Difference Between 502 Guarantee Loan and Direct Loan for RHS USDA Loan in Kentucky


The important differences between the Kentucky Section 502 guaranteed and Kentucky direct USDA and RHS loan programs are as follows:

The Kentucky RHS or USDA  lender for Section 502 guaranteed loans is a private savings and loan institution, bank, or mortgage company which also handles all the loan servicing. The lender for the direct program is the Rural Housing Service; Rural Development handles the servicing.

Income levels for Section 502 guaranteed borrowers are capped at 115 percent of the area
median income. Income levels for the direct program must be no more than 80 percent of the

 Payment assistance subsidy is not available through the guaranteed program.

Payment assistance, which can reduce the interest paid on the mortgage to as low as 1 percent, is available for borrowers in the direct program and is based on the borrower’s income as a percent of AMI.

Borrower protections differ between the programs. 

Applicants for guaranteed loans do not have the rights of moratorium or of appeal that accompany the direct program. Also, in the case of default, Section 502 guaranteed loans are liquidated by the commercial lender, while direct loans are
liquidated by the government.

Single Family Direct Home USDA Loan

This USDA loan assists low-income individuals purchase, repair, or renovate homes in more rural areas.

The life of the loan depends on the income:
Up to 33 years for applicants with incomes of more than 60% of the average median income for the region
Up to 38 years for borrowers with less income
Up to 30 years for those purchasing a mobile home or some other home which was mostly made in a factory

You need to have a household income of under 80 percent of the median income for the area to qualify, in addition to being able to afford the monthly payments. The home’s market value must also be reasonable.

Single Family Guaranteed Housing USDA Loan

For those of modest income, this loan type can help them obtain a home loan so long as their income is not more than 115% of the median income for the area. Such loans are for 30 years with variable interest rates.

Rural Repair & Rehabilitation Loans

This loan is a way of obtaining the means to repair and otherwise improve a home to rid it of safety hazards or make it more sanitary. Your income needs to be under 50% of the area’s median income and be otherwise unable to obtain the needed credit elsewhere.

Mutual Self-Help USDA Loan

Mutual self-help loans help low-income families to afford safe and clean homes or build their own. Typically, the families perform most of the labor themselves. Eligible families must have an income of less than 80% of the area’s average, must be without adequate housing, and cannot obtain credit elsewhere.

Terms for these USDA loans are for up to 38 years with effective interest rates of roughly 1%.

County or Equivalent Limit Effective 01-31-2020

Adair $265,400
Allen $265,400
Anderson $265,400
Ballard $265,400
Barren $265,400
Bath $265,400
Bell $265,400
Boone $265,400
Bourbon $265,400
Boyd $265,400
Boyle $265,400
Bracken $265,400
Breathitt $265,400
Breckinridge $265,400
Bullitt $266,800
Butler $265,400
Caldwell $265,400
Calloway $265,400
Campbell $265,400
Carlisle $265,400
Carroll $265,400
Carter $265,400
Casey $265,400
Christian $265,400
Clark $265,400
Clay $265,400
Clinton $265,400
Crittenden $265,400
Cumberland $265,400
Daviess $265,400
Edmonson $265,400
Elliott $265,400
Estill $265,400
Fleming $265,400
Floyd $265,400
Franklin $265,400
Fulton $265,400
Gallatin $265,400
Garrard $265,400
Grant $265,400
Graves $265,400
Grayson $265,400
Green $265,400
Greenup $265,400

Hancock $265,40
County or Equivalent Limit Effective 01-31-2020
Hardin $265,400
Harlan $265,400
Harrison $265,400
Hart $265,400
Henderson $265,400
Henry $266,800
Hickman $265,400
Hopkins $265,400
Jackson $265,400
Jessamine $265,400
Johnson $265,400
Kenton $265,400
Knott $265,400
Knox $265,400
Larue $265,400
Laurel $265,400
Lawrence $265,400
Lee $265,400
Leslie $265,400
Letcher $265,400
Lewis $265,400
Lincoln $265,400
Livingston $265,400
Logan $265,400
Lyon $265,400
McCracken $265,400
McCreary $265,400
McLean $265,400
Madison $265,400
Magoffin $265,400
Marion $265,400
Marshall $265,400
Martin $265,400
Mason $265,400
Meade $265,400
Menifee $265,400
Mercer $265,400
Metcalfe $265,400
Monroe $265,400
Montgomery $265,400
Morgan $265,400
Muhlenberg $265,400
Nelson $265,400
Nicholas $265,400
Ohio $265,400
Oldham $266,800
Owen $265,400
County or Equivalent Limit Effective 01-31-2020
Owsley $265,400
Pendleton $265,400
Perry $265,400
Pike $265,400
Powell $265,400
Pulaski $265,400
Robertson $265,400
Rockcastle $265,400
Rowan $265,400
Russell $265,400
Scott $265,400
Shelby $266,800
Simpson $265,400
Spencer $266,800
Taylor $265,400
Todd $265,400
Trigg $265,400
Trimble $265,400
Union $265,400
Warren $265,400
Washington $265,400
Wayne $265,400
Webster $265,400
Whitley $265,400
Wolfe $265,400
Woodford $265,400