Rural housing loans: A beginner's guide

by Teresa Merelman, Broker 08/02/2023

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If you’re interested in your financing options for buying or building a home outside a major urban area, you might want to consider the various rural housing loans offered by the United States government. The U.S. Department of Agriculture is an official government organization offering various loans to support communities in rural areas.

Here is some more of the basic information about rural housing loan opportunities:

Section 502 direct loans

One of the simplest types of loan assistance offered by the USDA is called a Single-Family Housing Direct Loan Program, or Section 502 loan. With these loans, the government lends the money directly to the homebuyer to buy, repair or build a new home in a qualified rural area.

Section 502 loans don’t require down payments, don’t require mortgage insurance, and typically have low, fixed interest rates. Payment assistance options can even lower interest rates even further.

USDA housing repair loans

Another option for rural housing is through the Section 504 Home Repair loan program. The USDA offers these loans to help potential homeowners bring home codes up to current standards, make necessary repairs, and address any safety or health issues with a property.

Determining your eligibility

How do you know if you’re eligible for a rural housing service home loan? There are some key factors determining eligibility, such as:

The location of the home you want to purchase or repair has to be in a low-population area.
An applicant’s household income must be below a certain threshold.
The applicant needs to show proof of credit history, though the minimum credit score is much lower than many other types of loan.
The property has to be used as a primary residence.

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Is a rural housing loan right for you? While these are just the basic facts about direct loans and other government-sponsored housing programs, this information can help you determine whether you might qualify.

About the Author

Teresa Merelman, Broker

Teresa's beginnings were at Fort Belvoir, Virginia. She was child #5 of 8 and born into an Air Force family that moved all over the United States but usually ended up back in the Washington, D.C. area. Teresa attended Miami University in Oxford, Ohio and received her bachelor's degree in business from George Mason University, in Fairfax, Virginia. Some of her prior careers include: computer buyer in Fairfax, Virginia; Deputy Clerk at the U.S. District Court in Denver, Colorado; Police Officer in Steamboat Springs, Colorado; and Bed & Breakfast owner in Stowe, Vermont. Teresa obtained her license as a Realtor® in 1998. She has been through many ups and downs in this profession and continues to learn every day. She very much enjoys the real estate profession and the wonderful people she has met and assisted along the way. In order to serve her clients and customers, Teresa continually attends classes and seminars. Some of her Designations and Certifications include:

ABR - Accredited Buyer Representative (2003)
CBR - Certified Buyer Representative (2000)
e-PRO - Internet Certified Professional (2001)
CNHS - Certified New Home Specialist (2005)
CRS - Certified Residential Specialist (2005)
AHS - Accredited Home-Stager Specialist (2008)
TRC - Transaction Referral Certification (2009)
RSPS - Resort and Second Home Specialist (2009)
GREEN - NAR's Green Designation (2009)
SFR - Short Sales & Foreclosures Certification (2009)
SRES - Senior Real Estate Specialist Designation (2012)
AHWD - At Home With Diversity (2021)
SRS - Seller Representative Specialist (2021)

Teresa has also served and continues to serve on several boards:

Lamoille Area Board of Realtors - President and Board of Directors
Vermont Association of Realtors - Board of Directors
NEREN (MLS) - Board of Directors and Shareholder
Vermont Real Estate Commission - as a member of VAR's Liaison Committee
Stowe Vibrancy - Board of Directors - this is a volunteer group that promotes activities in the Village of Stowe

In 2007, Teresa was named Vermont Realtor of the Year.Teresa and her husband, a local attorney, moved to Stowe in 1987. They had two sons and Stowe has been their home for the past 36 years. She still feels the Stowe area is a wonderful place to raise a family, there's always something going on. Teresa can often be found behind the lens of her camera documenting the beauty of the area and its many events.As an update, Teresa's older son is now a Doctor/resident at the University of New Mexico's Emergency Management Program. Her younger son graduated from James Mason University and currently resides in Chicago, IL as a supervisor for OKTA.