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Guaranteed Rural Housing

Reach more borrowers in rural communities

Reach underserved markets more easily with loans guaranteed by USDA’s Rural Housing Service (RHS) under its Section 502 Guaranteed Rural Housing (GRH) Loan Program.

Through the GRH program you can meet the needs of rural borrowers who have the necessary income and credit history, but not the down payment required to qualify for a conventional mortgage.

Freddie Mac purchases assumable and non-assumable GRH loans through our Fixed-rate Cash, Fixed-rate Guarantor and MultiLender Swap executions. Sellers must obtain Freddie Mac approval to sell Section 502 GRH mortgages to Freddie Mac, and these mortgages must be sold with recourse. The terms under which Freddie Mac purchases GRH loans are included in Chapter 35 of the Single-Family Seller/Servicer Guide (Guide).

Full and complete information about the GRH loan program is available from RHS offices.

FeatureRequirements
Property Type
  • Primary residences, including single-family dwellings, condominiums, planned unit developments (PUDs) and eligible manufactured homes.
  • Non-farm
  • Leasehold and rehabilitated properties
  • Property must meet the rural designation as defined by RHS
Eligible Mortgage Products
  • 30-year fixed-rate mortgages
  • Assumable and Non-assumable
Borrower Eligibility
  • Determined by RHS requirements
Transaction Type
  • Purchase transactions and no cash-out refinances, subject to Section 502 GRH Loan Program guidelines
  • 30-year fixed-rate mortgages
  • Non Loan Prospector mortgages only
Eligibility/Underwriting
  • Assumable mortgages must be sold to Freddie Mac with recourse within the meaning of Guide Section 11.10(a). Effective for mortgages with settlement dates on or after June 1, 2012, non-assumable mortgages must also be sold with recourse.
  • The LTV/TLTV ratios must comply with the Guaranteed Regulations for LTV/TLTV ratios.
  • The LTV/TLTV ratio cannot exceed 115 percent using the Freddie Mac calculation of LTV based on the lower of purchase price or appraised value and other requirements in Guide Section 23.2.
  • A non-assumable Rural Housing Service Section 502 GRH Mortgage must have a minimum Indicator Score of 620 or if no borrower has a usable credit score, the mortgage is eligible without meeting the minimum Indicator Score requirement when underwritten using nontraditional credit. Effective for mortgages with settlement dates on or after June 1, 2012, this requirement will no longer apply.
  • Secondary financing is generally not permitted.
  • The mortgage must have a guarantee provided by RHS. Private mortgage insurance is not required.
  • The mortgaged premises securing FHA and VA mortgages and assumable Section 502 GRH Mortgages may be transferred in accordance with applicable FHA, RHS or VA regulations.
  • Original loan amount may not exceed Freddie Mac loan limits or any RHS loans limits for this program, whichever is less.
  • Underwriting requirements are based on RHS program requirements and take into consideration the unique needs of borrowers in rural locations. See the GRH program requirements for more information.
Execution Options
  • Fixed-rate Cash, servicing-retained
  • Fixed-rate Guarantor
  • MultiLender Swap
Delivery Fees
  • Sellers must refer to Guide Exhibit 19 and/or their negotiated terms of business for delivery fees applicable for these mortgages.
  • Delivery fees are paid according to the delivery fee provisions stated in Guide Section A17.2.
Special Delivery Requirements
  • See Guide Section 17.19 for special delivery instructions for all Guaranteed Rural Housing Mortgages.
 Guidelines
  • Refer to Guide Section 35.2 of your Single-Family Seller/Servicer Guide

Download a Section 502 GRH Loan Program fact sheet for more details.

Lender Benefits

The Section 502 GRH Loan Program allows you to:

  • Broaden your market reach with a competitive affordable housing product designed specifically for rural areas
  • Expand Community Reinvestment Act (CRA)-eligible origination volume
  • Leverage Freddie Mac as your secondary market outlet for GRH loans

Benefits for Your Borrowers

The Section 502 GRH Loan Program helps your borrowers by: 

  • Providing flexible guidelines on down payment and reserve requirements
  • Allowing certain closing costs to be included in the loan amount under certain circumstances, subject to GRH Section 502 program restrictions
  • Allowing additional flexibility with no cash-out refinancing as permitted under the GRH Section 502 program

Get More Information

The information in this document is not a replacement or substitute for information found in the Single-Family Seller/Servicer Guide and/or the terms of your Master Agreement and/or Master Commitment.

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