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

What is 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.
• This is a federal program, so it is available beyond a single state or city.
• Funding comes from USDA Rural Development, Section 502 Direct Loan Program (Housing Act of 1949, 7 CFR Part 3550).

How much assistance does it provide?

Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama provides assistance worth 100% of the purchase price, as set by the program.

• The program can be combined with other assistance, subject to the rules of each.
• Amounts are the program's published maximums, not an offer — USDA Rural Development - Alabama (Rural Housing Service) determines any individual award.

Do you have to pay it back?

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.

Who qualifies?

Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama is open to buyers who will live in the home as their primary residence.

What are the income limits?

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.

What kind of home can it be used for?

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.

Where does it apply?

Single Family Housing Direct Home Loans (Section 502 Direct) - Alabama is a federal program, so it is not limited to Alabama.

• The program targets specific areas: Available only in USDA-designated eligible rural areas of Alabama.

How do you apply?

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.

1. 1

   Contact USDA Rural Development - Alabama (Rural Housing Service) to reserve funds

   Funds are reserved through Applications accepted year-round on an ongoing basis through local Alabama RD area offices (program period Oct 1 - Sep 30)., and are subject to availability.

2. 2

   Work with a lender who handles the program

   Hey Prescott is not a lender and does not accept applications; this page describes the program so a buyer can take it to a lender or housing counselor.