Purpose: Section 502 Direct Loans are used to help low-income individuals or households purchase homes in rural areas. All four counties listed are eligible for the USDA 502 Direct Home Loan program. Funds can be used to purchase an existing home or purchase a new home.

Eligibility: Applicants for Direct Loans must have low to very low incomes. Low and very low income is defined by the area median income in which the applicants wish to purchase a home.

                                                                                                                                                                                                                      Low           Very low                                                                   Low           Very Low

   Camden County:   $59,100       $36,950                                    Miller County:   $50,300       $31,450

  Laclede County:     $50,800       $31,750                                    Morgan County:$50,300       $31,450

   (The above income dollar amounts are based on a 38-year term loan amount for one to four person households.)

 

• Unable to obtain a standard/traditional mortgage residential home loan.

• As primary residence only, not as a second home or use the home to make income producing activities. Must not be a first-time homeowner.

• Have a debt-to-income ratio no greater than 41% per USDA rule

• Income cannot exceed 100% of the area median income for Moderate or Low Household Income (up to 4 incomes).

• Stable employment for at least two years, not just one job but employed consistently for two years

• Minimum credit score of at least 640 or higher is the suggested score but if scores are close or under minimum requirements, you may still be eligible for a loan. Discuss possible options with your lender to see if loan can still be approved if this is the case.

• Credit scores under 640 all collections must be paid in full or have written letter of explanation of why the debt and the action to pay and clear the debt in full.

• Must be U.S. Citizen, U.S. Non-Citizen National, or Qualified Alien.

• Applicants must not be suspended or barred from participation in federal programs

 

Terms: Loans are for up to 33 years (38 for some with very low income who cannot afford a 33-year term). The term is 30 years for manufactured homes. The promissory note interest rate is set by the United States government.

• Effective November 01, 2022, the current interest rate for Single Family Housing Direct home loans is 3.75% for low-income and very low-income borrowers (rates can vary monthly).

• Fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower.

• Traditional 33-year loan term for low-income applicants, and 38-year payback period for very low-income applicants who can’t afford the 33-year loan term.

• Zero or no down payment is typically required. Applicants with assets higher than the asset limits may be required to use a portion of those assets.

• Capped packaging fees-up to $2000 split between Certified Packager and Intermediary- fees may be included in loan total amount may not exceed loan limits or market value

• Rates, terms, fees, and qualifications will be fully explained upon formal application.

 

Standard: Under the Section 502 program, housing must be modest in size, design, and cost. Modest housing is property that is considered modest for the area, does not have market value more than the applicable area limit, and doesn’t have certain prohibited features. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building codes.

 

• USDA allows single family homes, multi family, and planned-unit developments.

• USDA allows condominiums, modular homes, and manufactured homes. Manufactured housing must be permanently installed.

• New construction for homes that have never been occupied require a 10-year new home warranty. 

• Not designed for income-producing activities, must be primary residence

• Homes need to be 2,000 finished square feet or less.

• Cannot have an in-ground swimming pool

• Property size below 5 acres and not sub-dividable

• Inspection is required, including a termite inspection

• Appraisals are required – 100% of appraised value 

• USDA Section 504 Home Repair program can be use for improvements on your existing home also, but must meet the age, location, and income requirements:

 

 

Please click on link below and fill out the United States Department of Agriculture Rural Development Eligibility Self-Assessment

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Using the Single Family Housing Direct Self- Assessment tool, potential applicants may enter information online to determine if the Section 502 Direct Loan Program is a good fit for them prior to applying.  The tool will provide a preliminary review after a potential applicant enters information on their general household composition, monthly income, monthly debts, property location, estimated property taxes, and estimated hazard insurance.  Potential applicants are welcome to submit a complete application for an official determination by USDA Rural Development (RD) regardless of the self-assessment results.  Upon receipt of a complete application, RD will determine the applicant’s eligibility using verified information and the applicant’s maximum loan amount based on their repayment ability and the area loan limit for Camden, Laclede, Miller and Morgan Counties.