Rural Homeownership is Possible Through USDA
By Kenneth Corn
Oklahoma State Director, USDA Rural Development
I’m a passionate proponent of homeownership. There is simply no better tool for a family to generate generational wealth than through the blessings of being a homeowner. In rural Oklahoma, I know many of our fellow neighbors struggle with the uncertainties of how to obtain that elusive first home. There is simply no better feeling knowing that you are providing a safe, and secure setting for the family and yet so many don’t know where to look or how to unlock that elusive door into homeownership.
It simply doesn’t have to be this way. Thankfully in my role as State Director, I have seen the incredible ways Rural Development has been that key for so many new homeowners in Oklahoma. USDA RD has two programs that can directly finance homeownership for our fellow Oklahomans. We also have another program where nonprofits can assist low income Oklahomans into their first home. The bottom line is there is certainly a path to home ownership, and I want to make sure we are providing our Oklahoma partners with the tools needed to unlock this elusive rural homeownership benefit.
The first program is probably our most popular USDA rural homeownership tool, and that is our Section 502 Guaranteed Loan Program, which assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Eligible applicants may purchase, build, rehabilitate, improve or relocate a dwelling in an eligible rural area with 100 percent financing. The program provides a 90 percent loan note guarantee to approved lenders to reduce the risk of extending 100 percent loans to eligible rural homebuyers. One of the best benefits of this loan is that there is no down payment required! Often a down payment is one of the biggest barriers to homeownership and USDA wants to uplift our Oklahoma neighbors – not put extra financial burdens on our rural communities.
To apply for this loan, first find a financial institution that processes USDA RD loans. I have found that most local banks in Oklahoma that extend mortgages utilize USDA, but nearly any bank that does mortgages usually utilizes this service. Next, we need to determine qualifications. For RD’s purposes applicants must:
- Meet income-eligibility (cannot exceed 115% of median household income)
- Agree to personally occupy the dwelling as their primary residence
- Be a U.S. Citizen, U.S. non-citizen national or Qualified Alien
- Buy in an eligible rural area, USDA’s eligibility site allows applicants to enter a specific address to determine suitable areas
The next program we offer is one of my favorite programs, and that is our Section 502 Direct Loan Program. This USDA loan assists low- and very-low-income applicants obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. The amount of assistance is determined by the adjusted family income. Additional benefits of this program allow for a 33–38-year payback period, requires no down payment and has interest rates lower than any other commercial lender. Currently, the direct loan rate as of June 1, 2023, sits at four percent. As you can tell by these benefits this program is simply unmatched by any other homeowner program. Ultimately these loan funds, if approved, can be used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.
As you can imagine our Direct Loan Program, has stricter requirements than through a commercial lender. USDA RD requires applicants to:
- have an adjusted income that is at or below the applicable low-income limit for the area where they wish to buy a house and they must demonstrate a willingness and ability to repay debt
- Be without decent, safe and sanitary housing
- Be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet
- Agree to occupy the property as your primary residence
- Have the legal capacity to incur a loan obligation
- Meet citizenship or eligible noncitizen requirements
- Not be suspended or debarred from participation in federal programs
Applicants can determine their eligibility status by calling our State Office at 405-742-1070 and they can also utilize USDA’s Eligibility site to help review if they may or may not qualify for RD assistance in this program. Because this program has complex rules, I would encourage anyone who thinks they might qualify for this or is unsure to call our Oklahoma RD Team. I have staff who are not only knowledgeable about these programs but are motivated to help their fellow Oklahomans on their journey to homeownership.
The final USDA RD program that I would like to talk about is geared towards nonprofit organizations like Habitat for Humanity. USDA recognizes that nonprofit organizations and of course our incredible Tribal partners are outstanding stakeholders on our goal of providing affordable and safe housing for Oklahomans. Knowing the importance these organizations play Rural Development provides Mutual Self-Help Housing Technical Assistance grants to help these organizations carry out local self-help housing construction projects. Grant recipients supervise groups of very-low- and low-income individuals and families as they construct their own homes in rural areas. The group members provide most of the construction labor on each other’s homes, with technical assistance from the organization overseeing the project. To see if an organization qualifies, I encourage them to call our State Office at 405-742-1070.
In addition to these amazing rural homeownership paths, RD also assists age 62+ and low-income rural homeowners with repair loans and grants. This is called our Section 504 Home repair Program and can be a valued lifeline for elderly neighbors who need a helping hand. Eligibility can be determined through our RD Staff by calling 405-742-1070.
As you can see the elusive nature of first-time homeownership in rural Oklahoma doesn’t have to be a mirage. I am fully committed to helping my fellow Sooners neighbors, so if you have any question about these programs or concerns anyone can reach out to me at: Kenneth.Corn@usda.gov.