What we verified in “USDA 502 Direct loan and payment assistance”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. Under USDA's regulation (7 CFR §3550.52), Section 502 money may be used to buy, build, rehabilitate, improve or relocate an eligible home that will be the borrower's permanent residence, and in limited cases to refinance debt; it may also pay reasonable loan expenses (closing, title, appraisal, surveying), special design features or equipment for a household member's disability, water, sewer and power connections, property taxes due at closing and the escrow account, essential equipment and energy-saving measures; and it may not be used for income-producing land or buildings or to pay for-profit companies for packaging the application or referring applicants.

   Sources 1 · 7 CFR §3550.52: 'Section 502 funds may be used to buy, build, rehabilitate, improve, or relocate an eligible dwelling and provide related facilities for use by the borrower as a permanent residence'; 'In limited circumstances section 502 funds may be used to refinance existing debt'; (d)(1) 'legal, architectural and engineering, technical, title clearance, and loan closing fees; and appraisal, surveying'; (d)(2) 'special design features or equipment when necessary because of a physical disability'; (d)(3) 'connection fees'; (d)(5) 'Real estate taxes that are due and payable on the property at the time of closing and for the establishment of escrow accounts'; (d)(7) 'essential equipment'; (d)(8) 'approved energy savings measures'; (e)(2) 'income-producing land or buildings'; (e)(3) 'Pay fees, commissions, or charges to for-profit entities related to loan packaging or referral' · Checked October 31, 2026

2. Under the regulation (7 CFR §3550.53), at loan approval the household's adjusted income may not exceed the area's low-income limit, and at closing it may not exceed the moderate-income limit; you must be a U.S. citizen or a noncitizen who qualifies as a legal alien; you must agree to and be able to live in the home; if the home is being built or renovated, an adult in the household must be available to make inspections and authorize progress payments; and as a rule current homeowners do not qualify for an initial loan, except, for example, when their current home is deficient housing.

   Sources 1 · 7 CFR §3550.53(a): 'At the time of loan approval, the household's adjusted income must not exceed the applicable low-income limit for the area, and at closing, must not exceed the applicable moderate-income limit'; (b): 'a United States citizen or a noncitizen who qualifies as a legal alien as defined in § 3550.10'; (c): 'Applicants must agree to and have the ability to occupy the dwelling'; 'an adult member of the household must be available to make inspections and authorize progress payments'; (d): 'Current homeowners are not eligible for initial loans except as follows'; '(ii) Purchase a new dwelling if the current dwelling is deficient housing' · Checked October 31, 2026

3. Under the regulation (7 CFR §3550.53(g)), you have repayment ability when the principal, interest, taxes and insurance payment (PITI) is no more than 33% of your repayment income and, with your monthly debts, no more than 41%; if you exceed those by a small amount, USDA may consider compensating factors such as a history of paying as much for housing, savings history, job prospects or adjustments for nontaxable income; and if you fall short, a cosigner or other household members may join the application.

   Sources 1 · 7 CFR §3550.53(g)(1): 'does not exceed thirty-three percent of the applicant's repayment income (PITI ratio)'; 'must not exceed forty-one percent of the applicant's repayment income (total debt ratio)'; (g)(2): 'compensating factors may be considered'; 'payment history'; 'savings history, job prospects, and adjustments for nontaxable income'; (g)(3): 'have another party join the application as a cosigner, have other household members join the application, or both' · Checked October 31, 2026

4. Under the regulation (7 CFR §3550.53(h)–(i)), you must be unable to get the credit you need from other sources on terms you could reasonably meet, and have a credit history that shows ability and willingness to pay; signs of unacceptable credit include, among others, being more than one payment behind for more than 30 days in the last 12 months, a foreclosure completed in the last 36 months, a tax lien with no payment arrangement, two or more rent payments 30 or more days late in the last 2 years and collection accounts with no arrangement; a bankruptcy with debts discharged more than 36 months ago, or a completed bankruptcy plan with 12 months of on-time payments, does not count against you; if you are turned down for credit, you are told the reason and source; and first-time buyers must complete a homeownership education course from a certified provider, with exceptions.

   Sources 1 · 7 CFR §3550.53(h): 'Applicants must be unable to secure the necessary credit from other sources on terms and conditions that the applicant could reasonably be expected to fulfill'; (h)(1)(i) 'exceeded one installment for more than 30 days within the last 12 months'; (iii) 'A foreclosure which has been completed within the last 36 months'; (iv) 'outstanding Internal Revenue Service tax lien'; (vi) 'Two or more rent payments paid 30 or more days late within the last 2 years'; (vii) 'Outstanding collection accounts'; (h)(2)(i) 'debts were discharged more than 36 months prior'; (h)(3) 'the applicant will be informed of the reason and source of information'; (i) 'a homeownership education course from a certified provider' · Checked October 31, 2026

5. Under the regulation (7 CFR §3550.55), everyone applying files a complete written application in USDA's format, and applications are accepted even when funds are not available; incomplete applications are returned in writing; USDA may ask you to confirm your interest and withdraw the application if you do not answer in time; and when funds are limited and there is a waiting list, priority goes first to existing customers who need loans to fix health and safety hazards, then to sales of USDA-owned homes or transfers, then to households facing hardship (such as living in deficient housing for more than 6 months or being about to lose a home to foreclosure), then to mutual self-help, packages from approved intermediaries and loans that leverage other financing, and then everyone else, in the order complete applications arrived, with a veterans' preference for same-day applications.

   Sources 1 · 7 CFR §3550.55(a): 'All persons applying for RHS loans must file a complete written application'; 'Applications will be accepted even when funds are not available'; (b)(1) 'Incomplete applications will be returned'; (b)(3) 'RHS may withdraw the application of any applicant who does not respond'; (c): 'processed in the order that the completed applications are received'; 'veterans' preference'; 'When funds are limited and eligible applicants will be placed on the waiting list'; (c)(1)–(5) priorities · Checked October 31, 2026

6. Under the regulation (7 CFR §§3550.57 and 3550.63), the home must be modest for the area, not designed to produce income and have a market value no higher than the area loan limit, with exceptions such as a very large household or a reasonable accommodation for a disability; existing homes must be sound, functional, in good repair or repaired with the loan, with adequate electrical, heating, plumbing, water and wastewater systems and free of termites; new in-ground pools are not allowed with new homes; the area loan limit is based on a percentage of the area's FHA limit, is reviewed at least every year and is posted on USDA's website; and total debt may not exceed 100% of market value for an existing home.

   Sources 1 · 7 CFR §3550.57(a): 'The property must be one that is considered modest for the area, must not be designed for income producing purposes, or have a market value in excess of the applicable maximum area loan limit'; 'to serve exceptionally large households or to provide reasonable accommodation'; 'in-ground swimming pools with new construction ... are prohibited'; (c): 'structurally sound; functionally adequate; in good repair'; 'free of termites'; §3550.63(a)(1): 'based on a percentage(s) of the applicable local HUD section 203(b) limit'; 'reviewed at least annually and posted to the Agency website'; (b)(1): '100 percent of market value for existing housing' · Checked October 31, 2026

7. Under the regulation (7 CFR §§3550.64, 3550.66 and 3550.67), non-elderly families must put net family assets above $15,000 toward the down payment, and elderly families assets above $20,000; the interest rate is USDA's rate in effect at loan approval or closing, whichever is lower, and the information is available at any Rural Development office; and the term is up to 33 years, up to 38 years if your adjusted income is no more than 60% of the area's adjusted median income and the longer term is needed to show repayment ability, and up to 30 years for manufactured homes.

   Sources 1 · 7 CFR §3550.64: 'Elderly families must use any net family assets in excess of $20,000 towards a down payment'; 'Non-elderly families must use net family assets in excess of $15,000'; §3550.66: 'the applicable RHS interest rate in effect at loan approval or loan closing, whichever is lower'; 'Information about current interest rates is available in any Rural Development office'; §3550.67(a): 'Thirty-three years'; (b)(1): 'Thirty-eight years ... does not exceed 60 percent of the area adjusted median income'; (d): 'Thirty years for manufactured homes' · Checked October 31, 2026

8. Under the regulation (7 CFR §3550.68), USDA gives three kinds of payment subsidy (interest credit, payment assistance method 1 and method 2); borrowers can get it if they live in the home, have adjusted income at or below the moderate-income limit and have a loan term of 25 years or more; under any method, assistance cannot exceed what would bring the payment down to a 1% interest rate; under method 2, which goes to borrowers who never had a subsidy, assistance is the lesser of the difference between the annual loan payment (plus taxes and insurance) and 24% of your adjusted income, and the difference between the loan payment and the payment at 1% interest; you cannot switch methods; and USDA reviews your income every year, and you must report when an adult in the household changes or gets a job, when household members change or when your income rises at least 10%.

   Sources 1 · 7 CFR §3550.68: 'RHS administers three types of payment subsidies: interest credit, payment assistance method 1, and payment assistance method 2'; (a)(1) 'if they personally occupy the property and have adjusted income at or below the applicable moderate-income limit'; (a)(2) 'only if the term of the loan is 25 years or more'; (b)(3) 'will receive payment assistance method 2'; (b)(4) 'A borrower may not opt to change payment assistance methods'; (c) 'payment assistance may not exceed the amount necessary if the loan were amortized at an interest rate of one percent'; (c)(1) 'less twenty-four percent of the borrower's adjusted income'; (e) 'The borrower's income will be reviewed annually'; 'if income increases by at least 10 percent' · Checked October 31, 2026

9. Under the regulation (7 CFR §3550.69), for qualified households USDA may defer up to 25% of the monthly principal and interest payment figured at 1%, for up to 15 years; it is granted only at the initial loan closing, reviewed every year and recaptured when you transfer title or stop living in the home; and to qualify, your adjusted income at approval must be within the very low-income limit, the term must be 38 years (30 for a manufactured home) and the 1% payment plus taxes and insurance must exceed a set share of your income.

   Sources 1 · 7 CFR §3550.69: 'RHS may defer up to 25 percent of the monthly principal and interest payment at 1 percent for up to 15 years'; 'This assistance may be granted only at initial loan closing and is reviewed annually'; 'subject to recapture when the borrower transfers title or ceases to occupy the property'; (a)(1) 'does not exceed the applicable very low-income limits'; (a)(2) 'The loan term is 38 years, or 30 years for a manufactured home' · Checked October 31, 2026

10. Under the regulation (7 CFR §3550.162), if your loan was approved or assumed on or after October 1, 1979, you must repay payment subsidy (including the former interest credit) and deferred assistance when you transfer title or stop living in the home, including in a foreclosure or deed in lieu; the amount is set by your subsidy repayment agreement and based on your equity when the loan is paid off, and is the lesser of the subsidy received and a portion of the home's value appreciation; if there is no equity under that calculation, the principal reduction attributed to subsidy is not collected; if you refinance or pay off the loan without transferring title and keep living in the home, you can defer the repayment interest-free until you sell or move, and it may be discounted if paid in full at closing; and in an assumption on new rates and terms, the seller may pay it or the buyer may add it to the assumed loan.

    Sources 2 · 7 CFR §3550.162(a): 'Borrowers with loans approved or assumed on or after October 1, 1979, will be required to repay subsidy amounts received through payment subsidy (including the former interest credit program) or deferred mortgage assistance'; 'due and payable when the borrower transfers title or ceases to occupy the property, including but not limited to, in the event of foreclosure or deed in lieu of foreclosure'; (b)(1) 'based on the borrower's equity in the property at the time of loan pay off'; 'If there is no equity based on the recapture calculation, the amount of principal reduction attributed to subsidy is not collected'; '(i) The amount of subsidy received; or (ii) A portion of the value appreciation'; (c) 'payment of recapture may be deferred, interest free, until the property is sold or vacated'; 'recapture will be discounted if paid in full at the time of settlement'; (d)(1) 'paid in full by the seller or included in the principal amount assumed by the buyer' · Checked October 31, 2026

11. According to the CFPB, the counseling agencies on its list are approved by HUD and can offer independent advice about whether a set of mortgage loan terms fits your goals and situation, often at little or no cost.

    Sources 3 · Find a housing counselor: 'approved by the U.S. Department of Housing and Urban Development (HUD), and they can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you' · Checked October 31, 2026