The Rural Housing Service offers or guarantees loans from the Rural Housing Service under the United States Department of Agriculture. RHS makes direct loans to low-income borrowers in rural regions and guarantees loans from lenders who fulfill RHS's conditions. RHS also guarantees loans made by lenders in rural areas. The RHS guarantees and originates more than just home mortgages. It offers loan programs to community services like schools, childcare centers, police and fire stations, and schools.

How RHS Loans Work

There are many types of RHS loans that can be used to help different borrowers. They work in different ways.

Single-Family Housing Guaranteed Loans

If you live in rural areas and have a low income but cannot obtain conventional mortgage financing, a Single-Family Housing Guaranteed Loan is worth looking into. Approved lenders provide these 30-year loans directly to the individuals and are backed by RHS. After you are approved, you might be eligible for a lower interest rate with no down payment. However, you must still meet certain mortgage requirements to afford the monthly payments. A Single-Family Housing Guaranteed Loan will cover 100% of the property's value and any upfront costs like closing costs and legal fees. These out-of-pocket expenses can be covered by down-payment assistance.

Single-Family Housing Direct Loans

These are for rural buyers with low- or very-low incomes. This program offers payment assistance to help reduce your mortgage payments for a certain period. Your adjusted family income will determine how much assistance you get. It must be less than the low-income limit where you plan to buy the house. You must show that you can repay the loans. You must also meet the following criteria to qualify for a Single-Family Housing Direct Loan:

• Do not have decent, safe, or sanitary housing
• You can't get a loan through other sources
• Occupy the home as your primary residence
• A minimum of 2,000 square feet is required for the property
• You cannot use the property to generate an income

Multifamily Housing Loans

The USDA Rural Housing Service offers financing for rural properties through this program. These loans can be used for rural housing projects for elderly or low-income borrowers. These loans programs can be used for:

Farm Labor Direct Loans & Grants

Grants and loans to help build housing for seasonal farm workers or all year. You can get loans for up to 33 years at a fixed rate of 1%.

MPR Loans and Grants

This program allows for the restructuring of housing projects' loans to improve access to affordable, safe rental housing. The borrower must provide affordable rental housing for the remainder of the USDA loan's term or 20 years.

Multifamily Housing Direct Loans

This program provides affordable financing options for housing projects for elderly and low-income people in rural areas. These loans are available at a low-interest rate for up to 30 years.

Multifamily Housing Loan Guarantees

This loan program supports loans from commercial lenders financing multifamily housing projects that provide affordable rental housing for rural low-income residents.

Pros

Low down-payment requirements

RHS loan provides financing without needing a down payment. This is a great option if you are short of cash.

Less-strict credit requirements

Most conventional mortgage lenders will not approve you if you don't have good credit. With a good credit score, you can still qualify for an RHS loan if your income is sufficient to repay the loan.

Rates lower

RHS loan programs often offer lower rates than others, including 1% rates to finance housing projects for farm laborers.

Cons

Only rural area

RHS loans are designed specifically to assist rural homeowners in purchasing their homes. An RHA loan is unavailable if you want a house in an urban area or your property does not qualify as rural.

Limitations on income

You won't be eligible if your income exceeds the income limits for the loan program. RHS loans are for those with lower or moderate incomes.

How Can You Qualify For An RHS Loan?

Low to moderate incomes can apply for loans. The income limits depend on where the borrower lives. A single-family home loan is only available for homes that are primary residences. The home must also be in an area of fewer than 35,000 people. Borrowers cannot be legal nonresident aliens or citizens of the United States and must not be in default on federal debt.