USDA Loans in Illinois

A USDA loan is a type of mortgage that is backed by the United States Department of Agriculture (USDA). This type of mortgage allows those buying or building homes in rural areas to take advantage of competitive interest rates and flexible down payment requirements. Qualifying borrowers can take out a USDA loan in Illinois with no down payment at all, making this a great option for those who want to minimize the upfront costs associated with purchasing a home.

To qualify for a USDA loan, applicants must fulfill specific criteria, including income thresholds that vary depending on the property’s location. The property in question must also be located in a designated rural or suburban community that’s been designated as eligible by the USDA. 

For those contemplating applying for a Illinois USDA rural home loan, the process starts by collaborating with a USDA-approved lender. These lenders process your application and underwrite the loan by assessing eligibility based on various factors, including income, credit history, and more. 

In essence, USDA loans give individuals and families the means to attain homeownership in rural regions without encountering significant financial hurdles. 

For anyone interested in diving deeper into USDA loan requirements in Illinois, we recommend that you read more about the fundamental requirements, such as:

• Citizenship: Eligible applicants must hold either U.S. citizenship or permanent residency status.
• Income thresholds: Potential borrowers need to adhere to the income limits set forth by the USDA, which vary depending on the size of the household and the geographical location.
• Location specifications: You can only use USDA loans to purchase properties that are located within designated rural areas. Use the USDA’s online eligibility tool to determine whether you can use a USDA loan to purchase real estate in a given area. 
• Lender-specific criteria: While general guidelines are in place, lenders may enforce additional conditions such as minimum credit scores, debt-to-income ratios (DTI), and proof of ample funds to cover closing expenses.

It is recommended that prospective buyers seek guidance from a USDA-approved lender to gain insight into requirements and understand their eligibility for a USDA loan in Illinois.

When considering your mortgage options, it’s crucial to weigh the pros and cons of USDA loans. Comparing the pros and cons of taking out a USDA home loan in Illinois will help you make more informed decisions as you navigate the mortgage application process. 

Pros

Some of the advantages of USDA loans are as follows:

• Zero down payment required: One of the most attractive features of USDA loans is the opportunity for buyers to acquire a home without any upfront payment. This significantly broadens access to homeownership, particularly for individuals with limited income to afford a low income mortgage.
• Competitive interest rates: Supported by government backing, USDA loans entail lower risk for lenders, enabling them to offer borrowers comparatively favorable interest rates.
• Flexible credit criteria: USDA loans typically boast more lenient credit score requirements in comparison to conventional loans, making them beneficial for borrowers with less-than-ideal credit histories.
• No PMI necessary: While those taking out conventional loans will typically have to pay PMI if their down payment is below 20%, this isn’t the case for USDA loans. Since these mortgages are backed by the government, lenders do not require borrowers to pay PMI, regardless of the down payment amount. 
• Streamline refinance: USDA mortgage holders can lower their interest rate (if available) with little to no paperwork and no appraisal.
• No penalties for prepayment: Unlike numerous other mortgage options, USDA loans do not penalize borrowers who opt to pay off their mortgage ahead of schedule, affording borrowers flexibility in managing their loan repayment.

Cons 

Some considerations of USDA loans are as follows:

• Location restrictions: Homes must be situated within regions designated as rural by the USDA, so, in general, you won’t be able to get a USDA loan in Chicago or other major cities (although you may be able to get a USDA loan near Chicago). Additionally, only primary residences are eligible, so you can’t use a USDA loan to buy a second home or investment property. 
• Income limits: USDA loans are intended to assist low to moderate income borrowers. The income restrictions attached to USDA loans can prevent high earners from taking out this type of financing. 
• Guarantee fees: All USDA loan borrowers pay an upfront and annual guarantee fee, which is a relatively low fee designed to support and fund the USDA mortgage program. Current guarantee fees are 1% upfront and .35% annually.
• Funding constraints: The availability of USDA loans is contingent upon the presence of funds, which may vary over time. Consequently, there may be instances of resource depletion leading to potential delays in the approval of loans.

If you want to qualify for a USDA loan, it’s essential to meet USDA loan requirements in Illinois, which are established both by the USDA and the particular lender you work with. Here are some of the Illinois USDA loan requirements you’ll have to meet to work with Griffin Funding: 

• Must be a U.S. citizen.
• A minimum FICO score of 600.
• Home must serve as your primary residence.
• Meet the minimum debt-to-income ratio.
• Must be able to prove steady income for the last two years.
• An applicant’s adjusted income should not exceed 115% of the median income for the area where the desired home is located, accounting for the size of the applicant’s family.

If you’re interested in taking out a USDA loan near Chicago or anywhere else throughout the state of Illinois, Griffin Funding is here to help. Griffin Funding offers expertise in assisting prospective buyers through every step of the mortgage process. 

Take advantage of Griffin Funding’s resources to achieve your home buying dreams. For instance, check out the Griffin Gold app, which serves as a user-friendly platform for comparing financing options, managing your money, privately browsing homes, and getting personalized assistance from our team of dedicated mortgage professionals.

Are you ready to take out a USDA home loan in Illinois? Contact Griffin Funding today to get started or fill out an online application to lock in your interest rate.