RHS Loan

What Is an RHS Loan?

An RHS loan is a type of financing provided or guaranteed by the Rural Housing Service (RHS) of the U.S. Department of Agriculture (USDA). The RHS lends directly to low-income borrowers in rural areas and guarantees loans issued by approved lenders that meet RHS requirements.

The RHS originates and guarantees more than home mortgages. It operates loan programs for community services such as healthcare clinics, police and fire stations, schools, and childcare centers—and things like first-responder vehicles and equipment.

Understanding RHS Loans

Different types of loan programs are available through the USDA’s RHS, each with its requirements for applicants and lenders. Single-family direct housing loans are for borrowers in low- to very-low-income brackets and are designed to help them secure safe, sanitary, and decent housing that they could not get on their own. A borrower who wants to buy a home and who might not qualify for a traditional mortgage because of low income or problematic credit history may have an improved chance of applying for an RHS single-family direct home loan.

The single-family housing guaranteed loan program helps approved lenders provide the opportunity for families to own decent housing. Borrowers can have low to moderate income. Approved borrowers can build, rehabilitate, improve, or relocate a residence in an eligible rural area.

The RHS also offers loan programs for multifamily rental housing in rural areas. These programs finance projects designed for low-income, elderly, and disabled individuals and families and domestic farmworkers.

The RHS multifamily loan programs include:

• Farm Labor Direct Loans and Grants
• Housing Preservation and Revitalization Demonstration Loans and Grants
• Multifamily Housing Direct Loans
• Multifamily Housing Loan Guarantees
• Multifamily Housing Rental Assistance

In addition to home loans, the RHS also manages loan programs for community services in rural locations such as police and fire stations, schools, and childcare centers.

RHS Loan Requirements

To be eligible for an RHS single-family loan:

• The borrower must be a U.S. citizen, U.S. noncitizen national, or qualified alien
• The borrower must not be able to obtain a loan from another source
• The family’s income cannot exceed the limits set for their respective area
• The residence must measure 2,000 square feet or less
• The residence must not have a market value that exceeds the loan limit for the area
• The residence cannot have an in-ground swimming pool
• The residence must not be designed for commercial activities
• The residence must be located in an approved area, which includes those with populations of 35,000 or less

For either the direct or guaranteed home loan programs, borrowers cannot be delinquent on any federal debt and must be U.S. citizens or legal nonresident aliens.

With an RHS loan, a down payment might not be required on the house, but the borrower must still be able to pay the mortgage payments, taxes, and insurance. The cost of required repairs could be included in the mortgage amount.

Funds for RHS single-family homes can be used for:

• New or existing residential property to be used as a permanent residence
• A site with a new or existing dwelling (no acreage limits)
• Repairs and rehabilitation
• Essential household equipment such as wall-to-wall carpeting, ovens, ranges, refrigerators, washers, dryers, heating, and cooling equipment
• Site preparation costs, including grading, foundation plantings, seeding or sod installation, trees, fences, and driveways
  

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