How do I Qualify for USDA 502 Home Loan Program?

by Ron White, Demand Media


A United States government-supported program can help you buy a home in you live in a rural area. The Section 502 Loan Guarantee Program, administered by the U.S. Department of Agriculture (USDA), guarantees home loans to households if they cannot obtain loans through typical mortgage programs and qualify under rules of the program.

How to Qualify for the USDA 502 Loan Program


To qualify for a USDA 502 loan you cannot earn more than 115 percent of your area’s median income. Use the USDA’s website (see Resources) to find out if you meet this income standard.


Meet the requirement that limits the program to applicants unable to qualify for a conventional mortgage. The USDA Rural Development office can make this determination based on a review of your income and credit history. You need to establish a fair credit history.


You also must meet the qualification formula for the home you want. To qualify for a loan, the monthly mortgage payment for the loan principal, interest, taxes and insurance must be no more than 29 percent of your gross monthly household income.


There are debt-level rules, too. You cannot use more than 41 percent of your gross monthly income to pay debts.


Apply for a 502 loan through an approved lender. Only institutions approved by the Rural Housing Service can issue loans. Local Rural Development offices can provide a list of approved lenders. You’ll need proof of your income–copies of your two most recent pay stubs–when you apply for the loan, which must be for 30 years at a fixed rate.


Buy a home that meets U.S. Department of Housing and Urban Development standards. A real estate agent or lender can provide you with details on these standards.


  • Visit a local Rural Development office if you have questions that your lender cannot answer.


  • Lying to the federal government about household income constitutes fraud and is a federal crime.






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