Rural Housing Service Loan

What’s the RHS?

The Rural Housing Service (RHS) is an agency of the United States Department of Agriculture (USDA). RHS is located within USDA’s Rural Development mission area.

The RHS operates a broad selection of programs intended to help low-income and moderate-income people residing in rural areas of the United States.

What’s an RHS mortgage loan?

rural americaAs a part of their mission to promote a higher quality of life in rural areas, the RHS aims to make it easier for low-income and moderate-income residents in rural areas to obtain home mortgage loans. The RHS does this in two different ways:

  • The RHS guaranteed mortgage loan. This loan is provided by a private lender, such as a bank, but guaranteed by the RHS, thus reducing the risk associated with the loan for the lender.
  • In some areas of the United States, the RHS lend money in the form of mortgage loans.

Can I only get a RHS mortgage loan to buy a home?

No, RHS mortgage loans can be used to buy a home, construct a home or rehabilitate a home.

Is RHS mortgage loans only available for homes?

No, the RHS runs loan programs for a wide range of rural community services. It can for instance be possible to obtain an RHS mortgage loan for a school, childcare center, police station, fire station or health care clinic.

The RHS also offers long-term subsidized loans for developers who wish to provide affordable rental or cooperative housing for underserved rural populations. You are extra likely to get your application approved if it concerns housing for low-income, elderly and/or disabled residents.

I live in a town – can I still be eligible for an RHS mortgage loan?

You don’t necessarily have to live smack in the middle of nowhere to be considered “rural enough” for the RHS. The RHS’s definition of a rural area is fairly broad and quite a lot of small towns fall within it.

RHS’s definition of rural area

An open country or any town, village, city, or place, including the immediate adjacent densely settled area, which is not part of or associated with an urban area and which:

(1)Has a population not in excess of 2,500 inhabitants; or

(2)Has a population in excess of 2,500 but not in excess of 10,000 if it is rural in character; or

(3)Has a population in excess of 10,000 but not in excess of 20,000, and-

(i)Is not contained within a Metropolitan Statistical Area; and

(ii)Has a serious lack of mortgage credit for lower and moderate-income families as determined by the Secretary of Agriculture and the Secretary of Housing and Urban Development.


The 2014 Farm Bill stipulate that some areas with a population of up to 35,000 individuals will remain eligible for RHS loans until receipt of the 2020 decennial census.

What’s a section 502 loan

One of the most well-known loans associated with the RHS is the Section 502 loan. It is called a Section 502 loan simply because this loan program is regulated by Section 502 of the Housing Act of 1949.

What can a 502 loan be used for?

  • Purchasing new or existing single-family rural housing. (Conditions apply.)
  • Repairing existing single-family rural housing. (Conditions apply.)

Who is eligible?

The intention of the 502 loan is to help people who are unable to obtain reasonable credit elsewhere. Please note that you must still be able to show that you are capable of sticking to the repayment plan for the 502 loan.

<60% of the median income

If your income is below 60% of the area’s median income, you may qualify for a 502 loan with a term of up to 38 years.

<80% of the median income

If your income is 60% or more of the area’s median income, you wont qualify for the longest term 502 loan, but there can still be other 502 loans – with a shorter repayment term – available for you. If your income is 80% or less of the area’s median income, you may be eligible for a 33-year loan.

115% or less of the median income

You can actually be eligible for a 502 loan even if your income is more than the area’s median income, but the term for this loan will be 30 years and it must be provided by a private lender. (The lender will provide the loan, but the RHS will guarantee it.) You can be eligible for this type of 502 loan if your income is up to 115% of the area’s median income.


When there is a need to prioritize between otherwise similar applicants, priority is given to first-time home buyers.


To approve your loan application, the RHS can require that you complete one of their home ownership counseling programs first.

RHS grants

The RHS also runs several grant programs, that can be an alternative to a loan in certain circumstances. Here area few examples:

  • Single Family Housing Grants
  • Socially-Disadvantaged Groups Grants
  • RHS Home-repair Grants
  • Farm Labor Housing Grants
  • Household Water Well System Grants
  • Individual Water & Wastewater Grants
  • Rural Energy for America Program Renewable Energy Systems & Energy Efficiency Improvement Loans & Grants

The RHS home-repair grant

The basic requirements for being eligible for this grant:

  • Rural resident
  • 62 years or older
  • Low-income

The cap for this grant is 7,500 USD.

This article was last updated on: February 12, 2018