Buying a home is an exciting milestone, but it can also be challenging, especially when trying to find an affordable mortgage For rural homebuyers in Illinois, the USDA Rural Development office provides an excellent home loan option to consider.
An Overview of USDA Home Loans in Illinois
The USDA Single Family Housing Direct Home Loan program, also known as Section 502 Direct, offers 100% financing to eligible homebuyers in rural areas of Illinois This means you can get a mortgage with no down payment required.
USDA home loans offer:
- Fixed interest rates, which are often lower than conventional loans
- No requirement for private mortgage insurance (PMI)
- Flexible credit guidelines
- Low or no down payment options
- Ability to finance closing costs into the loan
To qualify, you must meet income eligibility guidelines and purchase a home in a USDA-designated rural area of Illinois The property can be an existing house, new construction, or even land to build on Loan funds can be used to build, repair, renovate or relocate a home.
Benefits of USDA Home Loans in Illinois
There are many advantages to getting a USDA mortgage in Illinois, including:
1. No Down Payment Required
The biggest benefit is that USDA loans require no down payment for qualified buyers. This makes it easier for low-to-moderate income families to achieve homeownership.
2. Below Market Interest Rates
USDA home loans often have interest rates below conventional loans. As of June 2024, the interest rate is just 4.75% for low-income borrowers.
3. Low Mortgage Insurance
Only a small upfront guarantee fee of 1% of the loan amount is required at closing. No monthly mortgage insurance premiums.
4. Flexible Credit Guidelines
USDA has more flexible credit requirements than conventional loans. No minimum credit score is required.
5. Low Monthly Payments
With subsidized interest rates and up to 38 year loan terms, monthly mortgage payments are very affordable.
6. Purchase and Refinance Options
The program can be used to purchase a home or refinance an existing USDA loan at a lower interest rate.
7. Rural Location
The home must be located in an eligible rural area, making it ideal for small towns and country living.
USDA Rural Area Home Loan Requirements in Illinois
To qualify for a USDA home loan in Illinois, borrowers must meet certain eligibility criteria:
- Be a U.S. citizen or legal permanent resident
- Have a steady income and show repayment ability
- Have an adjusted household income at or below the limit for their area
- Have a credit history that indicates willingness and ability to repay debt
- Purchase a home that passes USDA standards for safety and quality
- Buy a home located in an eligible rural area of Illinois
Debt-to-income ratios are reviewed to ensure applicants can afford their monthly mortgage payment as well as other debt obligations.
There are no first-time homebuyer requirements for USDA loans. You can be a previous homeowner and still qualify.
How to Apply for a USDA Home Loan in Illinois
If you’re interested in the USDA home loan program in Illinois, follow these steps:
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Check your eligibility. Use the USDA Income and Property Eligibility tool to confirm you meet the income limits and property area requirements.
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Get pre-qualified. Work with a USDA approved lender to get pre-qualified. They will review your income, assets, debts, and credit to determine the loan amount you can afford.
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Find a property. Once pre-qualified, you can start your home search! Work with a local real estate agent to find homes in your price range in USDA eligible rural areas.
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Make an offer. When you find the perfect home, make an offer and apply for home loan financing with a USDA approved lender.
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Close on your new home. After your offer is accepted and your USDA loan is approved, you’ll close on the property to get the keys to your new home!
The USDA does not directly make loans. You must apply through participating lenders familiar with Rural Development guidelines. The lender will assist you through the mortgage process.
USDA Home Loan Income Limits in Illinois
To qualify for the USDA direct home loan program in Illinois, your household income must be below the limit for your area. Income limits are adjusted annually and vary by county, household size, and types of income counted.
Here are the current income limits for select counties in Illinois:
| County | 1 Person | 2 Person | 3 Person | 4 Person |
|---|---|---|---|---|
| Cook County | $49,950 | $57,100 | $64,250 | $71,350 |
| DuPage County | $56,800 | $64,900 | $73,000 | $81,100 |
| Kane County | $56,800 | $64,900 | $73,000 | $81,100 |
| McLean County | $49,950 | $57,100 | $64,250 | $71,350 |
| Peoria County | $49,950 | $57,100 | $64,250 | $71,350 |
| Sangamon County | $49,950 | $57,100 | $64,250 | $71,350 |
For larger households with 5+ members, income limits are higher. Check with a lender to confirm the limits in your county.
USDA Home Loan Interest Rates in Illinois
USDA home loans feature fixed interest rates that are very competitive. As of June 2024, here are the current USDA interest rates in Illinois:
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4.75% for low-income households
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As low as 1% for very low-income households with subsidized payments
So a USDA loan could save you .5% to 1% compared to current conventional mortgage rates.
Actual interest rates depend on your income, credit score, down payment, and other factors. Work with a lender to get actual rate quotes.
USDA Home Loan Limits in Illinois
There are limits on the amount you can borrow with a USDA home loan in Illinois based on the appraised value of the property.
For 2024, here are the max USDA loan limits by county:
| County | Limit |
|---|---|
| Cook County | $420,100 |
| DuPage County | $420,1000 |
| Kane County | $420,100 |
| McLean County | $326,500 |
| Peoria County | $314,800 |
| Sangamon County | $326,500 |
The limits represent the maximum 100% financing available. So if you were buying a $300,000 home in Sangamon County, you could get a USDA loan for the full $300,000 with no down payment.
Actual loan amounts are based on repayment ability, not just home appraisal. Loan limits are adjusted annually, so verify the most current limits.
Finding a USDA Approved Lender in Illinois
USDA home loans are provided by approved lenders familiar with Rural Development guidelines. Here are some options to find a lender in Illinois:
- Check the USDA Lender List for Illinois
- Ask your local real estate agent for recommendations
- Search online mortgage lender directories
- Compare options from national lenders like LoanDepot and New American Funding
Get rate quotes from multiple lenders to find the best USDA loan option for your situation.
The Benefits of Using a USDA Loan for Rural Homebuying in Illinois
For eligible homebuyers, USDA home loans offer big advantages that make buying a home more affordable, including:
- No down payment needed to buy a home
- Below market interest rates saving you money
- Up to 100% financing based on the appraised value
- Flexibility even if you have less-than-perfect credit
- No monthly mortgage insurance with minimal upfront fee
- Long repayment terms of up to 38 years for lower payments
If you want to buy a home for a low down payment in rural Illinois, be sure to consider the USDA direct home loan program as an option.
Additional USDA Rural Development Loan Eligibility Rules
Besides the guidelines that cover the home’s location, the borrower’s income, and debt ratios, there are other guidelines that potential borrowers need to be aware of.
Verifying Income
All borrowers who wish to use the rural development program to purchase a home must be able to prove their yearly income. Generally speaking, based on the way a person earns income, the following information will be needed
| Source of Income | Required Documents |
| Hourly or commissioned Employee |
|
| Self-Employed or Business Owner |
|
| Retired or Disabled |
|
Citizenship
Potential borrowers seeking to qualify for this program will need to fall into one of the following categories:
- Full citizen of the USA
- National non-citizen
- Qualified alien
The lender will ask for your proof of citizenship before getting the loan approved. You may also be asked to provide the proof again at the time of closing.
Not Only for First Time Home Buyers
The USDA mortgage is an excellent way for people to buy their first home. However, there is no restriction in the guidelines. People who are looking to purchase their 2nd home or even their 7th home may apply as long as they meet the other requirements.
Minimum Credit Requirements
The credit rules that determine if a person is approved for this mortgage are more relaxed in comparison to conventional mortgages. Many lenders have stated that the relaxed credit standards used to approve FHA applicants are very similar to USDA loans. People who have struggled in the past with their credit are now able to make their payments on time and should feel good about their chances of getting approved USDA.
PMI or Private Mortgage Insurance
With all mortgages, there comes a risk that the borrower may not be able to repay the loan at some point in the future. If this happens, the home is foreclosed and the lender loses money on the transaction.
To mitigate some of that risk, this program requires borrowers to pay a monthly premium known as private mortgage insurance.
This premium is applied to the loan in 2 ways:
- When the loan is closed and the borrower is ready to take possession of the home, a fee of 1% of the original loan balance is added to the mortgage. This allows the borrower to pay the fee over time.
- The second premium is calculated yearly. 0.35% of the outstanding mortgage balance is broken down into 12 payments and added to the monthly mortgage obligation.
Buying a House Using USDA Rural Development Loan ($1,000 DOWN)
FAQ
What is the income limit for USDA loans in Illinois?
What is the USDA rural development loan?
What is the difference between FHA and USDA home loans?
What are the DTI limits for USDA loans in 2024?
What is a USDA loan?
A USDA loan is a loan given out by the United States Department of Agriculture (USDA) to help low- or moderate-income people buy, repair or renovate homes in rural areas. With the help of a USDA loan, owning a home in a rural part of the country might be more accessible than you think.
Should you consider a USDA Rural Development Loan?
Consider getting a USDA rural development loan if you’re interested in buying, refinancing, or renovating a home in a rural community that will be your primary residence. The first step is talking to a USDA-approved lender, who can help you explore all the loan options available to find the right mortgage for you.
How do I get a home loan with rural development?
To get a home loan with RD (Rural Development), contact your local service center. For account inquiries, you must first obtain a USDA level 1 Customer ID and Password, which you can do by registering below.
What is USDA Rural Development?
USDA Rural Development is a part of USDA (United States Department of Agriculture) Rural Development. Our mission is to be a cost-effective service provider that helps homeowners and their families remain successful homeowners throughout the term of the loan. Our home loans are serviced by the Customer Service Center (CSC), located in St. Louis, Missouri.