New Construction or
Substantial Reconstruction
USDA Section 538 Loan Program
90% Federally-Guaranteed Financing
The goal of the USDA Section 538 Loan Program is to encourage commercial financing to foster the development and rehabilitation of moderately-priced rental housing in rural areas that is decent, safe, and competitive in the market.
Through a two stage application process, we the lender, will guide and assist you to ensure the packages are properly prepared for the USDA. The first step is a quick, no-cost, pre-application package called the “NOFA Response” and the second step is a compre-hensive application with $3,500 fee. The entire process to get the USDA Firm Commitment usually takes no longer than 60 days and can be as quick as 30 days for rehabilitation projects.
The benefits of the USDA Section 538 Loan Program include 90% Federal Guarantee Loan, maximum 40 year amortization, ZERO USDA guarantee fees, NO Davis-Bacon wage requirements, no loan cap or loan size restriction, fixed rate loan, and GNMA securitization.
Does your project qualify?
- Project must reside in an eligible rural area (generally population of 20,000 or less)
- Tenant income cannot exceed 115% of the area median income (AMI)
- Monthly rent for a unit may not exceed 30% of 115% of adjusted AMI and the overall average rents may not exceed 30% of 100% of adjusted AMI
- Minimum 25 year – Maximum 40 year term and amortization
- Maximum 90% loan-to-restricted-rent-value (97% for non-profit)
- Maximum 50% loan-to-cost (except for USDA 515 rehabs)
- Minimum 1.15 combined debt service coverage
- Equity requirement of at least 10% of total development cost (3% for non-profit)
- Rehab of at least $6,500/unit
- Project must have at least 5 rental units
Why choose Bonneville Multifamily Capital?
- One of the National Leaders with the most 538 loans closed
- Providing USDA section 538 training conferences
- Entire Department that specializes in 538 Loans
- Excellent relationships with all State and National USDA offices