Minnesota First-Time Home Buyer: 2022 Programs and Grants

What to know about buying a house in Minnesota

As a first-time home buyer in Minnesota, you have access to some great resources. The North Star state can provide homebuyer education courses, counseling, and special mortgage programs.

Best of all, Minnesota can deliver down payment assistance to qualifying borrowers. And that can help cover your down payment and closing costs to put you in a home sooner than you thought possible.

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Minnesota home buyer overview

The median home price in Minnesota was $340,000 in April 2022, according to data from the Minnesota Association of Realtors. That was an increase of 11.5% from the year before.

Minnesota home buyer stats

Average Home Sale Price in MN1	$340,000
Minimum Down Payment in MN (3%)	$10,200
20% Down Payment in MN	$68,000
Average Credit Score in MN2	742
Maximum MN Home Buyer Grant3	$17,000 repayment loan (Minnesota Housing) or $40,000 deferred loan (Saint Paul)

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

First-time home buyer loans in Minnesota

If you’re a Minnesota first-time home buyer with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first-time buyers have saved enough for 20% down. But the good news is, you don’t need that much. Not by a long shot.

Qualifying borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:

• Conventional 97: From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. You can usually stop paying mortgage insurance after a few years, once you’ve built at least 20% equity in your home
• FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re typically on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
• VA loan: Only for eligible veterans and service members, reservists, and National Guard. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan: For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• Minnesota Housing: May include competitive interest rates and can be used with down payment assistance. More information below

Note that government loan programs (including FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

In addition, most programs let you use gifted money or down payment assistance (DPA) to cover your down payment and closing costs. Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

If you’re unsure which program to choose for your first mortgage, your lender can help you find the right match based on your finances and home buying goals.

MN first-time home buyer programs

Aside from the standard loan types above, eligible Minnesota buyers may qualify for a home loan through the state.

• The Start Up program offers first-time home buyer loans with 3% down, affordable interest rates, and income limits up to $134,800 (in 2022). Down payment and closing cost assistance are available
• The Step Up program offers loans for repeat home buyers and existing homeowners. Perks are similar to the Start Up program, and refinancing and purchase price limits apply

The Minnesota Housing Finance Agency (Minnesota Housing) also says it “offers several HFA conventional mortgage products that must be layered with one of our Mortgage Loan Programs, offering the reduction or elimination of mortgage insurance (MI) costs with options available up to 97% LTV.”

That’s a lot of jargon. Broken down, it simply means:

• You could get an HFA loan through the state
• You’d only need a 3% down payment
• Your mortgage insurance costs would be reduced, meaning you’d have cheaper monthly mortgage payments than with many other loan types

As a Minnesota first-time home buyer, expect to need a credit score of 620 or better to qualify for this program. And you’ll need to complete a home buyer education course to be eligible.

Helpfully, Minnesota Housing provides a list of approved courses, including an online option, on its website. Just click the “+” symbol next to “Homebuyer education and resources.”

MN first-time home buyer grants

There are multiple home buyer grants and loans in every state. In Minnesota, you should find helpful programs at the city and county levels as well as the state level. You can ask your real estate agent or loan officer to point you in the right direction.

Statewide, Minnesota Housing provides down payment and closing cost loans that can help with your upfront home buying expenses.

It has three main down payment assistance options, all of which can be used for closing costs as well:

• Monthly Payment Loan: Borrow up to $17,000 as a second mortgage and repay it over 10 years in parallel with your main mortgage. Available with Start Up and Step Up loan programs
• Deferred Payment Loan: Borrow up to $11,000 at 0% APR. No monthly payments but you have to repay the loan in full when you move, sell, refinance, or finish paying down your main mortgage. Only available with the Step Up program
• Deferred Payment Loan Plus: Borrow up to $15,000 at 0% APR. No monthly payments but you have to repay the loan in full when you move, sell, refinance, or finish paying down your main mortgage. This has stricter eligibility criteria than the ordinary Deferred Payment Loan

You need to use a lender approved by Minnesota Housing to be eligible for any of these. And the one you choose will tell you which, if any, you can get. Always get quotes from multiple lenders before you commit.

Buying a home in Minnesota’s major cities

Home purchase prices in Minnesota’s three biggest cities are on the rise, but averages in Minneapolis haven’t been rising as quickly as in the rest of the state.

Each major city also has at least one down payment assistance program. And they’re all likely to have similar eligibility requirements, including that you’ve completed a home buyer education course; that you use an approved lender; and that you meet local income limits. (The smaller your income, the more assistance you’re likely to get.) Check with your provider for other loan terms and conditions.

Minneapolis first-time home buyers

The median list price in Minneapolis was $325,000 in April 2022, according to Realtor.com. That was up by only 2% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

• $9,750 for 3% down payment
• $65,000 for 20% down payment

The city of Minneapolis runs the Homeownership Opportunity Minneapolis (HOM) which provides loan amounts up to $10,000 to be applied to down payments. It’s a zero-interest, 30-year loan without any monthly payments. The assistance will have to be repaid when you move, sell, refinance, or finish paying down your main mortgage.

Eligible Minneapolis first-time home buyers must be below income limits, which vary by household size, and complete financial wellness counseling from an approved agency.

Saint Paul first-time home buyers

The median home price in St. Paul was $300,000 in April 2022, according to housing data from Redfin. That was an increase of 15.2% from April 2021.

If you want to buy a home at that median price, your down payment options might fall between:

• $9,000 for 3% down payment
• $60,000 for 20% down payment

The city of St. Paul normally offers help to first-time home buyers. But, when we visited its website, it said: “All Downpayment Assistance funds have been reserved. No new requests are being accepted at this time.”

Of course, that may have changed by the time you read this. So click that link to see whether funds are currently available.

When it’s operating, the program offers up to $40,000 to those who are eligible, with amounts varying depending on your need. And that takes the form of an interest-free loan that falls due only when you move, sell (unless there are no “net proceeds”), refinance, or finish paying down your main mortgage. Download the full program guidelines (PDF) for all the details.

Rochester first-time home buyers

The median list price in Rochester was $330,000 in April 2022, according to Realtor.com. That was up 11.9% year-over-year.

If you want to buy a home at that median price, your down payment options might fall between:

• $9,900 for 3% down payment
• $66,000 for 20% down payment

First Homes is a nonprofit subsidiary of the Rochester Area Foundation. And it can provide down payment assistance either using the Minnesota Housing Start Up program (above) or through its own First Homes Gap Loan.

For the latter, it offers up to $10,000 to qualifying buyers, but that depends on funding being available. This appears to take the form of an interest-free deferred loan. And you don’t have to repay that until you move out, sell, refinance, or finish paying down your main mortgage. Check with one of First Home’s participating lenders to see whether you’re eligible and if funds are available.

Where to find home buying help in Minnesota

All the organizations we’ve listed above should provide advice freely to any Minnesota first-time home buyer or one purchasing in their local area.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources.

Statewide first-time home buyer resources in Minnesota

Minnesota home buyer resources by county

City-level home buyer resources in Minnesota

What are today’s mortgage rates in Minnesota?

You can see today’s live mortgage rates in Minnesota here.

Experiment with a mortgage affordability calculator to determine your budget and to see how items like interest rate and down payment affect your monthly mortgage payment.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

¹Source: Minnesota Association of REALTORS Housing Statistics Report
²Source: Experian.com study of 2021 and 2020 data
³Based on a review of the state’s available DPA grants at the time this was written