The United States Department of Agriculture (USDA) Section 502 loan programs offer low income individuals and families in rural areas and small towns a chance at home ownership. The USDA also offers loans to repair or improve an existing property. A loan can be used to repair, build, renovate, relocate a home, prepare sites, or to purchase sites. Loans can also be used to provide sewage and water facilities. The goal of the loan program is to help rural and small communities, such as small towns outside ofBoston, thrive and grow.
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In order to qualify for a direct USDA loan, homeowners or potential homeowners must meet criteria set forth by the USDA. Applicants must be considered to have low or very low incomes. The USDA defines this as the following:
- Very low or low income – 50% below the area median income (AMI)
- Low income – 50% to 80% of the AMI
- Moderate income – 80% to 100% of the AMI
Families or individuals interested in a guaranteed loan must have income less than 115% of the median income for the area.
In the Millis-Clicquot area (approximately 19 miles southwest ofBoston) the median income is $64,081. To be eligible for a direct loan, an individual’s total income can not exceed $51,265. To qualify for a guaranteed loan in this area, individual homeowners can not make more than $70,489.
According to these guidelines a family of four planning to purchase or build a home in the Millis-Clicquot area with two wage earners would have to earn less than $102,530 to obtain a Section 502 guaranteed loan. The same family would need to earn less than $147,386 to obtain a Section 502 direct rural housing loan from the USDA.
Applicants must also be unable to obtain a loan elsewhere, but must have decent credit. They must also be able to set aside 24% of their income for mortgage payments, insurance, and taxes. The USDA does offer payment subsidy to help homeowners make their mortgage payments if they need it. If a homeowner needs subsidy to pay their mortgage, this will increase the interest rate on their mortgage The term of the loans is for up to 33 years, or 30 years on manufactured homes.
The home must also meet the USDA’s criteria to be eligible for a loan, it must not exceed the applicable area loan limit or have certain features such as an in ground pool. All homes must meet the area’s housing codes and manufactured homes must be installed permanently on the property. A loan from the USDA’s Section 502 programs may be the answer for potential homeowners who have low income and are unable to find mortgage funding from other sources.