USDA Programs

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New Construction or Substantial Rehabilitation (USDA RHS 538)

Features:

This is a non-recourse loan. Security: Assets of the borrowing entity. Long loan term up to 40 years Low fixed interest rate, fully amortizing. Loan-to-restricted-rent value up to 90% (97% for a not-for profit). Loan-to-cost up to 70% (not applicable for an existing USDA 515 loan). The program can be used to guarantee permanent financing, or a combination construction and permanent loan. It cannot be used for a loan that covers only construction. Fully assumable subject to CMI and USDA approval. 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.

Eligibility:

Borrowers may be for-profit, not-for-profit, individuals, partnerships, state or local public agencies, LLCs, trusts, or Indian tribes. A minimum of $6,500 per unit in rehab costs is required for New Construction, Acquisition, or the Revitalization, Repair, and Transfer Cost of Existing Direct Section 515 Housing. 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 closing. Project must be in a designated “Rural Area,” as defined by USDA—population must be less than 35,000.

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Substantial Rehabilitation of Existing USDA 515 Multifamily (USDA 538/515)

Features:

This is a non-recourse loan. Security: Assets of the borrowing entity. Long loan term up to 40 years Low fixed interest rate, fully amortizing. Maximum of the lesser of 90% loan-to-restricted-rent value or loan-to-cost ratio (97% for a non-for-profit enterprise). The program can be used to guarantee permanent financing, or a combination construction and permanent loan. It cannot be used for a loan that covers only construction.Fully assumable subject to CMI and USDA approval.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

Eligibility:

Borrowers may be for-profit, not-for-profit, individuals, partnerships, state or local public agencies, LLCs, trusts, or Indian tribes. For New Construction or Substantial Rehabilitation of Multifamily Projects only with an existing 515 loan in place. Project must be in a designated “Rural Area,” as defined by USDA—population must be less than 35,000. A minimum of $6,500 per unit in rehab costs is required for the Revitalization, Repair, and Transfer Cost of Existing Direct Section 515 Housing.

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Communities and Public Service Facilities USDA

Features:

Security is determined by the lender and approved by the USDA. Balloon payments at the end of the loan are prohibited. Interest rates for guaranteed loans may be fixed or variable. Loan-to-cost up to 90% (50% on Recreational Projects). Converts to permanent financing upon completion at no extra cost. Not subject to Davis-Bacon requirements.

Eligibility:

Community Facilities programs include guaranteed loans, direct loans and grants. Borrowers must be not-for-profit entities, local public entities, counties, special purpose districts, or Indian tribes. Project must be in a designated “Rural Area,” as defined by USDA—population must be less than 20,000. For New Construction, relocation, enlargement, or improving Community Facilities. Refinancing of existing debt may be considered. Essential community facilities such as Health Care, Recreation, Fire, Public Safety and Public Services.