Last Updated on September 12, 2023 by Lori Pace
The U.S. Department of Agriculture (USDA) owns the Rural Housing Service (RHS) which administers a wide range of programs such as the Section 504 home repair program. These programs aim to help rural communities develop and provide affordable housing. RHS provides both direct loans and guarantees mortgage loans from other lenders.
The RHS National Office, located in Washington, D.C., is responsible for setting policy, developing regulations, performing oversight, and other duties. RHS has a central collection and servicing center in St. Louis, Mo. DLOS (Direct Section 502 Loans and Section 504 Loans) is a computerized system. The USDA’s RD offices are responsible for RHS operations in the field. Each RD State Office oversees programs within a state or multistate region.
There are many ways to organize Rural Development offices in a state, but usually, Area or District Offices oversee Local Offices (also known as county or community development offices) and process and service grants and loans. The Local Office processes single-family housing applications, assists District Offices in servicing organizational applications, provides counseling for applicants’ families, and offers backup servicing if necessary.
The Section 504 Very Low-Income Housing Repair Program provides grants and loans to very low-income homeowners for repairs, improvements, and modernization of their homes, as well as to remove safety and health hazards.
Homeowner-occupants cannot obtain credit elsewhere. They also must have very low incomes (defined as less than 50 percent of the area’s median income). They will need to make improvements and repairs to make the home safer and more sanitary or remove safety and health hazards.
Only homeowners over the age of 62 can apply for grants. They cannot repay a Section 504. These grants cover repairs or improvements that remove safety and health hazards. These regulations allow for a broad interpretation of the term “owner”.
There are grants of up to $7,500 and loans of up to $20,000 available. The loans are available for up to 20 years at a 1 percent interest. For loans exceeding $2,500, a real estate mortgage will be a requirement. For loans exceeding $7,500, full title services are a requirement. If you did not sell the property within three years, you may need to repay the grants. If the applicant is able to repay part of the loan, there can be a grant/loan combination. You can combine a loan and a grant to receive up to $27,000.
While properties that have been repaired do not need to comply with other RHS codes, the installation of water and wastewater systems and associated fixtures must be in compliance with local health department requirements. Section 504 home repair program funds can be used to remove major safety and health hazards from a home, but not all. All work must comply with other local codes and standards.
If there is no backlog, the Rural Development local office manager will make a decision within 30-60 days.