USDA Loan Packaging

The USDA Rural Development’s 502 Direct Loan is subsidized by USDA, making it a very affordable option. No down payment or private mortgage insurance is required, and the interest rate is currently 2.5%. Monthly payments may be based on an interest rate as low as 1% depending on the level of subsidy received, with the goal being to keep your total monthly housing cost below 35% of your income. Closing costs are also less expensive when compared with most traditional mortgage loans offered by banks.

The maximum income limits and maximum loan amounts for the USDA 502 Direct loan are:

Banks offer a variant of this loan (called the USDA 502 Guaranteed Loan) but they charge a fee equal to 1% of the amount of the loan. With other miscellaneous lender fees tacked on, one can easily pay more than 1% of the loan amount to obtain this type of loan from a bank.

The People’s Self-Help Housing Homeownership Department is able to process and package a USDA 502 Direct loan for a flat fee of $1,750 offering you a considerable savings. Best of all, this fee can be financed as part of your loan if you wish, further reducing your closing costs.

Example of savings on loan fees using USDA 502 Direct vs. 502 Guaranteed:

Loan Program Basics:

• You can purchase new construction, or an existing home
• The home must generally be less than 2,000 square feet
• The home cannot have an in-ground swimming pool
• You must occupy the home, you cannot own another home, and the home cannot be designed for income producing activities
• The home must be located in an eligible rural area. Many communities with populations <35,000 qualify, including Fillmore, Piru, Guadalupe, Los Alamos, Nipomo, Los Osos, Atascadero, Templeton, Paso Robles, San Miguel, Shandon, King City, Greenfield and others. View our eligibility tool to see if a specific property is eligible.

Contact our Housing Specialists at (805) 540-2446 or homeownership@pshhc.org with any questions!