USDA Loan Illinois
The United States Department of Agriculture (USDA) created a loan program that allows borrowers to purchase a home with no down payment. More commonly, this mortgage product is known as the USDA loan program or the Rural Development Guaranteed Housing Loan Program. USDA loans are issued through the USDA loan program and helps thousands of families buy and upgrade their homes in rural suburban areas.
Minimum Credit Score
100% Loans for Rural Area Zip Code Specific
Why was the USDA Loan created?
The USDA loan program is designed to “improve the economy and quality of life in rural America.” The program offers low-interest rates and a zero percent down payment for eligible borrowers. Ultimately, this mortgage product helps people who can’t afford a traditional loan purchase a home in rural parts of the country.
What are USDA loan qualifications?
To be eligible for a USDA loan, there are several qualifications a borrower needs to meet. For example, there are income limits, which vary based on a borrower’s property location and household size. To find the most accurate loan guarantee limit, the USDA has created a map that illustrates the allowed loan limit, along with the corresponding geographical area and household size.
The USDA program also requires that the funds must be used toward the owner’s primary residency. Because the program gives borrowers the option to make no down payment, they are required to purchase mortgage insurance (MI). MI is an insurance premium that only protects the lender if the borrower defaults on the loan.
The program requires borrowers to manage monthly mortgage payments responsibly, which includes principal, interest, mortgage insurance, and taxes. However, the total payment must be 29% or less of your monthly income. Other monthly debts cannot exceed past 41% of your income. Although, some lenders may make an exception for higher debt ratios to those who have credit scores above 680.The USDA loan program deems applicants eligible if an individual or family is:
- 1. Without “decent, safe and sanitary housing”
- 2. Unable to secure a home loan from traditional sources
- 3. Making an income at or below the low-income limit for the area where they live
The USDA loan program does not require borrowers to provide a history of employment. However, it does require borrowers to show lenders a history of earning a stable income for at least two years. This means borrowers must prove to lenders they have a stable income of two years through either employment, child support, or contract income. Lastly, to qualify for a USDA loan, your home must be in an eligible region. Most locations include rural areas, and even some suburbs are eligible. Your lender can help review which areas are eligible for a USDA loan.
What are USDA credit score requirements?
ot all lenders offer USDA loans, you must find a qualified lender that specializes in underwriting USDA home loans. Most commonly, the lowest credit score the USDA loan program can permit is 640. However, if borrowers have a credit score of 660 or higher, they are likely to get lower rates and better terms.
What are USDA loan limits?
The USDA program has two sets of eligibility requirements – one regarding property eligibility and the other focusing on the applicant’s financial and credit eligibility. Both sets of requirements help determine a borrower’s loan income limit.
A lender will evaluate an applicant’s gross income to determine their eligibility. According to USDA guidelines, if a borrower’s income exceeds the maximum mark, they can adjust their gross income to help qualify. Your lender will require you to provide at least two years of tax returns to paint a clear picture of your income.
Usually, USDA loan limits are very generous. The goal of the USDA mortgage program is to help low to moderate-income families purchase a home in rural areas. A borrower’s loan limit varies depending on their income and property location. To find out your USDA home loan eligibility, contact a specialized lender that offers USDA financing.
What is a first-time homebuyer rural development loan?
First-time homebuyers are given the choice of financing a USDA rural development (RD) loan that allows buyers to finance 100% of the purchase price. This means, buyers are not required to make a down payment, which is extremely appealing to first-time homebuyers. The RD loan is guaranteed, meaning, if the borrower fails to make mortgage payments, the USDA will reimburse the lender for the loan.
While there is no down payment requirement, buyers will still need funds for closing costs, inspections, and mortgage insurance. Since it is hard to find a modern home in a rural area, the RD program has a surprisingly wide range of acceptable property types for the loan. Minor repairs can also be included with RD financing. This feature is appealing because repairs might be needed after buyers have moved in. By adding minimal renovation expenses, buyers can purchase a livable home.
In addition, if buyers want to pay off their loan early, they will not get penalized for making an early payoff, unlike other mortgage options. There is no monetary limit on a seller concession (or gift), which allows borrowers to receive an unlimited amount of funds from family members or friends. This feature is very attractive to first-time homebuyers who have limited assets available. Sellers can voluntarily pay for the buyer’s closing costs as well.
What is a USDA home loan map?To qualify for a USDA loan, the program requires the home to be in a rural area. The USDA loan program created a website based on Rural Development rural area requirements. This website contains information regarding eligible and ineligible areas according to USDA requirements. According to the website, rural areas are classified as:
- 1. A city or town that has a population of greater than 50,000 inhabitants
- 2. The urbanized area contiguous and adjacent to such a city or town
If you are interested in reviewing the USDA home loan map, visit the link here
What is a USDA credit score waiver?
People usually turn to finance a USDA loan when they have limited income. The majority of lenders accept applicants with a credit score of 640 and higher. However, if your credit score is under 640, applicants may choose to apply for a USDA home loan credit waiver. This option helps borrowers qualify for a loan that cannot meet the standard USDA underwriting guidelines.It is important to choose a lender that is familiar with the USDA manual underwriting process and the documentation required, especially when applying with a credit waiver. To manually underwrite this type of loan, the following paperwork is required:
- The lender has received a GUS response of Refer or Refer with Caution, or
- Any loan that needs to be manually downgraded because of:
- Lack of established credit history
- Authorized users
- Disrupted accounts
- 1. Temporary in time
- 2. Beyond the borrower’s control
- 3. Circumstances regarding removing the credit
- An argument over defective goods
- Medical condition or illness
- Employment termination
What is a USDA direct loan?
The Housing Assistance Council (HAC) is a national nonprofit organization that focuses on providing financial assistance for low-income families to purchase a home in rural areas of the United States. They created Section 502, a direct loan program that is run through the United States Department of Agriculture’s Rural Development Housing and Community Facilities Program officer (RD).
Applicants who want to apply for a USDA direct loan must have 'very low' income. According to guidelines, 'very low income' is described as below 50 percent of the area’s median income (AMI); low income is described as between 50 and 80 percent of AMI. Families also need to be without adequate housing and they must be able to handle mortgage payments, mortgage insurance, and taxes. Lastly, applicants must be unable to obtain credit but have a decent credit history.
The USDA direct loan has special terms compared to other loans. Direct loans can last up to 33 years and in other circumstances, 38 for applicants with incomes below 60 percent of AMI. The direct loan program does not require borrowers to make a down payment. A borrower’s payments will include principal, interest, taxes, and insurance.
The type of housing must also meet the direct loan requirements. For example, the size, design, and cost of the home must be modest. Also, the market value of the home must be within the Area Loan Limit. Your lender can help identify which homes meet these standards. Applicants that choose to purchase a newly constructed or existing home must abide by the national model building code adopted by the state, the Internal Energy Conservation Code (IECC) and, the RD requirements. These standards are implemented to ensure families are purchasing livable and safe homes.
What our customers say about us?
Neighborhood Loans was great to work with or getting a home mortgage. This team was really quick to respond to any questions that came up, were constantly looking for better rates and on top of all issues that arose. Getting a mortgage is a lot of work. If you are looking for a mortgage broker for purchasing a home, I recommend Neighborhood Loans. They will make the process smooth and look out for your best interests. - Laurel M.
Neighborhood Loans is a top-notch company to work with. Their workers are so knowledgeable and helpful throughout the entire process. I have used Neighborhood Loans for many home purchases and refinances, I would highly recommend them. The owner Reno is the “real deal”, he cares about his customers and makes sure EVERYONE is 100% satisfied. - J. Conone
They helped me out with a 203K loan on my first property. Explained the steps of the process to me before and throughout, as well as being there through text, call, or email whenever needed. Definitely would recommend Neighborhood Loans if you're looking to purchase a home. My family definitely is happy with the new place. Thanks again! - Marcin C.