USDA/RD 538 Program

The USDA/RA 538 Program provides financing to qualified borrowers to increase the supply of affordable rental housing for low- and moderate-income individuals and families in eligible rural areas and towns.

The purpose of this program is to guarantee permanent financing, or a combination of construction and permanent loan. It cannot be used for a construction only loan. It can be combined with other financing sources such as Low Income Housing Tax Credits, a HOME grant or loan, state or local assistance, or a second bank loan.

The following rural areas are eligible for the USDA/RA 538 Program:
  • Population of 10,000 or less
  • Population of 10,000 or 20,000 not contained within a metropolitan statistical area
  • An area classified as rural with a population of 10,000 to 20,000 that has a serious lack of mortgage credit

Tenants must have incomes at or below 115% of area medium income at the time of initial occupancy to qualify. Average rents cannot exceed 30% of 100% of the area median income. This includes utilities that are paid by the tenants.

The term of the loan under the USDA/RA 538 program is a maximum of 40 years and the interest rate must be fixed. The interest rate is subject to market conditions at rate lock. Loan amounts are capped at maximum costs per unit established by HUD and available from HUD offices. Nonprofit borrowers can borrow up to 97% of the total development cost or appraised value, whichever is less. For-profit entities may borrow up to 90% of cost or value.

Complexes must consist of at least five units and may contain units that are detached, semi-detached, row houses or multi-family structures.