USDA – Rural Development Housing and Community Facilities Program (HCFP)

A common barrier to owning a home for many people is the lack of funds to make a down payment.  The USDA (United States Department of Agriculture) provides a 100% financing option for qualified buyers who want to purchase properties in rural areas and price ranges that meet their requirements.  To be eligible, you must not qualify for a loan from another source which is typically the lack of a down payment.  There are income requirements which are listed by county and to determine if you qualify, contact a participating lender in your area.

The HCFP provides a number of homeownership opportunities to rural Americans, as well as programs for home renovation and repair.   The most commonly utilized program is the Loan Guarantee Program (Section 502). 

 Under this program the HCFP guarantees loans made by private sector lenders. (A loan guarantee through HCFP means that, should the individual borrower default on the loan, HCFP will pay the private financier for the loan.) The individual works with the private lender and makes his or her payments to that lender.  Under the terms of the program, an individual or family may borrow up to 100% of the appraised value of the home, which eliminates the need for a down payment.

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.

Eligibility: Applicants for loans may have an income of up to 115% of the median income for the area. Area income limits for this program are here.   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:

       Any State housing agency;

       Lenders approved by:

   HUD for submission of applications for Federal Housing Mortgage Insurance or as an issuer of Ginnie Mae mortgage backed securities;

   the U.S. Veterans Administration as a qualified mortgagee;

   Fannie Mae for participation in family mortgage loans;

   Freddie Mac for participation in family mortgage loans;

       Any FCS (Farm Credit System) institution with direct lending authority;

       Any lender participating in other USDA Rural Development and/or Farm Service Agency guaranteed loan programs.

Terms: Loans are for 30 years.  The promissory note interest rate is set by the lender.  There is no required down payment. The lender must also determine repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt (29%-41% based on credit scores).

Standards: Under the Section 502 program, 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.