Rural Housing Service Loans, also known as RHS loans, allow low to moderate-income rural residents the opportunity to get loans with minimal closing costs and no down payment. The rural housing service loan program was created by the Department of Agriculture in 1994 to help foster home ownership and community development in rural areas.
Rural housing service loans can be used for purchasing, constructing, repairing, or relocating a home and its related facilities.
There are two types of RHS loan programs. The first is a section 502 rural housing guarantee loan program. Under this program, borrowers obtain loans from private lenders, and the rural housing service guarantees the loans.
To qualify for this program, borrowers must be able to afford the monthly payments, must be without adequate housing, and unable to get a loan elsewhere. Borrowers must also have acceptable credit history.
This RHS loan program also puts a limit upon how much income the borrower can make to be eligible. Borrowers who make up to 115% of the Area Median Family Income fall within the income limits of the program.
Under the Rural Housing Guarantee Loan Program, loans can be had for a period of up to 30 years.
The second type of RHS loan program is the Secton 502 Single Family Housing Direct Loan Program. Under this loan program, borrowers receive loans directly from the rural housing service. These loans may be used to purchase a home, build a new home, repair or renovate a home. Under certain circumstances, the loan program may be used to refinance debts.
This program is intended for those with very low to low incomes (those whose incomes are between 50% and 80% of the Area Median Family Income).
As with the guaranteed loan program, borrowers under the Direct Loan Program must be able to afford the monthly payments, must be without adequate housing, and unable to get a loan elsewhere. Borrowers must also have acceptable credit history.
These loans are typically for a period of 33 years, although borrowers with incomes under 60% of the Area Median Family Income who cannot afford a 33-year period can get a term of 38 years on the loan.
To find out if you qualify for either of the above programs, contact your Rural Development state office. You can find the office by going here.
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