The Section 502 Direct program is intended to help those who do not currently own adequate housing buy, build, relocate, rehabilitate, or improve a property to use as a permanent residence. All improvements must be on land that, after closing, is part of the security property.

Agency funds cannot be used to purchase or improve structures designed for income producing purposes or income-producing land. Home-based operations such as child care, product sales, or craft production that do not require specific features are not restricted.

Refinancing of non-Agency debt, except for debt on manufactured homes, is permissible in 3 circumstances:

• Refinancing for an existing home at risk of foreclosure, due to circumstances beyond the applicant’s control.
• Refinancing for an existing home in need of repairs totaling $5,000 or more to correct major deficiencies and make the dwelling decent, safe, and sanitary.
• Refinancing for a site without a dwelling, if the debt was for the sole purpose of purchasing the site, the applicant is unable to pay the debt, and the applicant is otherwise unable to acquire decent, safe, and sanitary housing. The site must meet certain Agency conditions, and the Agency loan must include adequate funds to construct a dwelling on the site that conforms to Agency requirements.

A deduction of $480 is made for each household member (other than the applicant, co-applicant, or spouse of the applicant/co-applicant) who is:

• age 17 or younger or
• an individual with a disability or
• a full-time student

A deduction for the care of minors 12 years of age or under, to the extent necessary to enable a member of the applicant/borrowers's family to be gainfully employed or to further his or her education.

Payment for these services may not be made to persons whom the applicant/borrower is entitled to claim as dependents for income tax purposes.

Medical expenses may be deducted from annual income for elderly households if the expenses:

• will not be reimbursed by insurance or another source; and
• when combined with any disability assistance expenses are in excess of 3 percent of annual income.

If the household qualifies for the medical expenses deduction, expenses of the entire family are considered. For example, if a household included the head (grandmother, age 64), her son (age 37), and her granddaughter (age 6), the medical expenses of all 3 family members would be considered. Typical medical expenses may include: services of hospitals, labs, clinics, physicians, nurses, dentists, and other health care providers or facilities; prescription medications; medical insurance premiums; eyeglasses; hearing aids; home nursing care; periodic scheduled payments on accumulated medical bills; travel expense & lodging for medical treatment; etc.

Reasonable expenses for the care of an individual with disabilities in excess of 3% of the annual income, when combined with eligible medical expenses, may be deducted from annual income if the expenses:

• Enable the individual with disabilities or another family member to work;
• Are not reimbursable from insurance or any other source; and
• Double not exceed the amount of earned income included in annual income by the person who is able to work as a result of the expenses.

Typical disability expenses include:

• Care attendant to assist an individual with disabilities with daily activities of daily living directly related to permitting the individual or another family member to work;
• Special apparatus, such as wheelchairs, ramps, adaptations to vehicles or work place equipment, if directly related to permitting the individual with disabilities or another family member to work.

An adult member of the household who will be responsible for repayment of the loan.

An adult member of the household who will also be responsible for repayment of the loan.

A person, other than the applicant, spouse, or co-applicant, who carries at least the minimum number of credit hours considered to be full-time by the college or vocational school in which the person is enrolled

All other persons who will make the applicant's dwelling their primary residences for all or part of the next 12 months. Live-in aides and foster adults living in the household are not considered household members.

Answer 'Yes' to this question if the applicant or co-applicant is at least 62 years of age or older, or an individual with a disability. Because this is a “family deduction” each household receives only one deduction, even if more than one member is elderly or disabled. In the case of a family where the deceased applicant/borrower or spouse was at least 62 years old or an individual with disabilities, the surviving family member shall continue to be classified as an “elderly household” for the purposes of determining adjusted income if:

• At the time of death of the deceased family member, the dwelling was financed by the Agency;
• The surviving family member occupied the dwelling with the deceased family member at the time of death; and
• The surviving spouse (if any) has not remarried.

Reasonable documented expenses for care of the individual with disabilities, that are more than 3 percent of annual income, may be deducted from annual income if the expenses:

• Enable the individual with disabilities or another family member to work;
• Are not reimbursable from insurance or any other source; and
• Do not exceed the amount of earned income included in annual income by the person who can work because of the expenses. If the disability assistance enables more than one person to be employed, the combined incomes of all persons must be included.

Estimated annual figures, even if you have not identified a specific property you wish to purchase. These estimates should be reasonable and based on the market area you are, or will be, located in.

The additional funding source may be a private lender that provides home financing at market rates and terms, a State or local government, or a nonprofit organization that provides subsidized loans or grants.

Only debts of the applicant and any co-applicants are considered.

If the applicant and co-applicant have a joint debt, do not list the debt more than once; it should be included only once under either applicant or co-applicant.

In community property states, the non-purchasing spouse's obligations must be considered as well to determine the applicant's purchasing capacity, unless excluded by State law. Community property states include: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Puerto Rico allows property to be owned as community property as do several Indian jurisdictions. Alaska is an opt-in community property state, where property is separate unless both parties agree to make it community property through a community property agreement or a community property trust.

This includes debt obligations with more than 6 months repayment remaining, including loans, alimony, and child support; credit cards; co-signed loans; etc. Do not include routine monthly expenses such as utilities, cell phones, insurance, etc.

If there are multiple payments for one debt type (e.g., more than one credit card, auto payment, etc), combine those monthly payments into one monthly sum to be entered in the applicable field.

If the applicant and co-applicant have a joint debt, do not list the debt more than once; it should be included only once under either applicant or co-applicant.

Student loan payments. Use the actual monthly payment under the existing repayment plan. Please be aware that a different payment amount may be considered in the Total Debt ratio if you submit a complete application for an official determination, in accordance with HB-1-3550, Chapter 4, even if you have a $0 monthly payment because you are on an income-driven repayment plan, or the loan(s) is in deferment or forbearance.

The Agency has no minimum history requirement for employment in a particular position. The key concept is whether the applicant has a history of receiving stable income and a reasonable expectation that the income will continue.

Base Pay includes a projected income anticipated for the next 12 months including full and part-time employment and seasonal work. (Example: $10/hr x 40 hrs/wk x 52 wks = $20,800 annually / 12 months = $1,733 monthly gross income) Historical data based on the past 12 months or previous fiscal year may be used if a determination cannot be logically made.

Overtime, commission, and bonus income is income that is more than the base wages. Overtime, commission, and bonuses for Rural Development eligibility purposes should be verifiable and dependable. The applicant should have a history of these types of income to be considered. Typically, a 12-month history of working overtime or receiving a bonus or commissions would be a good indicator that these will continue unless the employer indicates it will not continue. Averaging the amounts received over the last 12-24 months would be an acceptable method to determining projected amounts.

When analyzing self-employment income, the Agency must perform a detailed review of the applicant’s individual and business tax returns to confirm that the income is stable and dependable (likely to continue). Income based on a two-year history of self-employment, in the same line of work, is an acceptable indicator of stable and dependable income. Because self-employment income may change each year, the Agency develops an average monthly income by using at least two full years of the applicant's self-employment income. An average takes in consideration typical market fluctuations, thus better predicting the applicant’s long-term earning ability. Please be aware a different income amount may be considered if you submit a complete application for an official determination, in accordance with HB-1-3550, Chapter 4, since income from self-employment is subject to market/economic fluctuations and requires a cash flow analysis.

Other sources of income from public assistance, child support, alimony, or retirement that is consistently received is considered stable when such payments are based on a law, written agreement or court decree, the amount and regularity of the payments, the eligibility criteria for the payments, such as the age of the child (when applicable), and the availability of means to compel payments.

If there are multiple sources for one type of income (e.g. – more than one retirement fund you receive distributions from, different sources of child support, etc), combine those figures into one monthly sum to be entered in the applicable field.