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.
As 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:
No, RHS mortgage loans can be used to buy a home, construct a home or rehabilitate a home.
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.
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.
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.
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.
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.
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.
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.
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.
The RHS also runs several grant programs, that can be an alternative to a loan in certain circumstances. Here area few examples:
The basic requirements for being eligible for this grant:
The cap for this grant is 7,500 USD.