993; FY 00 est $3,200,000,000; and FY 01 est $3,700,000,000.

Budget Account Number:  12-4141-0-3-371; 12-2081-0-1-371.

Authorization:  Housing Act of 1949, Title V, Section 502, as amended, Public Law 89-117, 42 U.S.C. 1471 et seq.; Public Law 92-310, 42 U.S.C. 1480, 42 U.S.C. 1472; Public Law 98-51; Public Law 100-233; Amendment of Consolidated Farm and Rural Development Act of 1987, Section 601.

Regulations, Guidelines, and Literature:  7 CFR 1944.1-1944.50; Home Ownership, PA-977, no charge; 7 CFR Part 3550 "Direct Single Family Housing Loans and Grants," (approximate cost $5.70). For guaranteed loans, 1980-D "Subpart D - Rural Housing Loans," (App. cost $8.00).


Regional or Local Office:  Consult your local phone directory under United States Department of Agriculture for Rural Development field office number. If no listing, contact appropriate Rural Development State Office listed in Appendix IV of the Catalog or on the internet at

Headquarters Office:  Director, Single Family Housing Direct Loan Division or Direct Single Family Housing Guaranteed Loan Division, Rural Housing Service (RHS), Department of Agriculture, Washington, DC 20250. Phone: (202) 720-1474 (direct loans); (202) 720-1452 (guaranteed loans). Use the same number for FTS. (Home Page)

(See Appendix IV for more contact info.)


Formula and Matching Requirements:  This program has no matching requirements. This program has no statutory formula. A basic formula is used to allocate program funds to various States. The criteria used in the basic formula include the States percentage of the National: Number of rural occupied substandard units, rural population, rural population in places of less than 2500 population, number of rural households between 50 and 80 percent of the area median income, and number of rural households below 50 percent of the area median income. The data source for each of these criteria is based on the latest census data available.

Length and Time Phasing of Assistance:  This assistance is available throughout the year by means of quarterly allocations of funds to District offices. Funds may be disbursed at loan closing or deposited in a supervised bank account for purchase of a building site, and purchase or repair of a dwelling, or in multiple advances for construction. For guaranteed loans, funds are disbursed after all work is complete. Applications for assistance far exceed available funding. There is generally a waiting list for funding.

Uses and Use Restrictions:  Direct loans may be used for construction, repair or purchase of housing; to provide adequate sewage disposal facilities and/or safe water supply for the applicant's household; for weatherization; to purchase or install essential equipment if the equipment is normally sold with dwellings in the area; to buy a minimum adequate site on which to place a dwelling for the applicant's own use; and under certain conditions to finance a manufactured home and its site. Debts directly related to the house may under certain circumstances be refinanced with direct loans. Dwellings financed must be modest, decent safe and provide sanitary housing. For direct loans, the cost of dwelling financed cannot exceed the maximum dollar limitation established under section 203(b) of the National Housing Act as of September 30, 1998 for the area in which the property is located. For guaranteed loans, there is no loan limit; however, the proposed mortgage must be within qualifying ratios. The property must be located in a place that is rural in character and does not exceed 10,000 population or in certain cases a place whose population exceeds 10,000 but is not in excess of 25,000. Assistance is available in the States, Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, the Commonwealth of Northern Mariana's, and the Trust Territories of the Pacific Islands. Loans are made at the interest rate(s) specified in RD Instruction 440.1, Exhibit B (available in any Rural Development local office) for the type of assistance involved, and are repaid over an amortization period of up to 33 years for regular loans and 38 years for loans to applicants whose adjusted annual income do not exceed 60 percent of the area median income, if necessary to show repayment ability. Payment assistance is granted annually which would reduce the monthly installment on the note to an amount equal to what it would be if the note were amortized to as low as one percent, depending on the loan amount, the size and income of the family. Payment assistance is subject to recapture by the government when the customer no longer resides in the dwelling. The Deferred Mortgage Demonstration Program was available during fiscal years 1991- 1995 however, there has not been funding provided for deferred mortgage authority or loans for deferred mortgage assumptions in four fiscal years. Deferred mortgage payment assistance is available to make home ownership affordable for a greater number of very low-income families who lack repayment for the mortgage when amortized at 1 percent for a 38 year period, or 30 years for a manufactured home. The guaranteed program is an acquisition only program. Guaranteed loans are amortized over 30 years. The interest rate is negotiated with the lender.


Reports:  Borrowers receiving a payment subsidy interest must submit verification of household income annually for recalculation of benefits.

Audits:  None.

Records:  Borrowers are not required to, but should retain copies of loan-related documents.

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Last Updated, November, 2000             Comments or Questions?           ©Grant 2000, All Rights Reserved