Processing Priorities

For USDA Rural Development, a priority system is used to ensure that applicants who meet the priorities established for the program are selected for processing first. The priority system is used only to determine the order in which applications will be processed. Once applicants are selected for processing, the order in which they actually receive funding will depend on how long it takes to conduct all required verifications and how long it takes the household to locate a property. 

The Agency gives processing priority to applicants who have an especially serious need for immediate assistance and for loans that are to the Agency’s benefit. Applicants with higher priorities must be processed before those with lower priorities. Applicants who do not qualify for any priority should be processed only when no applications with a priority remain unprocessed. Within each priority category, applications should be processed in the order they are considered complete. 

Funding for a USDA 502 Direct Loan loan is based on a scale of 1-5, with one being the highest priority and five being the lowest. However, most of the time applicants do qualify or are not in the situation described to be categorized as priorities 1-3. So, that leaves priorities 4 and 5.  

The types of priorities are described below:

5. Fifth Priority: NONE

Applicants who apply directly with USDA and do not meet or qualify for priority consideration in the below listed priorities will be selected for processing after all applications with priority status have been processed.

4. Fourth Priority: Loans that Bring in Additional Resources

Applicants seeking a USDA 502 Direct home loan and have their loan package funneled through an Agency-approved intermediary under the certified loan application packaging process, and loans that will leverage funding or financing from other sources as outlined in Paragraph 10.1. A, will receive fourth priority for processing.

Depending on qualification, the Fourth Priority is the most accepted within all Priorities.  

3. Third Priority: Hardships

Applicants facing housing-related hardships will receive third priority for processing. Hardship circumstances include living in deficient housing for more than 6 months. Deficient housing is defined as a dwelling that lacks complete plumbing, lacks adequate heating, is dilapidated or structurally unsound, has an overcrowding situation that will be corrected with loan funds, or is otherwise uninhabitable, unsafe, or poses a health or environmental threat to the occupant or others. To retain the hardship designation, the resulting loan must eliminate the deficient housing issue which existed at the time of the application. Other hardship circumstances include current homeowners in danger of losing a property through foreclosure due to circumstances beyond their control, and other circumstances determined appropriate by the State Director on a case-by-case basis.

Example – Deficient Housing Scenario

The Smiths are an 8-person household currently living in a 2-bedroom apartment. They qualify for hardship processing because they are overcrowded with more than 2 people per bedroom. In order to retain the hardship priority, they would need to purchase a property (4 or more bedrooms) which corrects the overcrowding condition. If the Smiths selected a 3-bedroom property, they would no longer qualify for the hardship processing/funding priority. However, assuming the dwelling meets the property requirements, a loan could be made on the dwelling when funds become available under the fifth/general priority, as the Agency has no minimum number of bedroom requirement based on household size.

2. Second Priority: REO Property or Transfer/Purchase of Agency-Financed Property

Applicants interested in obtaining loans for purposes that are in the Agency’s interest, but that do not directly involve removing hazards in a security property, will receive second priority for processing. These are loans related to the sale of Real Estate Owned (REO) property and loans related to the transfer and assumption (or purchase with new loan proceeds) of property owned by a program borrower.

1. First Priority: Subsequent Loans to Correct Health and Safety Hazards

Current Agency borrowers who request subsequent loans to correct health and safety hazards will be selected for processing first.