Last Updated on September 15, 2023 by Lori Pace
Single mothers looking to buy a home can apply for single family housing under the Section 502 Guaranteed Rural Housing Loan (GRH). In short, this loan is through USDA‘s Rural Housing Service (RHS). Conventional mortgages are available to rural borrowers. As these borrowers have the income and credit history necessary without the down payment requirement.
USDA’s Rural Housing Service (RHS) makes it easier to reach underserved markets. Rural borrowers with the right income and credit history can apply for the GRH program. However, they do not have to make a down payment in order to qualify for a conventional loan.
Freddie Mac buys GRH loans assumable or not through Fixed-rate Cash, Fixed rate Guarantor, and MultiLender Swap executions. To sell Section 502 GRH mortgages, sellers must get Freddie Mac approval. Besides, these mortgages must also be sold with recourse.
Section 502 GRH Loan program allows you to expand your market reach by offering a competitive affordable housing product specifically designed for rural areas. It also increases Community Reinvestment Act-eligible origination volumes. This section also leverages Freddie Mac as your secondary outlet for GRH loans.
For Whom that Single Family Housing – Guaranteed Rural Housing Guaranteed Loans Applies?
- Firstly, borrowers who want flexible guidelines on down payment and reserve requirements.
- Secondly, people who need closing costs to be eligible for the loan amount. These requirements are under certain circumstances, subject to GRH Section 502 program restrictions.
- And lastly, borrowers who want additional flexibility with no cash-out refinancing as permitted under the GRH Section 502 program.
Product Features of Single Family Housing – Guaranteed Rural Home Loans
Borrower Eligibility/Borrower Profile
RHS requirements determine these eligibilities, including:
Credit Fees In Price | Single Family Housing – Guaranteed Rural Home Loans
- For these mortgages, sellers must refer to either Guide Exhibit 19 and/or their negotiated terms for business.
- Credit Fees in Price will be paid in accordance with the Credit Fee. These are in Price provisions in Guide Section 6303
Refer to Guide Section 6302.15 to find special delivery instructions applicable for Guaranteed Rural Housing Mortgages.
- Guide Section 6201.7(a) states that assumable mortgages must not be sold to Freddie Mac without recourse. Moreover, non-assumable mortgages that have settlement dates after June 1, 2012 must be sold with recourse.
- Following the Guaranteed Regulations for LTV/TLTV Ratios is a must.
- LTV/TLTV cannot exceed 115 per cent using the Freddie Mac calculation. This LTV/TLTV ratio is based on either the appraised or purchase price. Besides, other requirements are in Guide Section 4203.2.
- Non-assumable Rural Housing Service Section 502 GRH Mortgage must have at least an Indicator Score of 620. If no borrower has usable credit scores, the mortgage will be eligible even if it does not meet the Indicator Score requirements.
- Secondary financing is not generally allowed.
- RHS must provide a guarantee for the mortgage and private mortgage insurance is not necessary.
- You may transfer the mortgaged properties. But these are securing FHA or VA mortgages. Moreover, assumable Section 502 GRH mortgages in accordance to applicable FHA/RHS regulations.
- The original loan amount cannot exceed either the Freddie Mac loan limit or RHS loan limits, whichever is lower.
- RHS program requirements act as determination for the underwriting requirements. They also take into account rural borrowers’ unique needs. So, for more information, see the GRH requirements.
Eligible Mortgage Products | Single Family Housing – Guaranteed Rural Home Loans
- 30-year fixed-rate mortgages
- Fixed-rate Cash servicing-retained
- Fixed-rate Guarantor
- MultiLender Swap
Property Type/Eligible Properties
- Primary residences (single-family dwellings, condominiums, planned unit developments (PUDs) and eligible manufactured homes)
- Leasehold and rehabilitated properties
- Property must meet the rural designation as defined by RHS
Transaction Type | Single Family Housing – Guaranteed Rural Home Loans
- Purchase transactions and no cash-out refinances, subject to Section 502 GRH Loan Program guidelines
- 30-year fixed-rate mortgages
- Non Loan Product Advisor℠ mortgages only