Very Low to Moderate Income Housing Loans

To assist very low, low-income, and moderate-income households to obtain modest, decent, safe, and sanitary housing for use as a permanent residence in rural areas.

Agency - Department of Agriculture

Established in 1862, the Department of Agriculture serves all Americans through anti-hunger efforts, stewardship of nearly 200 million acres of national forest and rangelands, and through product safety and conservation efforts. The USDA opens markets for American farmers and ranchers and provides food for needy people around the world.

Office - Consult your local telephone 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

Relevant Nonprofit Program Categories

Program Accomplishments

Maximum loan restricted by area loan limits. In FY 2007, the average direct loan was $108,663, while the average guaranteed loan for home purchase was $102,649. Loans in high cost areas may be higher.

Uses and Use Restrictions

Direct and guaranteed loans may be used to buy, build, or improve the applicant's permanent residence.

New manufactured homes may be financed when they are on a permanent site, purchased from an approved dealer or contractor, and meet certain other requirements.

Under very limited circumstances, homes may be re-financed with direct loans.

Dwellings financed must be modest, decent, safe, and sanitary.

The value of a home financed with a direct loan may not exceed the area limit.

The property must be located in an eligible rural area.

Assistance is available in the States, the Commonwealth of Puerto Rico, the U. S. Virgin Islands, Guam, American Samoa, the Commonwealth of Northern Mariana's, and the Trust Territories of the Pacific Islands.

Direct loans are made at the interest rate specified in RD Instruction 440.1, Exhibit B (available in any Rural Development local office), and are repaid over 33 years or 38 years for applicants whose adjusted annual income does not exceed 60 percent of the area median income, if necessary to show repayment ability.

Payment assistance is granted on direct loans to reduce the installment to an "effective interest rate" as low as one percent, depending on adjusted family income.

Payment assistance is subject to recapture by the government when the customer no longer resides in the dwelling.

There is no funding provided for deferred mortgage authority or loans for deferred mortgage assumptions.

Guaranteed loans may be made to refinance either existing RD Guaranteed Housing loans or RHS Section 502 Direct Housing loans.

Guaranteed loans are amortized over 30 years.

The interest rate is negotiated with the lender.

Eligibility Requirements

Applicant Eligibility

Applicants must have very low-, low- or moderate incomes.

Very low-income is defined as below 50 percent of the area median income (AMI); low-income is between 50 and 80 percent of AMI; moderate income is below 115 percent of AMI.

Families must be without adequate housing, but able to afford the housing payments, including principal, interest, taxes, and insurance (PITI).

Qualifying repayment ratios are 29 percent for PITI to 41 percent for total debt.

In addition, applicants must be unable to obtain credit elsewhere, yet have an acceptable credit history.

Beneficiary Eligibility

Applicants must meet eligibility requirements.


Applicants may need to submit evidence of inability to obtain credit elsewhere, verification of income, debts, and other information on the application; plans, specifications, and cost estimates. This program is excluded from coverage under OMB Circular No. A-87.

Aplication and Award Process

Preapplication Coordination


This program is excluded from coverage under OMB Circular No.

A-102 and E.O.


Application Procedures

For direct loans, application is made at the Rural Development field office serving the county where the dwelling is or will be located. For guaranteed loans, application is made to a participating private lender. This program is excluded from coverage under OMB Circular No. A-110.

Award Procedures

Rural Development field offices have authority to approve most Direct loan requests. Processing of guaranteed loans varies in each State. Contact your Rural Development State Office, listed in the telephone directory. If no backlog exists, decisions on direct loan applications are made within 30 to 60 days. Requests for guarantee loans are acted upon in 3 days of receipt of the lender's request for guarantee.




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.

Range of Approval/Disapproval Time

For direct loans, from 30 to 60 days subject to availability of funds, from the time the application is filed if no backlog of applications exists. A 'pre-qualification' may be provided to potential direct loan applicants upon call or visit to a Rural Development office, though results are not binding. For guarantees, a decision is required within 3 days of loan package submission by the approved lender.


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.


Applicants may reapply at any time.

Assistance Considerations

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 2,500 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. 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 direct loans far exceed available funding. There is generally a waiting list for direct loan funding.

Post Assistance Requirements


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




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

Financial Information

Account Identification

12-4141-0-3-371; 12-2081-0-1-371.


Direct Loans Initial Obligations FY 07 $1,119,555,000; FY 08 est $1,121,486,000; and FY 09 est not available. Guaranteed Loan Purchases: FY 07 $3,334,132,000; FY 08 est $4,129,225,000; and FY 09 est not available.

Range and Average of Financial Assistance

FY 07 Average: 502 Direct Loans ($108,663); Guaranteed Loans ($102,649). Loans in high cost areas may be higher.

Regulations, Guidelines, and Literature

7 CFR Part 3550 "Direct Single Family Housing Loans and Grants." For guaranteed loans, 1980-D "Subpart D -Rural Housing Loans."

Information Contacts

Regional or Local Office

Consult your local telephone 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 Director Single Family Housing Guaranteed Loan Division, Rural Development (RD), Department of Agriculture, Washington, DC 20250. Telephone: (202) 720-1474 (direct loans); (202) 720-1452 (guaranteed loans).

Criteria for Selecting Proposals

Not applicable.

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