The Rural Housing Service works with
private lenders to guarantee loans to borrowers for the construction of multi-family
housing units; community facilities; and individual homes. Most loan guarantees
issued by the Rural Housing Service are from 80-100% of the amount of the loan. The reasons investors might choose to work with the
Rural Housing Service are many. Since loan guarantees issued by RHS are backed by
the full faith and credit of the U.S. Treasury, many lenders consider RHS programs to be a
relatively risk-free way to expand portfolios.
Also, loans made possible by partnerships
between RHS and private lenders improve the economic health of rural communities.
The continued well-being of rural areas provides more opportunities for lending
institutions which invest in these communities
The following is a list of programs in
which lenders might be interested, and information about lender eligibility.
Single Family Housing Programs
Single Family
Housing Loan Guarantees (Section 502)
Private lenders work with RHS to
offer loans to individuals interested in building or purchasing a home. Loans are
made to individuals for up to 100% of the appraised value of the home. Terms
are for 30 years, and the interest rate is negotiated between the lender and the
individual borrower. (The interest rate on the loan must be
fixed and cannot exceed the rate specified in the Notice of Funding Availability (NOFA)
published yearly in the Federal Register.) RHS provides a guarantee to the
lender of 90% of the worth of the loan.
Qualified lenders for the Single Family Housing
Guaranteed Loan Program include any State housing agency; lenders approved by HUD, the
U.S. Veterans Administration, Fannie Mae or Freddie Mac for certain purposes; Farm Credit
System institutions; and lenders participating in other USDA Rural Development and/or
Consolidated Farm Service Agency guaranteed loan programs.
For more information
about the Single Family Housing Guaranteed Loan Program, click here.
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Multi-Family Housing
Programs
Eligible lending partners for Rural
Housing Service Multi-Family Housing loans are those currently approved and considered
eligible by:
- the Federal National Mortgage Association
- the Federal Home Loan Mortgage Corporation
- a member of the Federal Housing Finance
Board, or
- the Department of Housing and Urban
Development.
State Housing Finance Agencies are also
considered eligible lenders. Other lenders have the opportunity to enter into a
correspondent bank relationship with approved lenders in order to participate in the
program.
Rural Rental Housing
Guaranteed Loan Program (Section 538)
This program is intended to fund
construction, acquisition, or rehabilitation of rural multifamily housing for low-income
occupants. The Rural Housing Service guarantees up to 90% of the amount of the loan
from a private lender to a housing developer.
Residents of the completed housing
facility must be very low- to moderate-income households; or elderly, handicapped, or
disabled persons with income not in excess of 115% of the median income of the surrounding
area.
The terms of the loans guaranteed may be
up to 40 years, and the loans must be fully amortized. Rates of the loans guaranteed must
be fixed, as negotiated between lender and borrower, within the maximum established under
the Notice of Fund Availability (NOFA) RHS publishes each year in the Federal Register.
The rate is based on the 30-year Treasury
Bond rate on the day prior to date of loan closing.
For more information
about the Rural Rental Housing Guaranteed Loan Program, click here.
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Community Facilities
Guaranteed Loan Program
Examples of eligible lenders are:
- Banks or savings and loan associations
- Mortgage companies that are part of banks
or holding companies
- Farm Credit Banks
- Insurance companies regulated by the
National Commissioner of Insurance Companies
Other lenders under Federal or State
credit examination and supervision may also be approved by the Rural Housing Service
Administrator
The Rural Housing Service Community
Facilities Program assists in development of essential community facilities and services
in rural areas of up to 20,000 in population. To
see examples of projects which may be eligible for essential community facilities under
the Community Facilities Loan and Grant Programs click here.
Loans can be guaranteed to municipalities, counties, and
special-purpose districts, as well as to non-profit corporations and tribal
governments. Applicants must have the legal authority to borrow and repay loans, to
pledge security for loans, and to construct, operate, and maintain the facilities.
They must also be financially sound and able to organize and manage the facility
effectively.
The interest rate is negotiated between the lender and the
applicant. It may be fixed, variable, or both. Loan payments must be
amortized. Loan terms are for the estimated useful life of the facility or no more
than 40 years. The Rural Housing Service can guarantee up to 90% of the worth of the
loan.
For more information
about the RHS Community Facilities program, click here.
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To determine eligibility for
these and other Rural Housing Service programs, please contact your local or State Rural Development office.
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