Rural Development Guaranteed Housing Loans or Section 502 loans are used to help low-income individuals or households qualify for a home loan in a rural area. While many programs exist for new owners in urban areas, many banks are hesitant to loan to a low-income applicant who resides in a rural, sometimes isolated area. However, when a bank or other lender knows that the federal government guarantees the loan, they become more willing to lend to an individual or family. Funds from a Rural Development Guaranteed Housing Loan can be used to build a home. They can also be used to purchase and renovated an existing home, or to purchase and prepare a site so that a home can be built there. This includes providing water and sewage facilities.

In order to qualify, applicants for a USDA loan must have an income comparable to the median income for the area they want to live. Applicants must be able to verify that they are currently without adequate housing, but have an income that allows them to afford mortgage payments. A reasonable credit history will also be considered as part of the application process. These loans are not inten
ded for those who are too impoverished to make mortgage payments.

A variety of lenders are available to process USDA loans. Any large bank or local credit union can handle these loan applications since they function the same way as most traditional FHA or HUD loans; it's just that they apply specifically to rural homeowners. These loans do not require a down payment; however, banks will help the homeowners carefully consider their debt ration in order to determine that a mortgage payment can fit within the context of the total family debt.

Rural Development Guaranteed Housing Loans include a 30-year fixed-rate term. Even if a family's income changes over the term, the rate and payment will remain the same. This protects families and individuals from adjustable rate mortgages that can put payments in jeopardy. In order to apply for a USDA loan, contact the Rural Development office in your area. The staff in these local offices can advise people about the process, income cut-offs and can provide a list of eligible homes in the area.

Purchasing a home is still possible in today's market. Those with modest means, looking to purchase a modest home may find what they need through a USDA rural loan.