Programs for first-time homebuyers in MN in 2021

Minnesota Housing offers mortgage programs for both first-time and repeat homebuyers, as well as two different down payment and closing cost assistance programs.

Working with one of Minnesota Housing’s participating lenders, you can determine which loan best suits your needs and apply for assistance.

Start Up Mortgage

The Start Up program offers affordable, fixed interest rates, and you can put as little as 3% down on a conventional loan. It also features low or no mortgage insurance options, which helps keep your monthly payments low.

Start Up is just for first-time homebuyers, which includes individuals who haven’t owned a home in the last three years. You’ll also have to fall within Minnesota Housing’s income limits, as well as the credit score requirements for your type of mortgage.

The purchase price limit is either $294,600 or $340,000, depending on where you want to live in the state.

Step Up Mortgage

The Step Up program helps current homeowners (or anyone who has owned a home within the last three years) to either buy a new home or refinance at affordable, fixed rates.

As with the Start Up loan, buyers can put down as little as 3% with Minnesota Housing’s exclusive conventional loans and still receive low or no mortgage insurance options to keep their monthly payments low. The credit score requirements vary depending on your loan type, but typically range from 580-620.

To qualify, you’ll have to meet Minnesota Housing’s income limits, as well as the regional purchase price limits, which vary based on your household size.

In some areas of the state, that would be $382,950 for one unit and $490,250 for two units. In others, it’s $331,760 for one unit and $424,800 for two units.

More: How to avoid a delay or denial in your mortgage application.

Monthly Payment Loan

The Monthly Payment Loan can be used with both the Start Up and Step Up programs to help homebuyers cover the down payment and closing costs associated with buying a home.

You can qualify for a second loan of up to $17,000 at the same interest rate as your primary loan, which you’ll be expected to pay back over a 10-year term.

Deferred Payment Loan

The Deferred Payment loan is exclusively for first-time homebuyers who use the Start Up program to help with their down payment and closing costs.

Two different types of loans are available:

  • Deferred Payment Loan, which provides up to $10,000 for homebuyers.
  • Deferred Payment Loan Plus, which provides up to $13,000 for buyers who meet certain criteria.

Your mortgage lender can walk you through the repayment terms and conditions.

The Best Lenders for First-Time Homebuyers

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Who qualifies for first-time homebuyer MN grants and other programs?

Minnesota Housing’s goal is to ensure all Minnesota residents have access to safe and affordable housing. Residents who meet the organization’s purchase price and income limits can apply for assistance through an approved lender.

Other requirements vary by program, but first-timers are asked to participate in a homebuyer education course to help prepare for the responsibility of homeownership.

More: Get a free credit score and credit monitoring from Credit Sesame.

Nationwide first-time homebuyer programs

The most common way to buy a home is to go through the private market and get a “conventional” mortgage.

The barrier to entry can be pretty high, though. You’ll usually need a credit score of 620 and a 5% down payment to get a lender on board.

More: Use these savings accounts to build up your down payment.

Many first-time buyers will have an easier time using one of these nonconventional mortgages offered by the feds.

FHA loans

The Federal Housing Administration introduced FHA loans in the mid-1930s to help more Americans buy homes. At the time, more than half the population rented. The economy was still bouncing back from the Great Depression, and homeownership was out of reach for many.

FHA loans have more lenient requirements; you can skate by with a credit score of 580 and a down payment of just 3.5%. That said, a bigger down payment can help you avoid paying for mortgage insurance and let you in the door with a credit score as low as 500.

The FHA's Loan Requirements Explained.

A walkthrough of how to meet the FHA's requirements.

See Guide

VA loans

These loans, which are guaranteed by the U.S. Department of Veterans Affairs (VA), were introduced back in 1944. Congress passed an act to grant more benefits to veterans, who had been asking for help accessing affordable homes.

These loans are strictly reserved for active service members, veterans or surviving military spouses. You’ll have to pay a sizable funding fee, but you’re not required to make a down payment or pay mortgage insurance.

USDA loans

These loans are guaranteed by the United States Department of Agriculture for lower-income rural and suburban Americans. As with VA loans, USDA loans don’t require down payments or mortgage insurance.

Instead, you’ll have to pay an upfront 1% guarantee fee and an annual 0.35% fee based off of your total loan amount. For most borrowers, those fees are still less expensive than the mortgage insurance costs associated with other types of mortgages.

Most people won’t qualify for USDA loans, though. They have strict income limits to ensure the assistance is directed only to lower-income households.

The current income limits in most parts of the country are $86,850 for one- to four-member households and $114,650 for five- to eight-member households, but the limits may be higher if you live in an area with a higher cost of living. You can find your region’s threshold on the USDA’s website.

Next steps

Now that you know all your options in Minnesota, you may be asking yourself: “What next?”

A great first move would be to take a look at your credit score and see how you measure up to your ideal loan’s requirements. You can get a free score through the site Credit Sesame.

Was your score disappointing? That’s OK; you have plenty of options. An organization like Self credit repair can help you bring your score up.

When you’re in good shape, don’t forget to gather the important documents you’ll need to prove you’ve got money in the bank and money floating in.

Then you can finally think about getting pre-approved for a mortgage and start shopping for your new digs.

State-Level First-Time Homebuyer Programs
Arizona Department of Housing (ADOH)
Arkansas Development Finance Authority (ADFA)
California Housing Finance Agency (CalHFA)
Colorado Housing and Finance Agency (CHFA)
Connecticut Housing Finance Authority (CHFA)
Delaware State Housing Authority (DSHA)
Florida Housing Finance Corp. (Florida Housing)
Georgia Dream
Hawaii Housing and Finance Development Corporation (HHFDC)
Idaho Housing and Finance Association
Illinois Housing Development Authority (IHDA)
Indiana Housing and Community Development Authority (IHCDA)
Iowa Finance Authority (IFA)
Kansas Housing Resources Corporation
Kentucky Housing Corporation (KHC)
Louisiana Housing Corporation (LHC)
MassHousing (Massachusetts)
Michigan State Housing Development Authority (MSHDA)
Minnesota Housing
Missouri Housing Development Commission (MHDC)
Montana Board of Housing (MBOH)
Nebraska Investment Finance Authority (NIFA)
Nevada Housing Division
New Mexico Mortgage Finance Authority (MFA)
State of New York Mortgage Agency (SONYMA)
North Carolina Housing Finance Agency (NCHFA)
Ohio Housing Finance Agency (OHFA)
Oklahoma Housing Finance Agency (OHFA)
Oregon Housing and Community Services (OHCS)
Pennsylvania Housing Finance Agency (PHFA)
South Dakota Housing Development Authority (SDHDA)
Tennessee Housing Development Authority (THDA)
Texas Department of Housing and Community Affairs (TDHCA)
Utah Housing Corp
Virginia Housing
Washington State Housing Finance Commission (WSHFC)
Wisconsin Housing and Economic Development Authority (WHEDA)
Wyoming Community Development Authority (WCDA)

About the Author

Sigrid Forberg

Sigrid Forberg

Staff Writer

Sigrid is a staff writer with MoneyWise. A graduate of Carleton University's journalism program, she spent the better part of the last six years writing about business and retail. In her spare time, she enjoys reading, baking and riding her bicycle.

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