509 1st Avenue South • Great Falls, Montana 59401 • Phone: 406-761-5861 • Toll Free: 1-866-587-2244 • Fax: 406-761-5852
USDA Rural Development Resources
U.S. Department of Agriculture Rural Development
The U.S. Department of Agriculture’s Rural Development sector has multiple loans and grants in place to assist in financing housing, for both rentals and homeownership.
Visit the main USDA RD housing website at http://www.rurdev.usda.gov/LP_Subject_HousingAndCommunityAssistance.html
Section 502 loans are primarily 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.
Applicants for direct loans from HCFP must have very low or low incomes. Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI. Click here to review area income limits for this program. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance, which are typically 24 percent of an applicant's income. However, payment subsidy is available to applicants to enhance repayment ability. Applicants must be unable to obtain credit elsewhere, yet have reasonable credit histories.
Loans are for up to 33 years (38 for those with incomes below 60 percent of AMI and who cannot afford 33-year terms). The term is 30 years for manufactured homes. The promissory note interest rate is set by HCFP based on the Government’s cost of money. However, that interest rate is modified by payment assistance subsidy.
Standards: Under the Section 502 program, housing must be modest in size, design, and cost. Modest housing is property that is considered modest for the area, does not have market value in excess of the applicable area loan limit, and does not have certain prohibited features. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards.
For more information, visit Rural Development’s Direct Loan webpage at: http://www.rurdev.usda.gov/HAD-Direct_Housing_Loans.html
USDA RD offers a guaranteed loan to qualified applicants.
Eligibility: Applicants for loans may have an income of up to 115% of the median income for the area. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories.
Approved lenders under the Single Family Housing Guaranteed Loan program include:
Development and/or Farm Service Agency guaranteed loan programs.
Standards: Housing must be modest in size, design, and cost. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. New Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards. Existing manufactured housing will not be guaranteed unless it is already financed with an HCFP direct or guaranteed loan or it is Real Estate Owned (REO) formerly secured by an HCFP direct or guaranteed loan.
The Guaranteed Rural Rental Housing Program was established to increase the supply of moderately-priced housing in rural areas; ensure that housing is affordable to low- and moderate-income rural residents whose incomes are 115 percent of area median income (AMI) or less; provide housing that is decent, safe, sanitary, and competitive in the market; and foster risk-sharing partnerships with public and private lenders. Under the program, the Agency will provide credit enhancements to encourage private and public lenders to make new loans for affordable rental properties that meet program standards.
An applicant must be a U.S. citizen(s) or legal resident(s), a U.S. owned corporation, a limited liability corporation (LLC) or a partnership in which the principals are U.S. citizens or permanent legal residents. Other than public agencies, Indian tribes, and individuals, borrowers must provide documentary evidence that they are valid legal entities, licensed to do business in the state in which the property is located and able to enter into agreements governing the loan and guarantee.
Lender's must be an approved and currently active lender in one of the following multifamily housing programs: the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Department of Housing and Urban Development (HUD) or the Government National Mortgage Association (Ginnie Mae). A State or local housing finance agency, a member of the Federal Home Loan Bank System or other lender may be eligible to participate if they can demonstrate satisfactory experience with multifamily lending.
The program has been designed to increase the supply of affordable multifamily housing through partnerships between HCFP and major lending sources , as well as State and local finance agencies and bond issuers.
The maximum loan to value is 90% for for-profit entities and 97% for non-profit entities. The guaranteed loan has a minimum term of 25 years and a maximum term of 40 years. There is no maximum or minimum loan amount. The interest rate negotiated between the borrower and lender is fixed for the life of the guaranteed loan.
For more information, visit USDA RD’s Guaranteed Rental Housing Loans website at http://www.rurdev.usda.gov/HAD-Guaranteed_Rental_Loans.html
The program is adaptable for participation by a wide variety of owners. Loans can be made to individuals, trusts, associations, partnerships, limited partnerships, State or local public agencies, consumer cooperatives, and profit or nonprofit corporations.
Ownership - Individuals, partnerships, limited partnerships, for-profit corporations, nonprofit organizations, limited equity cooperatives, Native American tribes, and public agencies are eligible to apply. For-profit borrowers must agree to operate on a limited-profit basis (currently 8 percent on initial investment). Borrowers must be unable to obtain credit elsewhere that will allow them to charge rents affordable to low- and moderate-income tenants.
Very low-, low-, and moderate-income families; the elderly; and persons with disabilities are eligible for tenancy of Section 515-financed housing. Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is capped at $5,500 above the low-income limit. Those living in substandard housing are given first priority for tenancy. When rental assistance is used top priority is given to very low-income households.
Rural Development State Directors use needs criteria to establish a list of targeted communities for which applicants may request loan funds. A list of these communities is published yearly in the Federal Register in the form of a Notice of Funding Availability (NOFA). The applications are then rated competitively in order to select recipients.
This is primarily a direct mortgage program, but its funds may also be used to buy and improve land and to provide necessary facilities such as water and waste disposal systems.
The National Office publishes a Notice of Funds Availability in the Federal Register as soon after the start of the Fiscal Year as possible. Generally, the NOFA should be published around November 1.
The NOFA will indicate the information that applicants must submit in their project proposal: The criteria the Agency will use to evaluate and rank project proposals; The deadline for submitting project proposals; and
The state office addresses where: the project proposals must be sent; A list of designated places for the state may be obtained; and the funding for the state may be obtained.
For more information, visit USDA RD’s Rural Rental Housing Loans website at http://www.rurdev.usda.gov/HAD-Direct_Rental_Loans.html
The Section 502 Mutual Self-Help Housing Loan program is used primarily to help very low- and low-income households construct their own homes. The program is targeted to families who are unable to buy clean, safe housing through conventional methods. Families participating in a mutual self-help project perform approximately 65 percent of the construction labor on each other's homes under qualified supervision. The savings from the reduction in labor costs allows otherwise ineligible families to own their homes. If families cannot meet their mortgage payments during the construction phase, the funds for these payments can be included in the loan.
Applicants must have very low or low incomes. Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI. Families must be without adequate housing; however, they must be able to afford the mortgage payments including principal, interest, taxes and insurance (PITI). These payments are 22 to 26 percent of an applicant's income. In addition, applicants must be unable to obtain credit elsewhere, yet have reasonable credit histories. Families with very low incomes living in substandard housing are given first priority.
Loans are for up to 33 years (38 for those with incomes below 60 percent of the area median and who cannot afford 33-year terms). The promissory note interest rate is set by HCFP (in July 1997 it was 7.25 percent). However, the interest rate is not usually meaningful since payment assistance can reduce the interest rate to as low as 1 percent. The amount of subsidy is determined by family income as a percentage of AMI, so that the family pays from 22 to 26 percent of their income for principal, interest, taxes, and insurance (PITI) up to an amount not exceeding the promissory note rate. There is no required down payment. HCFP must also determine repayment feasibility using ratios of repayment (gross) income to PITI and to total family debt.
Under the Section 502 Mutual Self-Help Housing program, housing must be modest in size, design, and cost. Modest housing is defined as housing costing less than the HUD dollar cap, which as of 1997 was $81,548 with adjustments for high cost areas. Houses constructed must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards.
For more information, visit RD’s Mutual Self-Help Loans page at: http://www.rurdev.usda.gov/HSF_SFH.html
Rural Repair and Rehabilitation Loans and Grants
The Very Low-Income Housing Repair program provides loans and grants to very low-income homeowners to repair, improve, or modernize their dwellings or to remove health and safety hazards.
To obtain a loan, homeowner-occupants must be unable to obtain affordable credit elsewhere and must have very low incomes, defined as below 50 percent of the area median income. They must need to make repairs and improvements to make the dwelling more safe and sanitary or to remove health and safety hazards. Grants are only available to homeowners who are 62 years old or older and cannot repay a Section 504 loan. For Income and Property Eligibility please see our Eligibility Site.
Loans of up to $20,000 and grants of up to $7,500 are available. Loans are for up to 20 years at 1 percent interest. A real estate mortgage and full title services are required for loans of $7,500 or more. Grants may be recaptured if the property is sold in less than 3 years. Grant funds may be used only to pay for repairs and improvements resulting in the removal of health and safety hazards. A grant/loan combination is made if the applicant can repay part of the cost. Loans and grants can be combined for up to $27,500 in assistance.
Repaired properties do not need to meet other HCFP code requirements, but the installation of water and waste systems and related fixtures must meet local health department requirements. Water supply and sewage disposal systems should normally meet HCFP requirements. Not all the health and safety hazards in a home must be removed with Section 504 funds, provided that major health and safety hazards are removed. All work must meet local codes and standards.
For more information, please visit RD’s Rural Repair and Rehabilitation website at: http://www.rurdev.usda.gov/HAD-RR_Loans_Grants.html
509 1st Avenue South • Great Falls, Montana 59401• Phone: 406-761-5861 • Toll Free: 1-866-587-2244 • Fax: 406-761-5852