USDA Single Family Housing Guaranteed Loan Program (Section 502 Guaranteed)

What is USDA Single Family Housing Guaranteed Loan Program (Section 502 Guaranteed)?

USDA Single Family Housing Guaranteed Loan Program (Section 502 Guaranteed) is a first mortgage for homebuyers in Alabama, administered by USDA Rural Development, Alabama State Office.

• The USDA Section 502 Single Family Housing Guaranteed Loan Program provides a 90% loan note guarantee to approved private lenders, enabling low- and moderate-income households to purchase, build, or rehabilitate a home in eligible rural areas of Alabama with no money down. Applicants must not exceed 115% of area median income and must occupy the property as their primary residence. Not limited to first-time homebuyers; supports 30-year fixed-rate financing.
• 100% financing — no down payment required.
• No minimum credit score set by USDA.
• 90% federal loan guarantee.
• Closing costs, repairs, and site prep may be financed.
• No set purchase price limit.
• Not restricted to first-time homebuyers.
• 30-year fixed rate.
• Manufactured homes eligible.
• This is a federal program, so it is available beyond a single state or city.
• Funding comes from Federal — USDA Rural Housing Service; 90% loan note guarantee backed by federal government.

Do you have to pay it back?

USDA Single Family Housing Guaranteed Loan Program (Section 502 Guaranteed) is a first mortgage and is repaid under the terms set by USDA Rural Development, Alabama State Office.

• 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?

USDA Single Family Housing Guaranteed Loan Program (Section 502 Guaranteed) is open to buyers who will live in the home as their primary residence.

What are the income limits?

USDA Single Family Housing Guaranteed Loan Program (Section 502 Guaranteed) limits household income to 115% of the area median income, which varies by county and household size.

• FY2025 income limits vary by Alabama MSA/county. Moderate income (115% AMI) 4-person limits: Huntsville MSA $119,850; Birmingham-Hoover HMFA $119,850; Auburn-Opelika HMFA $119,850; Decatur MSA $104,800; most other Alabama counties $119,850. 1-8 person limits in HB-1-3555 Appendix 5 (PN 645, 06/18/2025).
• The limit applies to total household income, not only the borrower’s.
• The program lists a maximum household size of 8.
• 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?

USDA Single Family Housing Guaranteed Loan Program (Section 502 Guaranteed) caps the purchase price as follows: No set maximum purchase price; loans are based on appraised value; must be modest, adequate housing.

• Eligible property types include Single Family, Condo, Townhouse, PUD, Modular, and Manufactured.
• New construction is eligible.
• Manufactured homes are eligible.

Where does it apply?

USDA Single Family Housing Guaranteed Loan Program (Section 502 Guaranteed) is a federal program, so it is not limited to Alabama.

• The program targets specific areas: Only properties in USDA-designated eligible rural areas qualify; verify at eligibility.sc.egov.usda.gov; urban/suburban areas typically ineligible.

How do you apply?

Applications for USDA Single Family Housing Guaranteed Loan Program (Section 502 Guaranteed) go through USDA Rural Development, Alabama State Office, which publishes the current terms and the application steps on its own site.

1. 1

   Contact USDA Rural Development, Alabama State Office to reserve funds

   Funds are reserved through Applications accepted on a continuous basis through approved lenders; no reservation required, 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.