The USDA home loan program provides 100% financing to eligible homebuyers in rural and suburban areas of Illinois. With no down payment requirement and more flexible credit standards, a USDA loan can be an excellent option for low- to moderate-income buyers.
However, there are specific eligibility criteria borrowers must meet to qualify for a USDA mortgage in Illinois. This comprehensive guide covers all the key USDA loan requirements for Illinois home purchases in 2023.
Overview of USDA Loans
USDA home loans are government-backed mortgages insured by the US Department of Agriculture. Some key features include
- 100% financing – No down payment required
- Low credit scores – Minimum 640 FICO score
- Low rates & costs – Competitive interest rates and upfront costs
- Fixed terms – 10, 15, 20, 25, 30-year loan terms
- Rural locations – Properties must be in USDA-eligible rural/suburban areas
USDA mortgages help lower income borrowers overcome two big hurdles to homeownership saving for a down payment and having pristine credit
Illinois USDA Loan Requirements
While more flexible than conventional mortgages, USDA loans have specific eligibility standards borrowers must meet. Here are the key criteria for USDA loans in Illinois:
Property Location
The home must be located in a USDA-designated rural or suburban area of Illinois. You can verify a property’s eligibility using the USDA Property Eligibility Site.
Over 75% of Illinois is currently eligible, including many suburban areas near cities like Chicago, Rockford, Peoria, Springfield, and Champaign.
Borrower Income Limits
Income must be below USDA income limits for the county where the property is located. Limits range from $60,900 to $117,000 depending on household size and location.
You can look up the 2023 Illinois USDA income limits here.
Credit Score Requirements
Minimum 640 FICO credit score required for all borrowers. No non-traditional credit permitted.
Debt-to-Income Ratio
Total debt-to-income ratio must be below 29%/41% (with compensating factors).
Cash Reserve Funds
No required cash reserves. Gifts and down payment assistance programs allowed for closing costs.
First-Time Homebuyer Rule
Borrowers cannot own another home. Allowed if acquiring new primary residence.
Homebuyer Education
Required for first-time buyers. Must complete before closing.
Loan Amount Limits
Loan amounts cannot exceed the FHA mortgage limits for each Illinois county. See limits here.
Occupancy and Property Types
Must be primary residence. Eligible properties include 1-unit homes, townhomes, condos, and manufactured homes.
Credit History
No bankruptcy or foreclosure over past 36 months. Past derogatory credit allowed with sufficient compensating factors.
Stable Income & Employment
Two years of consistent employment and income sources required. Self-employed borrowers must show positive income over last two years.
Sentence Requirements
Applicants cannot be currently delinquent on any federal debt.
How to Apply for a USDA Loan in Illinois
Follow this step-by-step process when applying for a USDA mortgage:
1. Find Eligible Property
Search for homes only in USDA-approved locations in Illinois to avoid wasted time.
2. Get Pre-Approved
Work with a USDA-approved lender to assess your eligibility and get a pre-approval letter.
3. Make an Offer
Make an offer contingent on USDA loan financing and appraisal.
4. Submit Full Application
Provide all required income, employment, and credit documentation for underwriting.
5. Obtain Conditional Approval
The lender will issue a conditional approval upon meeting all eligibility criteria.
6. Complete Home Inspection
Inspector will check for any deficiencies that must be repaired prior to closing.
7. Await Final Approval
Lender coordinates the appraisal and final underwriting to confirm loan approval.
8. Close on Your USDA Loan!
Final walkthrough, signing, closing disclosure, and receive your keys!
USDA Mortgage Rate and Costs in Illinois
Here are current USDA loan rates and fees to expect:
- Interest rates – Around 6.5% for 30-year fixed
- Upfront MI – 1.75% of loan amount
- Ongoing MI – 0.35% of balance annually
- Origination fee – 1% of loan amount
- Other costs – Appraisal, credit, title fees of ~$2,500
USDA loans typically have lower total costs than FHA or conventional loans. Interest rates are very competitive with other government-backed mortgages.
Tips for Getting Approved for a USDA Loan in Illinois
Follow these tips to boost your chances of successfully qualifying for a USDA-backed mortgage:
- Achieve a credit score of at least 680
- Reduce debt balances to lower DTI
- Save up for closing costs/prepaid items
- Gather all required income/tax documents
- Include a co-borrower if needed
- Research lenders thoroughly and shop around
- Act fast when you find an eligible home
With proper preparation and diligence, a USDA loan can help you achieve the dream of affordable homeownership in Illinois!
Need a 620 credit score
USDA Loans .Net requires a middle credit score of at least 620. If you are close, apply and we can help.
Step 1 of 10
Ready for a change? With a home loan from the USDA, that new home is finally within arm’s reach. For Illinois residents, the average income limit for a family of 1-4 is about $110,650, and for family of 5 or more the limit can be as high as $173,250. For more info, fill out the form below to get in touch with one of our USDA loan specialists and get the Illinois home you’ve always wanted.
The map below shows the areas of Illinois eligible for a USDA loan. Check out the USDA property eligibility screen for more detail on eligible areas.
Below you will find a link to the USDA income limits for Illinois:
- NO down payment – Finance 100% of your home
- NO maximum loan amount in Illinois.
- NO assets needed to qualify
- Flexible credit guidelines
- Competitive, fixed interest rates so payments do not increase
- USDA Loans are for new and existing properties
Start your Illinois USDA home loan now! Just fill out this quick form to get started & a USDA loan specialist will contact you with your options.
What areas are eligible?
Buying a House Using USDA Rural Development Loan ($1,000 DOWN)
FAQ
What is the income limit for USDA loans in Illinois?
How high does your credit score need to be for a USDA loan?
What are the DTI limits for USDA loans in 2024?
What is the USDA limit for 2024?
What are the requirements for a USDA home loan?
The property must be in an eligible rural area as the USDA defines it, and borrowers must meet household income requirements that vary depending on location and household size. The USDA also offers the Single Family Housing Direct loan through the Section 502 Direct Loan Program.
Does the USDA offer a direct loan?
The USDA also offers the Single Family Housing Direct loan through the Section 502 Direct Loan Program. These loans are meant to help low-income families buy, build, or fix up small homes in rural areas. The USDA, rather than private lenders, provides funding for direct loans as opposed to guaranteed loans.
Are USDA Loans guaranteed?
USDA loans are guaranteed by the USDA Rural Development Guaranteed Housing Loan Program, a part of the U.S. Department of Agriculture. Most USDA loans are issued by partner lenders, though the department can grant them directly to qualified borrowers with incomes below a certain limit.
Where can I find a USDA loan lender?
You can find a USDA loan lender by visiting the U.S. Department of Agriculture’s website, which maintains a list of approved lenders for the Rural Housing Program. The USDA Rural Housing loan offers a 30-year fixed-rate mortgage only, with no 15-year fixed option or adjustable-rate mortgage (ARM) program available.