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Rural Housing Service (RHS) Loan Programs

The Rural Housing Service is part of the U.S. Department of Agriculture and is designed to help people in rural areas become home owners. The Rural Housing Service was created in 1994 to meet housing and community needs in rural America. They provide loans with minimal closing costs, no down payment is required, and the borrower doesn’t have to purchase private mortgage insurance.

There are two programs of note:

  1. Rural Housing Guaranteed Loan Program; for when the borrower has a low to moderate income. The program will offer a guarantee to the mortgage lender that the mortgage will not default. These are 30 year loans made available through RHS approved lenders.
  2. Single Family Housing Direct Loan Program; for cases where the borrower has a very low to low income. For these people there are programs that make mortgages directly available to the borrower. These are normally 33 year loans (if the borrower earns less than 60% of the Area Median Family Income a 38 year term is available) made available through the RHS.
Eligibility Requirements:

There are certain requirements that must be met before being eligible for an RHS loan program:

  • You must live in a rural area as defined by the agency. Basically you must not be associated with an urban area and live in an open area or in a community of less than 10,000 people that is rural in nature.
  • You must have a modest family income. The income requirements are measured against the Area Median Family Income and differ from state to state. Low to moderate incomes are defined as being between 80% and 115% of the Area Median Family Income. Low incomes are those between 50% and 80% of the Area Median Family Income and those earning less than 50% of the Area Median Family Income have very low incomes.
  • Loan limits depend on the area where the house is located. Higher price areas have upper limits of around $195,000 while lower cost areas have upper limits of around $100,000.
  • No down payment is required but the borrower must be able to pay the mortgage payments, taxes and insurance. Further the borrower must be without adequate housing, be unable to qualify for a mortgage elsewhere and have an acceptable credit history.
  • As well as purchasing houses RHS loans may also be made to qualified applicants for house repairs, house renovations, house relocation or (under certain conditions) to refinance home debts.