Minnesota First-Time Home Buyer | Programs and Grants

By: Peter Warden Updated By: Ryan Tronier
March 14, 2023 - 8 min read

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. This can help cover your down payment and closing costs to put you in a home sooner than you thought possible.

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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 Minnesota Housing Finance Agency, or Minnesota Housing, offers special mortgages and cash to cover some or all of your down payment and closing costs. Here’s what you can expect.

Minnesota Housing Start Up

The Start Up program offers first-time home buyer loans with 3% down, affordable interest rates, and income limits up to $134,800 (in 2023). Down payment and closing cost assistance is also available. More on that in the next section.

Minnesota Housing Step Up

If you’re a repeat buyer or a Minnesota first-time home buyer who exceeds household income limits, the Step Up program may be ideal for you. Perks are similar to the Start Up program, and refinancing and purchase price limits apply.

Minnesota Housing Conventional Loans

Minnesota Housing’s website 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. You’ll also need to complete a home buyer education course to be eligible.

Helpfully, Minnesota Housing provides a list of approved courses (see the resource section below), 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 cit, county, and state levels. 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 $18,000 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 $16,500 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 $18,000 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 standard 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.

Minnesota home buyer key stats

The median home price in Minnesota was $315,000 in February 2023. That was an increase of 3.4% from the year before, according to data from the Minnesota Association of Realtors.

Although home price inflation shows signs of slowing in Minnesota, saving for a down payment can still be a challenge for first-time buyers. If you find yourself in this situation, keep reading to find out if you qualify for one of many home buyer assistance programs available.

Minnesota home buyer stats

Average Home Sale Price in MN1$315,000
Minimum Down Payment in MN (3%)$9,450
20% Down Payment in MN$63,000
Average Credit Score in MN2742
Maximum MN Home Buyer Grant3$18,000 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 that you don’t need that much. Not by a long shot. 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 premiums (MIP) 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 development 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 your mortgage loan, you could potentially get into a 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.

Buying a home in Minnesota’s major cities

Home purchase prices in Minnesota’s three biggest cities are relatively flat, for the most part. Real estate prices in Rochester are actually down 2.7% between February 2023 and 2022.

Each major city also has at least one down payment assistance program. They’re all likely to have similar eligibility requirements, including that you’ve completed a homeowner education course; use an approved lender; and meet local income limits. Check with your provider for other loan terms and conditions.

Minneapolis first-time home buyers

The median list price in Minneapolis was $300,000 in February 2023. That was flat year over year, according to Realtor.com.

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 Minneapolis runs the Homeownership Opportunity Minneapolis (HOM) which provides a zero-interest, no payment 30-year loan with $10,000 in assistance for homebuyers between 61- 80% AMI and $20,000 in assistance for homebuyers below 60% AMI. 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 $254,000 in January 2023. That was a slight decrease of 1.9% from January 2022, according to housing data from Redfin.

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

  • $7,620 for 3% down payment
  • $50,800 for 20% down payment

The city of St. Paul offers up to $40,000 to those who are eligible, with amounts varying depending on your need. This DPA 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. Check out the resource section below and download the full program guidelines (PDF) for all the details.

Rochester first-time home buyers

The median list price in Rochester was $347,200 in February 2023. That was down 2.7% year-over-year, according to Realtor.com.

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

  • $10,416 for 3% down payment
  • $69,440 for 20% down payment

First Homes is a nonprofit subsidiary of the Rochester Area Foundation. 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 $12,000 to qualifying buyers, but that depends on available funding. 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.

When you’re ready to start the home buying process, experiment with a mortgage calculator to see how down payment and interest rates will affect your mortgage payment. Then, get personalized rate quotes from at least three to five mortgage lenders.

Don’t just look at advertised rates online. Apply for preapproval and compare the interest rates and fees you’re offered. Because 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

Peter Warden
Authored By: Peter Warden
The Mortgage Reports Editor
Peter Warden has been writing for a decade about mortgages, personal finance, credit cards, and insurance. His work has appeared across a wide range of media. He lives in a small town with his partner of 25 years.
Ryan Tronier
Updated By: Ryan Tronier
The Mortgage Reports Editor
Ryan Tronier is a personal finance writer and editor. His work has been published on NBC, ABC, USATODAY, Yahoo Finance, MSN Money, and more. Ryan is the former managing editor of the finance website Sapling, as well as the former personal finance editor at Slickdeals.