© Housing Assistance Council, 2000

Permission is granted ONLY to nonprofit community-based organizations to reproduce and/or adapt this document, and only for their own use.

ISBN 1-58064-008-7

TABLE OF CONTENTS

1. Introduction
   1. What is the Rural Homeownership Loan Program?
   2. About This Guide
2. RHS Rural Housing Programs
   1. Using RHS Rural Housing Programs
   2. RHS Service Area
   3. RHS/Rural Development Organization
   4. Locating Rural Development County Offices
   5. Applicable Regulations
   6. Ordering Instructions
3. RHS Section 502 Rural Housing Loans
   1. A Few Basic Facts
   2. Recent Changes
   3. Eligible Borrowers
   4. Restrictions on Eligibility
   5. Credit History
   6. Loans to Rural Development and RHS Employees
   7. Eligible Uses of Loan Funds
   8. Refinancing Debts
   9. Prohibited Features and Amenities
   10. Ineligible Uses
   11. Dwelling Requirements
   12. Property Requirements
   13. Ownership Requirements
   14. Maximum Loan
   15. Loan Terms and Rates/Payment Assistance
   16. Recapture of Interest Subsidy
4. How to Apply
   1. Complete Applications
   2. Incomplete Applications
   3. Basic Application Processing
   4. Delayed Processing
   5. Immediate Processing
   6. Selection for Processing
   7. Verification
   8. Applicant Interview
   9. Certificate of Eligibility
   10. Environmental Review
   11. Disapproval and Appeal
   12. Loan Approval
   13. Loan Security
   14. Security Requirements for Special Ownership Categories
   15. Loan Closing
   16. Loan Closing Expenses
   17. Contract Arrangements
   18. Builder’s Warranty
5. Variations of the Section 502 Loan Program
   1. Mutual Self-Help Housing Loans
   2. Deferred Mortgage Payment Demonstration
   3. Manufactured Housing
   4. Section 502 Guaranteed Loans
   5. Loans for Condominiums and in Community Land Trusts
   6. Housing Demonstration Program
   7. Participation Loans
   8. Exception Authority
6. Servicing
   1. DLOS
   2. Fees and Reviews

Appendices
Additional  Links

Through the Section 502 direct loan program, the federal Rural Housing Service/Rural Development provides mortgage loans to low- and very low-income households purchasing homes in rural areas. This guide – part of the Housing Assistance Council’s popular Technical Series – explains the requirements for using the Section 502 direct loan program, and how to apply.

This guide was prepared by Art Collings with assistance from Leslie Strauss, both of the Housing Assistance Council (HAC). The work that provided the basis for this publication was supported by funding under contracts and cooperative agreements with the U.S. Department of Housing and Urban Development, including most recently Cooperative Agreement H-21069 CA. Ndeye Jackson served as Government Technical Representative for that Cooperative Agreement. The substance and funding of that work are dedicated to the public. HAC is solely responsible for the accuracy of the statements and interpretations contained in this publication and such interpretations do not necessarily reflect the views of the United States Government.

HAC, founded in 1971, is a nonprofit corporation which supports the development of rural low-income housing nationwide.  HAC provides technical housing services, loans from a revolving fund, housing program and policy assistance, research and demonstration projects, and training and information services.

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