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What is the USDA 502 Direct Program, and Do I Qualify?

Home Loans

Just Choice

January 19, 2023

If you fall into the low or moderately-low income bracket and are looking for a clear pathway to homeownership in a rural area, you’ll want to know about USDA 502 Direct.

Backed by the U.S. Department of Agriculture, this program offers a payment assistance subsidy that reduces mortgage repayments based on the applicant’s adjusted family income.

Are you eligible for the USDA 502 Direct assistance? And if so, which areas of the country qualify as “rural,” and how much can you borrow? We’ll tell you everything you need to know.

Do I Qualify for the USDA 502 Direct Program?

Applicants must meet two main criteria to qualify for USDA 502 assistance.

First, you must demonstrate the ability to repay your loan. Second, you must have an adjusted income at or below the low-income region where you wish to purchase a home.

The program is active in rural areas across all 50 states, so review the USDA income limit map here for specific details.

Additional Qualifying Criteria

In addition to meeting income and repayment requirements, applicants must also:

  1. Lack what the USDA considers “decent, safe, and sanitary housing”
  2. Be ineligible for traditional home loans
  3. Make the qualifying property your primary residence
  4. Have the “legal capacity” to fulfill loan obligations
  5. Be a U.S. citizen or meet non-citizen qualifications
  6. Not have been previously barred from participating in other federal programs

Also worth noting: Borrowers must repay the subsidy once the property transfers ownership or the loan recipient moves to another home.

What Kind of Properties Qualify?

Eligible properties must be “modestly sized” for the qualifying rural area, cannot have a market value that exceeds the loan limit, and cannot be used to generate income.

How Can I Use USDA 502 Funds?

The USDA is relatively flexible about how qualifying applicants use payment assistance. It can be used to build, repair, renovate, relocate a home or purchase and prepare building sites. Or, it can be used conventionally to simply buy an existing home in a qualifying rural area.

Is There a Limit On How Much I Can Borrow?

Unfortunately, there isn’t a single-word answer to this question, as the max loan amount hinges on the applicant’s ability to repay the loan. But we can tell you this—the USDA considers four criteria, including:

  1. Debts
  2. Assets
  3. Income amount
  4. The amount of payment assistance for which applicants qualify

Learn More About the 502 Direct Loan Program: Contact JustChoice Today

JustChoice Lending (JCL) is a socially responsible mortgage lender that matches clients with the right loan—every time. We offer competitive rates, unrivaled attention and service, and lasting partnerships. Contact us to learn more about USDA 502 and determine if you qualify.

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