If you are an average buyer looking to purchase a home during this hot market, there is a little-known program that may be able to help you if you qualify within the income and purchase price limits.
The United States Department of Agriculture’s (USDA) Single Family Housing Direct Home Loans, also known as the Section 502 Direct Loan Program, assists low- and very-low-income applicants to obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. The amount of assistance is determined by the adjusted household income.
Several factors are considered when determining an applicant’s eligibility for Single Family Direct Home Loans. At a minimum, applicants interested in obtaining a direct loan must have an adjusted income that is at or below the applicable low-income limit for the area where they wish to buy a house and they must demonstrate a willingness and ability to repay debt.
Applicants must:
- Be without decent, safe, and sanitary housing
- Be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet
- Agree to occupy the property as your primary residence
- Have the legal capacity to incur a loan obligation
- Meet citizenship or eligible noncitizen requirements
- Not be suspended or debarred from participation in federal programs
Properties financed with direct loan funds must:
- Generally, be2,000 square feet or less
- Not have market value more than the applicable area loan limit
- Not have in-ground swimming pools
- Not be designed for income producing activities
Borrowers are required to repay all, or a portion of the payment subsidy received over the life of the loan when the title to the property transfers or the borrower is no longer living in the dwelling.
Applicants must meetincome eligibilityfor a direct loan. For example, in Grafton County the following income limits apply according to the size of the household:
| 1 Person | 2 Person | 3 Person | 4 Person | 5 Person | 6 Person | 7 Person | 8 Person | |
| Very Low Income | $46,300 | $46,300 | $46,300 | $46,300 | $61,150 | $61,150 | $61,150 | $61,150 |
| Low Income | $74,100 | $74,100 | $74,100 | $74,100 | $97,800 | $97,800 | $97,800 | $97,800 |
Generally, rural areas with a population less than 35,000 are eligible.That rule holds true for all the counties in Northern New Hampshire.
Loan funds may be used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.
Using theSingle Family Housing Direct Eligibility 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 eligibility determination 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 eligibility 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 thearea loan limitfor the county in which the property is located.
As for the interest rate and payback period:
- Fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower
- Interest rate when modified by payment assistance, can be as low as 1%
- Up to 33-year payback period - 38-year payback period for very low-income applicants who cannot afford the 33-year loan term
No down payment is typically required; however, applicants with assets higher than the asset limits may be required to use a portion of those assets.
Applications for this program are accepted through yourlocal RD officeyear round. New Hampshire shares a state office with Vermont:
Vermont | New Hampshire
Anthony Linardos, State Director
87 State Street Suite 324, P O Box 249
Montpelier, VT 05601
(802) 828-6000
(802) 828-6018 Fax
www.rd.usda.gov/vt
www.rd.usda.gov/nh
Processing times vary depending on funding availability and program demand in the area in which an applicant is interested in buying and completeness of the application package.
The program is governed by:
- The Housing Act of 1949 as amended,7 CFR, Part 3550,
- HB-1-3550- Direct Single-Family Housing Loans Field Office Handbook
USDA Rural Development’s Section 502 Direct Loan Program provides a path to homeownership for low- and very-low-income families living in rural areas, and families who truly have no other way to make affordable homeownership a reality. Providing these affordable homeownership opportunities promotes prosperity, which in turn creates thriving communities and improves the quality of life in rural areas.
