USDA rural development loans are an incredible resource for prospective homebuyers living in rural areas. Rural loans in Vermilion County, Illinois, are an attractive option for financing because they require no money down and have very competitive rates. Because this loan has so many appealing features many people assume it must be very hard to qualify for this loan or that the process is too time consuming or confusing. Fortunately, that's not the case. Here's what you need to know to obtain a rural loan in Danville, Illinois.
Gather Eligibility Information
The most important thing you can do to make sure the rural loan process goes smoothly is to understand eligibility requirements and then gather the appropriate documents to verify your eligibility. First of all, you must live in an area that qualifies as rural, which any mortgage broker or bank can easily tell you. You should also gather documents such as proof of income, residency status, tax returns, proof of identity, and financial documents like bank statements. Even if you don't have a home under contract, the sooner you gather this information, the quicker the process can go once you begin.
Obtain Credit Score
It's also a good idea to know what your credit score is when you begin the process to make sure you qualify for a rural loan. Fortunately, the minimum score required is reasonable, around 640. If your credit is lower than this, it doesn't automatically mean you're disqualified; there may be some room for leniency. In the meantime, do your best to lower your debts, pay bills on time, and stay as far from your credit line as possible on credit cards.
Know Income Limits
The income limit for a USDA loan isn't a set amount. The limit depends on what your income is compared to the average of the region. You can get a more specific income limit by visiting the USDA website or talking to a loan officer at Catlin Bank. In some cases, if the income is higher than the limit, you may still be able to obtain the loan because certain expenses like medical expenses and child care can be deducted when considering income qualifications.
Know Loan Limits
USDA loans are issued as direct or guaranteed loans. Direct loans come straight from USDA, while guaranteed loans are through a third party lender. The monthly payment (including interest) should be 43% or less of the total monthly income. Your process can go more quickly if you know what price range of home to look for so that you don't get to the loan process and realize you can't qualify for that amount with a rural loan.
Understand Loan Terms
Last of all, as you go through the loan process, be sure to understand the loan terms so that there are no surprises at closing. There is typically no down payment required and no private mortgage insurance. The loan is usually a fixed rate for 30 years, but be sure to know exactly what the terms are throughout the process.