Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama

Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama is a first mortgage for homebuyers in Alabama, administered by USDA Rural Development - Alabama (Rural Housing Service). USDA Rural Development's Section 502 Direct Home Loan Program helps low- and very-low-income Alabama households buy, build, or repair homes in eligible rural areas, with loans made directly by USDA. The program offers up to 100% financing (typically no down payment) and a payment-assistance subsidy that can reduce the effective interest rate to as low as 1% based on adjusted family income. Terms run up to 33 years (38 for very-low-income borrowers). Up to 100% financing, typically no down payment required. Payment-assistance subsidy can lower the effective rate to as low as 1%. Fixed rate 5.125% (effective June 1, 2026) for low/very-low income. Terms up to 33 years (38 for very-low-income). Applications accepted year-round; can be used to buy, build, repair, or relocate a home. Funding comes from USDA Rural Development, Section 502 Direct Loan Program (Housing Act of 1949, 7 CFR Part 3550).

Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama is a first mortgage and is repaid under the terms set by USDA Rural Development - Alabama (Rural Housing Service). Repayment is triggered by Payment subsidy (subsidy recapture) is repaid in whole or in part when title transfers or the borrower no longer occupies the dwelling. The assistance is recorded in First position. Forgiveness and repayment terms are set by the program and can change — confirm them on the official program page before applying.

Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama is open to homebuyers who will live in the home as their primary residence. On credit, the program states: No fixed minimum credit score; applicants must demonstrate a willingness and ability to repay debt. Residency requirement: Property must be located in an eligible rural area in Alabama and occupied as the applicant's primary residence. Citizenship or immigration status: Must meet citizenship or eligible noncitizen requirements. Program Status: OPEN. This is a direct first-mortgage loan rather than a stand-alone DPA layer, included because it eliminates the down payment for income-eligible rural Alabama buyers. Interest rate 5.125% effective 6/1/2026 (adjusts with market). County-specific income and area loan limits apply; specific 4-person income limit and max purchase price are county-dependent and omitted.

Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama limits household income to 80% of the area median income, which varies by county and household size. Applicants must have adjusted income at or below the applicable low-income limit for the county (very-low and low-income tiers). Income limits vary by county and household size - see USDA RD Direct income limit map. Family income may be adjusted for children, disabled or elderly household members, childcare, and eligible medical expenses. The limit applies to total household income, not only the borrower’s. Area median income figures are published by HUD and updated annually, so check the current table for the county before relying on a number.

Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama caps the purchase price as follows: Property market value may not exceed the applicable county area loan limit (see USDA RD area loan limit map). Eligible property types include Single Family. New construction is eligible. Manufactured homes are eligible.

Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama serves homebuyers purchasing anywhere in Alabama. The program targets specific areas: Available only in USDA-designated eligible rural areas of Alabama.

Applications for Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama go through USDA Rural Development - Alabama (Rural Housing Service), which publishes the current terms and the application steps on its own site. Funds are reserved through Applications accepted year-round on an ongoing basis through local Alabama RD area offices (program period Oct 1 - Sep 30). Hey Prescott is not a lender and does not accept applications; this page describes the program so a homebuyer can take it to a lender or housing counselor.