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A first-time home buyer in Minnesota can take advantage of loan programs designed to make getting a mortgage more affordable.
Learn more about first-time home buyer programs in Minnesota and across the country, and discover what it takes to qualify.
National first-time home buyer programs
Loans that make it easier for first-timers to buy a home exist in all 50 states. No matter where you live, ask potential lenders about mortgage options to overcome limited income, low credit scores or lack of a down payment.
Conventional mortgage
Best for:
Low down payments, limited mortgage insurance premiums
What you need to know:
A conventional mortgage is a home loan that isn’t guaranteed or insured by the federal government. Conventional mortgages that conform to the requirements set forth by Fannie Mae and Freddie Mac allow down payments as low as 3% for first-time buyers or lower-income home buyers. Unlike FHA loans, conventional loans allow borrowers to eventually cancel their mortgage insurance or avoid mortgage insurance altogether if they put at least 20% down.
VA loans
Best for:
Military, low down payments
What you need to know:
The U.S. Department of Veterans Affairs helps service members, veterans and surviving spouses buy homes. VA loans are especially generous, providing competitive interest rates, often requiring no down payment or mortgage insurance. Although there is no official minimum credit score, most VA-approved lenders require scores of at least 640.
FHA loans
Best for:
Low credit score, low down payments
What you need to know:
This is the go-to program for many first-time home buyers with lower credit scores. The Federal Housing Administration allows down payments as low as 3.5% for those with credit scores of 580 or higher. The FHA will insure loans for borrowers with scores as low as 500 but requires a 10% down payment for a score that low. Mortgage insurance is required for the life of an FHA loan and cannot be canceled.
USDA loans
Best for:
Low down payments, rural
What you need to know:
A USDA home loan is a zero-down-payment mortgage for eligible rural and suburban home buyers. USDA loans are issued by the U.S. Department of Agriculture through the USDA Rural Development Guaranteed Housing Loan Program. There are income limitations, which vary by region. Applicants with credit scores of 640 or higher receive streamlined processing. Those with scores below that must meet more stringent underwriting standards.
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Minnesota first-time home buyer loan programs
As a first-time home buyer, you may benefit from loan programs offered by the Minnesota Housing Finance Agency, or Minnesota Housing. If you’re eligible for these programs, you’ll also have access to down payment and closing cost assistance. Minnesota Housing defines a first-time home buyer as anyone who hasn’t owned a home in the past three years; however, certain programs are available to repeat buyers as well.
Minnesota Housing highlights and eligibility requirements
Highlights
Low down payment requirements and fees.
Up to $17,000 in down payment and closing cost assistance.
Options for low-cost or no mortgage insurance.
Eligibility
Minimum credit score as low as 640.
Income limits that vary by household size and location.
Maximum purchase price of $402,000 for certain metro areas.
Home buyer education course may be required.
Must contribute 1% of the purchase price or $1,000 to get down payment assistance.
Start Up mortgage
Best for:
Low mortgage insurance, low down payment
What you need to know:
Exclusively for first-time home buyers, this program gives you access to conventional and government-backed loans with fixed interest rates and low origination fees.
The Start Up mortgage requires a down payment as low as 1% and, if necessary, provides options for low-cost or no mortgage insurance. If you qualify for the Start Up mortgage, you may also be eligible for down payment and closing cost assistance.
Step Up mortgage
Best for:
Low down payment, low mortgage insurance
What you need to know:
Available to repeat buyers — those who’ve owned a home within the past three years — this program offers loans with fixed interest rates, affordable mortgage insurance options and low origination fees.
Down payment requirements for the Step Up mortgage are as low as 3%. Those who qualify for the Step Up mortgage may also be eligible for help with a down payment or closing costs. You can also use Step Up to refinance your home.
Monthly Payment loan
Best for:
Down payment assistance, closing cost assistance
What you need to know:
Available to both first-time and repeat home buyers, this assistance program makes up to $17,000 available for a down payment and closing costs. The Monthly Payment option uses the same interest rate as your mortgage and is paid back in monthly installments for 10 years.
You must use either a Start Up or Step Up mortgage to qualify for the Monthly Payment loan.
Deferred Payment loan
Best for:
Down payment assistance, closing cost assistance
What you need to know:
This down payment and closing cost assistance program is available only to first-time home buyers using the Start Up mortgage. Most borrowers will be eligible for up to $10,000 through this program. You may be able to borrow up to $13,000 if you meet at least two of the following criteria:
You’re the sole head of the household with an eligible dependent
You have at least four people in your household
You have a household member with a disability
You have a front-end debt-to-income ratio of 28% or higher
No payments are required on your Deferred Payment assistance loan for the full term of your Start Up mortgage. No interest accrues on the Deferred Payment loan during this time, but it must be repaid in full when the property is sold, refinanced or paid off.
Your next step
If you think one of these Minnesota first-time home buyer programs meets your needs, contact participating lenders. They’ll help you figure out if you qualify and calculate how much assistance you can get.
You’ll also want to make plans to attend an approved home buyer education course, which is required for first-time home buyers before closing.
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