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US Department of Agriculture Rural Housing

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Buying a Home With Help from USDA
Rural Development

Section 502 Direct Single Family Home

Ownership Loans
The Section 502 Direct Loan Program provides low and
very– low income people the opportunity to acquire,
build, rehabilitate, or improve single family dwellings in
rural areas. Under this program, borrowers receive a loan
directly from USDA Rural Development.
• Eligible applicants are families and individuals with
incomes below 80% of the median income level of
the communities in which they intend to live.
• Loans may be made for the purchase of an existing
home or to build a new house. Loan funds may also
be used to repair or renovate a house being
purchased through our program.
• The standard term for a Section 502 loan is 33 years,
but 38- year loans are available to those who cannot
afford a 33- year loan.
• Applicants may be eligible for payment assistance to
reduce monthly payments.
Section 502 Guaranteed Single Family Home
Ownership Loans
Guaranteed Housing Loans are available for individuals
whose income is too high to qualify for a direct loan.
Applicants apply to approved lenders and USDA Rural
Development issues loan note guarantees to the private
lenders. These loans are made at a fixed rate of interest
for 30 years. The lender may loan up to 100% of the
appraised value; closing costs and repairs can often be
included in the loan. Private mortgage insurance is not
required, but a small one time guarantee fee is required at
closing.

Home Improvement and Repair
Assistance

Section 504 Home Repair Loans and Grants
The Section 504 Loan and Grant program provides
assistance for very-low income homeowners to make
general repairs or modifications, which may improve
or modernize a home. Grants must be used to remove
health or safety hazards or make the property more
accessible for household members with disabilities.
• Applicants may obtain multiple Section 504 loans,
but the maximum outstanding balance is $20,000.
• Loans have a maximum term of 20 years and a
fixed interest rate of 1%.
• Grants are available for very–low income
homeowners age 62 and older who cannot afford a
loan.
• Grants are limited to a lifetime assistance of
$7,500.
Building a Home with “Sweat Equity”
Section 523 Mutual Self Help Housing
Loans and Grants
Under the Section 523 Loan and Grant program,
households provide a substantial portion of the labor
involved in building their own homes. This “sweat
equity” contribution reduces the total costs of purchasing
homes and provides families with immediate equity in
their dwellings. Because it brings families together to
build each other’s houses, the program builds and
strengthens the ties within communities.
• Families supply necessary labor while obtaining a
Section 502 Housing Loan to purchase land,
materials and to subcontract work on technical
items.
• A private or public non– profit corporation or a
public body obtains a Section 523 Mutual Self–
Help Technical Assistance Grant to provide the
training, homeownership education, construction
supervision and guidance needed to fulfill the goals
of the self– help housing program.
• The terms of the loan are the same as the Single
Family Homeownership terms, but the applicant
provides a substantial portion of construction labor.
• To obtain a grant, the non– profit organization must
have technical and supervisory experience to carry
out objectives of the self help project.

In April 2003, a wind and ice storm severely damaged Olivia
Wilmer’s 49 year old trailer. A friend, Jan Plank, rallied the
support of several agencies and friends to provide a new mobile
home for Ms. Wilmer. USDA Rural Development provided a
Home Repair grant to remove the old trailer, install block skirting
around the new manufactured home, install a new well and septic,
and replace the existing electrical system. On June 3, 2003, Ms.
Wilmer welcomed friends, representatives of the cooperating
agencies, television reporters, and USDA Rural Development State
Director Patrick Brennan to the dedication of her new home.

Building a Home with “Sweat Equity”
Section 523 Mutual Self Help Housing
Loans and Grants

Under the Section 523 Loan and Grant program,
households provide a substantial portion of the labor
involved in building their own homes. This “sweat
equity” contribution reduces the total costs of purchasing
homes and provides families with immediate equity in
their dwellings. Because it brings families together to
build each other’s houses, the program builds and
strengthens the ties within communities.
• Families supply necessary labor while obtaining a
Section 502 Housing Loan to purchase land,
materials and to subcontract work on technical
items.
• A private or public non– profit corporation or a
public body obtains a Section 523 Mutual Self–
Help Technical Assistance Grant to provide the
training, homeownership education, construction
supervision and guidance needed to fulfill the goals
of the self– help housing program.
• The terms of the loan are the same as the Single
Family Homeownership terms, but the applicant
provides a substantial portion of construction labor.
• To obtain a grant, the non– profit organization must
have technical and supervisory experience to carry