How to Get a Government Home Loan with Low or Moderate Income
Written by: Rebecca Game
The government provides loans to those individuals who have low
to moderate income for permanent residence in rural areas. To
qualify for these government loans is not that hard and the
restrictions are small.
The Federal agency that provides the loans for housing is: Rural
Housing Service, (RHS)
Their main objective is to assist very low, low-income, and
moderate-income households so that they can get decent, safe,
and modest housing as a permanent residence.
The types of assistance they provide are "Direct Loans" or
"Guaranteed / Insured Loans".
Description for Uses and Use Restriction Reads:
"Direct and guaranteed loans may be used to buy, build, or
improve the applicant's permanent residence. New manufactured
homes may be financed when they are on a permanent site,
purchased from an approved dealer or contractor, and meet
certain other requirements. Under very limited circumstances,
homes may be re-financed with direct loans. Dwellings financed
must be modest, decent, safe, and sanitary. The value of a home
financed with a direct loan may not exceed the area limit. The
property must be located in an eligible rural area. Assistance
is available in the States, the Commonwealth of Puerto Rico, the
U.S. Virgin Islands, Guam, American Samoa, the Commonwealth of
Northern Mariana's, and the Trust Territories of the Pacific
Islands. Direct loans are made at the interest rate specified in
RD Instruction 440.1, Exhibit B (available in any Rural
Development local office), and are repaid over 33 years or 38
years for applicants whose adjusted annual income does not
exceed 60 percent of the area median income, if necessary to
show repayment ability. Payment assistance is granted on direct
loans to reduce the installment to an "effective interest rate"
as low as one percent, depending on adjusted family income.
Payment assistance is subject to recapture by the government
when the customer no longer resides in the dwelling. There is no
funding provided for deferred mortgage authority or loans for
deferred mortgage assumptions. Guaranteed loans may be made to
refinance either existing RHS Guaranteed Housing loans or RHS
Section 502 Direct Housing loans. Guaranteed loans are amortized
over 30 years. The interest rate is negotiated with the lender."
The eligibility requirements are:
"Applicants must have very low, low or moderate incomes. Very
low-income is defined as below 50 percent of the area median
income. Low-income is between 50 and 80 percent of AMI. Moderate
income is below 115 percent of AMI. Families must be without
adequate housing, but able to afford the housing payments,
including principal, interest, taxes, and insurance (PITI).
Qualifying repayment ratios are 29 percent for PITI to 41
percent for total debt. In addition, applicants must be unable
to obtain credit elsewhere, yet have an acceptable credit
It would be very wise to check the area that you are interested
in to see what they yearly taxes are as some areas are very high
compared to others. Depending on your age, and area, taxes could
run anywhere from 500.00 per year up to thousands of dollars per
year. By age, I mean that senior citizens get a huge tax break
on property taxes.
You can also lower property taxes by other means including
farming. Check with their office to see what tax breaks you can
You may be required to show proof of your inability to get
credit elsewhere, verification of your income, any debts that
you owe,and other pertinant information on the application such
as plans, specifications, and cost estimates.
How Do You Apply? For direct loans, application is made at the
Rural Development field office serving the county where the
dwelling is or will be located. For guaranteed loans,
application is made to a participting lender. This program is
excluded from coverage under OMB Circular No. A-110.
Rural Development field offices have the authority to approve
most Direct loan requests. The processing of guaranteed loans
will vary from State to State. You will need to contact the
Rural Development State Office in your area. It will be listed
in your local telephone directory.
If no backlog exists, decisions on direct loan applications are
made within 30 to 60 days. Requests for guarantee loans are
acted upon in 3 days.
The time it takes to get approved or disapproved can range
anywhere from 30 days to 60 days depending on the availablity of
funds and whether or not the application was filed while a
backlog of applications are present. For guarantees, a decision
is required within 3 days of loan package submission by the
You CAN appeal if you are denied the loan or loan guarantee:
"Agency regulations providing customers with the rights for an
informal review, mediation or alternative dispute resolution
(ADR), or appeal to the National Appeals Division (NAD) are
contained in 7 CFR Part 3550. NAD regulations are found at 7 CFR
Part 11. Requests for an informal review, mediation and ADR must
be received within 30 days from the date of the adverse
decision. Requests for an appeal to NAD must be received within
30 days of receipt of the adverse decision."
You can also reapply at any time.
This assistance is available throughout the year by means of
quarterly allocations. Funds may be given at the loan closing or
they may be deposited in the bank account for purchase of a
building site, and purchase or repair of a dwelling, or in
multiple advances for construction. For guaranteed loans, funds
are distributed after all the work has been completed.
Just so you know, the applications for direct loans far exceed
available funding. There's usually a waiting list if you want
direct loan funding for a home.
You are not required to, but you should keep copies of any of
your loan related documents.
Range and Average of Financial Assistance From $1,000 to
$105,000; an average of $73,350 for 502 direct loans, and 93,000
for guaranteed loans. Loans in high cost areas may be higher.
Literature and Guidelines: 7 CFR Part 3550 "Direct Single
Family Housing Loans and Grants." For guaranteed loans, 1980-D
"Subpart D -Rural Housing Loans."
You can contact their offices here:
For Your Local Office: They will be listed under United States
Department of Agriculture for Rural Development in your local
phone directory. If you can't find their listing, you can
contact the Rural Development State Office on the web here:
Headquarters Office Director, Single Family Housing Direct Loan
Division or Director Single Family Housing Guaranteed Loan
Division, Rural Housing Service (RHS), Department of
Agriculture, Washington, DC 20250. Telephone: (202) 720-1474
(direct loans); (202) 720-1452 (guaranteed loans).
You can visit their web site here: http://www.rurdev.usda.gov
About the author:
Rebecca Game is the founder of Digital Women ®, an online
community for women in business. A 30 year entrepreneur and
dedicated to helping other women find business loans and
business grants. Visit her site: Business
Grants for Women or at her main site: http://www.digital-women.com
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