Project must be in a designated “Rural Area,”
as defined by USDA—population must be less
Tenant income restrictions of 115% of area
median income upon initial occupancy.
Rents plus tenant paid utilities may not exceed
30% of 115% of area median income, and
average rent for project including utilities may
not exceed 30% of 100% of area median
Property must contain at least five units.
Full escrows for property taxes and all
applicable insurance are funded at closing.
A Replacement Reserve account must be
established at closing. A Construction Contingency Escrow in the
amount of 2%.
An Operating Escrow Reserve in the amount
of 2% of the total development cost or
appraised value (whichever is greater) may be
required to cover operating losses until
sustaining occupancy is reached, and must be
funded by with cash or letter of credit at
This is a non-recourse loan.
Security: Assets of the borrowing entity.
An existing USDA 515 loan can be
subordinated to a new USDA 538 mortgage.
Long loan term up to 40 years. Low fixed interest rate, fully amortizing.
The program can be used to guarantee
permanent financing, or a combination
construction and permanent loan.
Fully assumable subject to CMI and USDA
A loan can be combined with other financing
sources such as: Low Income Housing Tax
Credits, HOME grant or loan, State or local
assistance (including tax-exempt bond
financing) or a second bank loan.
Debt service coverage ratio of 1.15.
Not subject to Davis-Bacon requirements.
Click here to download a PDF of this program.