Section 502 Direct Loans

Department of agriculture usda.

Section 502 direct loans. Also known as the section 502 direct loan program this program assists low and very low income applicants obtain decent safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant s repayment ability. Those eligible for the usda direct loan must make between 50 80 percent of. Billion for 29 326 loans while the direct program obligated approximately 1 07 billion for a total of 14 789 loans.

The lender for section 502 guaranteed loans is a private savings and loan institution bank or. With a section 502 direct loan these families can access affordable safe mortgages with interest rates starting at just 1 percent over a 38 year term. Loans are made directly by rhs 7 cfr 3550 or by private lenders with a usda guarantee 7 cfr 1980.

Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. In fy 2013 the average household income for direct borrowers was 28 600 while guaranteed loan recipients earned an average of 54 200. Proceeds from a section 502 home loan may be used to build repair.

This section breaks down additional differences between the two loan programs. Section 502 is the single most cost effective federal housing program. In addition while slightly over 35 percent of direct loans went to non whites and.

Usda direct vs usda guranteed. The important differences between the section 502 guaranteed and direct loan programs are as follows. The usda is not a direct lender.

Homeownership direct loans section 502 january 2004 the rural housing service rhs is a part of rural development rd in the u s. Section 502 loans are a rural housing loan program administered by the rural housing service rhs authorized under section 502 of the housing act of 1949 borrowers may obtain loans for purchasing or repairing new or existing single family housing. The program was created to help low income buyers purchase safe sanitary homes in rural areas with some assistance from the usda.