USDA Direct vs. Guaranteed Loan Requirements. The USDA direct loan is designed to support low income households who wouldn’t otherwise be able to secure any sort of home financing. This leads to more income restrictions on direct loans compared to guaranteed loans. The 502 USDA Guaranteed Mortgage is intended for rural buyers with higher income.
With a guaranteed farm loan, the lender is FSA’s customer, not the loan applicant. Guaranteed loans are the property and responsibility of the lender. The lender and loan applicant complete the Application for Guarantee and submit it to the FSA Service Center in their lending area.
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In short, the USDA Direct loan is set aside for home buyers that have low to very low income. These loans are processed directly by the USDA only, as the name "direct" implies. The USDA 502 Guaranteed loan is geared towards moderate income borrowers, this program makes up the large majority of USDA loans in the U.S. today.
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USDA Direct Loan vs USDA Guaranteed Loans. Many don’t realize that there are two types of Section 502 Single-Family Rural Housing Loans and mistake the usda single-family direct Loan with the Single-Family Guaranteed Loan. The USDA created both loan programs to boost homeownership in rural and suburban areas.
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HB-1-3550 – Direct Single family housing loans field office Handbook; Why does USDA Rural Development do this? USDA Rural Development’s Section 502 Direct Loan Program provides a path to homeownership for low- and very-low-income families living in rural areas, and families who truly have no other way to make affordable homeownership a reality.
This farm financing program is made available by the USDA through the FSA. USDA Guaranteed Farm Loans. Unlike the direct farm loan, the Guaranteed Farm Programs are funded by USDA-approved commercial lenders and banks. The USDA makes sure that the terms are reasonable for both the borrowing farmers and ranchers and the lending party.
Loan Types. The USDA offers two types of loans for first-time home buyers under Section 502: the guaranteed loan and the direct loan. Private lenders service guaranteed loans, with the government reducing the lender’s risk by guaranteeing repayment. direct loans target home buyers with lower incomes than those eligible for guaranteed loans.