USDA Rural Development has implemented handbook revisions to its Section 502 direct loan program that affect how loans are processed and who qualifies.
According to the National Association of Realtors, the Section 502 program helps low- to very-low-income borrowers buy homes in rural areas. The changes took effect Feb. 10.
NAR said the most significant change for homebuyers is a reduction in the program’s loan limit.
The cap was previously set at 80% of local HUD limits, but it has been lowered to 60%. That means borrowers will have access to less financing than before. USDA also removed the ability to grant exceptions to this limit, NAR reported.
Changes Impact How SNAP Benefits Count
Also, SNAP benefits no longer will count toward a borrower’s income when determining eligibility, and appraisals now must be completed before a loan can be approved, eliminating the prior previous of obligating loans “subject to appraisal.”
NAR said that applicants with unresolved federal debt no longer will be able to seek an exception to continue the application process. NAR noted that the certified packaging fee has been capped at $750, and the 38-year loan term now requires state director approval.
When direct loan funds are unavailable, NAR said that applicants will be directed to consider the Section 502 guaranteed loan program as an alternative. USDA also updated its priority processing thresholds for loans that include affordable housing financing.
The National Association of Realtors noted that unlike formal rulemaking, handbook updates don’t require public notice or a comment period, which means these changes were not subject to formal stakeholder input before taking effect.
