502 Direct Loan Program
HOMEBUYERS
Applying for a USDA 502 Direct Home Loan can be an ideal way to help you achieve your dream of owning a home.
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Learn about 502 Direct Loans
Find out more about the USDA's 502 Direct Loan program below.
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Find out if you might qualify
Take the USDA's assessment to see if the program might be a good fit.
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Contact us to get started
Get in touch and one of our loan officers can confirm which program(s) you qualify for.
What is a 502 Direct Loan?
This program, offered through the United States Department of Agriculture (USDA), helps low-income individuals or households purchase homes in rural areas.
While 502 Direct Loans are primarily used to help purchase a home, they can also be used to repair, renovate, or relocate homes or to purchase and prepare sites, including providing water and sewage facilities.
Provides Payment Assistance
502 Direct Loans provide payment assistance to increase your ability to repay your loan. Payment assistance is a type of subsidy that reduces your mortgage payment for a short time.
100% Financing
502 loans typically provide 100% financing without private mortgage insurance or a down payment.
30+ Year Terms
The standard 502 direct loan term is 33 years. However, loans up to 38 years are permitted when the household's income doesn't exceed 60% of the area median and a longer term is needed for repayment. Manufactured homes have a maximum 30-year term.
Fixed Interest Rate
The interest rate is fixed, and based on current market rates at loan approval or closing, whichever is lower. When modified by payment assistance, the monthly mortgage payment can be reduced to as low as an effective 1% interest rate.
Who is eligible?
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You must have a debt-to-income ratio no greater than 41%.
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You need to have stable employment. Less than two years of employment is allowed if you:
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recently changed jobs but remain in the same line of work;
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frequently change jobs but demonstrate income continuity;
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are a recent graduate;
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are a recent member of the military entering the civilian workforce; or
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have recently reentered the workforce after an absence due to an extended medical illness, caring for a family member, or other similar circumstances.
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You must be a U.S. Citizen, U.S. Non-Citizen National, or Qualified Alien.
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You must NOT be suspended or barred from participation in federal programs.
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While there is no minimum credit score requirement, you must have proof of your intent to repay any outstanding debts. All collections must either be paid in full or documented as an occurrence beyond your control that is not likely to occur again.
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Your income cannot exceed 100% of the area median income for Moderate or Low Household Income. See our FAQs below for more details.
To be eligible:
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Find Out If You Qualify
Income Guidelines are for all household members occupying the home. These income guidelines are based on 80% or lower of the Area Median Income and are changed periodically when new information is obtained. For example:
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Camden County: $40,850-$65,350
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Laclede County: $35,300-$56,500
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Miller County: $36,600-$58,550
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Morgan County: $35,300-$56,500
The above income dollar amounts are based on one to four-person households and are subject to change. Income limits increase for households with more than four people. Click here to see the latest income limits for your household size.
What are the income restrictions? What qualifies as low or very low income?
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Even if it says you are ineligible, we still highly recommend getting in touch with us by completing our intake form. You may still be eligible or may be eligible for other programs. Our Certified Packager will contact you to get more details. Upon receipt of a complete application, they will determine your eligibility using verified information and the applicant’s maximum loan amount based on their repayment ability and the area loan limit.
Yes, but it is a much longer process.
Yes. The Builder needs to be involved in this process to make sure the home meets the USDA Minimum Standards and Warranty.
Borrowers can expect USDA 502 Direct Home loan processing to take approximately one to two months, depending on various factors and qualifying conditions. The USDA 502 Direct Home Loan takes this long to approve a loan because it wants to ensure all details of the request are valid. Depending on your unique needs, a USDA 502 Direct Home loan may process in a shorter or longer timeframe.
USDA 502 Direct Home program loans do not have private mortgage insurance, which is typically a feature of conventional mortgage loans. Homeowners will be required to obtain their own homeowners insurance coverage.
Frequently Asked Questions
Single family homes
Homes must be modest in size, design, and cost. The minimum square footage is typically no less than 400 square feet, and the house must have areas for cooking, eating, sleeping, and sanitary needs. In-ground swimming pools are allowed if they already exist on the property and the pool is inspected. Property size cannot be large enough to be subdivided under local subdivision regulations and should not be a working farm.
Condominiums, modular homes, and manufactured homes
Manufactured housing must be permanently installed.
Repair or renovate existing home
Loans may be used to repair, improve or modernize homes or remove health and safety hazards.
Purchase and prepare sites
Including providing water and sewage facilities.
Properties cannot have market value in excess of the applicable area loan limit
This varies by area.
Secondary (vacation) home.
The loan must be used for your primary residence. The applicant must agree to and have the ability to occupy the home on a permanent basis.
Income-producing activities
The home cannot be designed for income-producing activities.
What can (and can't) the loan be used for?
