Very Low to Moderate Income Housing Loans - Direct

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 - See Regional Agency Offices.

Consult your local telephone directory under Department of Agriculture for a Rural Development field office listing or vist the website for a State Office listing.

Program Accomplishments

Not Applicable.

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 RHS Guaranteed Housing loans or Section 502 Direct Housing Loans.

Guaranteed loans are amortized over 30 years.

The interest rate is negotiated with the lender.

In addition to meeting the requirements of this program, applicants must also comply with applicable provisions of the American Recovery and Reinvestment Act of 2009 (ARRA) and any related regulations and guidance.

For non-construction projects, this will include ARRA reporting requirements.

For construction projects, this will include the ARRA reporting requirements as well as the Davis-Bacon Act requirements.

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-incomes 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 principle, 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 subject to environmental review pursuant to the National Environmental Policy Act (NEPA) of 1969.

Environmental impact information is not required for this program.

This program is excluded from coverage under E.O.


Application Procedures

This program is excluded from coverage under OMB Circular No. A-102. This program is excluded from coverage under OMB Circular No. A-110. 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 with a participating private lender.

Award Procedures

Rural Development field offices have authority to approve most direct loan requests. Processing of guaranteed loans varies in each State. Consult your local telephone directory under U.S. Department of Agriculture for a Rural Development field office listing or visit the website for a State Office listing.


Not Applicable.


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. American Recovery and Reinvestment Act of 2009, Public Law 111-5.

Range of Approval/Disapproval Time

If no backlog exists, decisions on direct loan applications are made within 30 to 60 days. A "prequalification" may be provided to potential direct loan applicants upon call or visit to a Rural Development office, though results are not binding. Requests for guaranteed loans are acted upon within three days of receipt of the lender"s request for guarantee.


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 found at 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 the 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 statutory formula.
Matching Requirements: This program has no matching requirements. 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.
This program does not have MOE requirements.

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. Method of awarding/releasing assistance: quarterly.

Post Assistance Requirements


No program reports are required.

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

No progress reports are required.

No expenditure reports are required.

No performance monitoring is required.


No audits are required for this program.


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) FY 09 $267,124,146; FY 10 est $1,000,000,000; FY 11 est not reported. (Guaranteed/Insured Loans) FY 09 $3,352,228,000; FY 10 est not reported.; FY 11 est not reported.

Range and Average of Financial Assistance

FY09Average: 502 Direct Loans ($131,588). Guaranteed Loans ($109,807). Loans in high cost areas may be higher.

Regulations, Guidelines, and Literature

Direct Loans -- 7 CFR Part 3550, Direct Single Family Housing Loans and Grants. Guaranteed Loans -- 7 CFR Part 1980-D, Rural Housing Loans.

Information Contacts

Regional or Local Office

See Regional Agency Offices. Consult your local telephone directory under Department of Agriculture for a Rural Development field office listing or vist the website for a State Office listing.

Headquarters Office

Director, Single Family Housing Direct Loan Division; Director, Single Family Housing Guaranteed Loan Division USDA, Rural Development, 1400 Independence Avenue, S.W., Washington, District of Columbia 20250-0787 Phone: (202) 720-1474; (202) 720-1452.

Criteria for Selecting Proposals

Not Applicable.

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