Legal Definitions - Rural Housing Service

The Rural Housing Service (RHS) is an agency operating within the U.S. Department of Agriculture. Its primary mission is to support the availability of safe, decent, and affordable housing in rural areas across the United States. The RHS achieves this by either directly providing loans to eligible individuals and families or by guaranteeing loans made by private lenders, thereby reducing the risk for those lenders and making it easier for rural residents to secure financing for their homes.

Here are some examples of how the Rural Housing Service operates:

• Example 1: Direct Loan for a Low-Income Family
  A family of four living in a very small, isolated town in Montana earns a modest income and has struggled to save a large down payment. They wish to purchase a modest home within their community but find that traditional banks are unwilling to offer them a mortgage due to their income level and the property's remote location. The Rural Housing Service might step in to provide a direct loan with favorable interest rates and terms, enabling the family to achieve homeownership where conventional financing was not an option.

  This example illustrates how the RHS directly provides financial assistance to individuals who might otherwise be unable to secure housing loans in rural settings.

• Example 2: Loan Guarantee for a First-Time Homebuyer
  A young couple with stable jobs wants to buy their first home in a growing rural subdivision outside a mid-sized town in Georgia. While they have good credit, their savings for a down payment are limited, making them a slightly higher risk for a conventional mortgage. A local credit union is hesitant to approve their loan without additional security. The Rural Housing Service could guarantee the loan for the credit union, assuring the lender that a portion of the loan would be covered if the couple defaulted. This guarantee encourages the credit union to approve the mortgage, allowing the couple to purchase their home.

  This example demonstrates the RHS's role in guaranteeing loans from private lenders, which reduces risk for those lenders and expands access to credit for rural homebuyers.

• Example 3: Home Repair Assistance for an Elderly Resident
  An elderly widow living alone in a small, aging farmhouse in rural Vermont discovers that her well pump has failed, leaving her without running water. She lives on a fixed income and cannot afford the significant cost of replacing the pump and repairing the plumbing. The Rural Housing Service offers programs that can provide direct loans or even grants for essential home repairs and improvements to ensure the safety and habitability of homes for low-income rural residents. Through such a program, she could receive the necessary funds to restore her water supply.

  This example highlights the RHS's broader support for existing rural housing, ensuring that current residents can maintain safe living conditions through direct financial aid for critical repairs.