USDA loans: how they work for first-time homebuyers in Itasca County

For more than 30 years, the U.S. Department of Agriculture (USDA) mortgage loan program has been helping low-to-moderate income residents in rural areas achieve the dream of homeownership.

USDA lending dates back to the 1930s, when the Great Depression prompted the creation of the Department of Agriculture. The agency’s primary mission was to relocate farming communities to more profitable areas but evolved to include credit and lending to farmers. In 1991, the program was expanded to also provide access to single family home mortgage financing in rural areas.

Today, USDA mortgage loans help low-income residents in rural areas achieve the dream of homeownership via two great benefits—no down payment requirement and lower interest rates compared to conventional loans. However, buyers must meet certain requirements with their income and property location to be eligible.

Locally, Itasca County is considered a USDA designated rural area, meaning USDA mortgage loans are available to qualified buyers.

Fred Bolstad, head of retail home lending at U.S. Bank, oversees a team of mortgage loan originators that help educate homebuyers on the best loan product for their needs. To qualify for a USDA mortgage loan, borrowers typically need to meet the following criteria:

Income limits. Your combined household income must fall below the USDA set limit. For 2024, the standard USDA loan income limit for 1-4 member households is $110,650; and for 5-8 member households is $146,050. The income limit varies by state and county and cannot be exceeded by 115% of Area Median Household Income, which is set each year by the Department of Housing & Urban Development. Income limits are revised each year by the USDA.

Property location. The property you are purchasing must be located within a USDA-designated rural area. In most cases, these are areas with a population less than 35,000.

Loan limits. Each year, the USDA also revises the limits for how much money can be borrowed via a USDA loan based on high- and low-cost areas. This year, the standard limit is $398,600, with higher cost counties having higher limits between $431,400 and $919,800.

Ability to repay the loan. Lenders facilitating a USDA loan will also look at your financial history, income stability and other debts to determine your ability to repay the loan. This is common practice for all mortgage types.

To learn more about the USDA loan program, visit rd.usda.gov or contact your local U.S. Bank branch to speak with a mortgage loan originator.