For low-income families, buying a house may seem nearly impossible; and between saving for a down payment, closing costs, mortgage payments, and countless other fees, we can understand why. If you’re concerned about the financial implications of being a homeowner, there’s something you should know that will ease your worries.
Earning a low income doesn’t automatically disqualify you from being a homeowner. Luckily for low-income buyers in Minnesota, there are a number of helpful programs, grants, and mortgage options that can help you overcome some of these barriers to entry.
Best Minnesota Loans & Grants for Low-Income Home Buyers
Start Up Mortgage
If you have low credit and low mortgage insurance, this may be right up your alley. Start Up mortgage is a first-time homebuyer program that is meant to promote affordable interest rates and help homeowners better tackle their down payments and closing costs.
Start Up mortgage requires a down payment of as little as 3%. If needed, low-cost or no mortgage insurance options are readily available under this option. And it gets even better: if you qualify for Start Up mortgage, you may also be eligible for down payment and closing cost assistance.
Step Up Mortgage
This loan assists low-income families purchase a house, or could even help current homeowners refinance. The main purpose of Step Up is to promote affordable interest rates in the state of Minnesota.
The monthly payment portion of this Minnesota Housing program provides assistance to low-income buyers in being able to afford losing costs and the down payment of a home purchase. This loan also enables borrowers in Minnesota to reduce or eliminate mortgage insurance costs altogether.
Deferred Payment Loan
This loan is meant to help ease the cost of home ownership for first-time homebuyers in The North Star State. There are two options for this loan: a deferred payment loan and a plus loan. The deferred payment loan allows you to take out between $5,000 and up to $7,500. For those borrowers who meet the requirements, the plus loan can offer as much as $10,000.
The loan term is equal to the first mortgage and has a 0% interest rate. Deferred Payment loans are repaid when the property is sold.
Keep in mind that borrows must have a minimum credit score of 640 to qualify, and are required to attend a homebuyer education course.
Mortgage Credit Certificate
This program helps Minnesota homeowners better afford their mortgage payments. For those that qualify, the Mortgage Credit Certificate allows homeowners to claim 35% of their mortgage interest paid every year as a federal income tax credit; homeowners could receive up to $2,000 in tax savings.
This certificate can be used in conjunction with a Minnesota Housing mortgage, as well as the Monthly Payment Loan (listed below), which helps with the home down payment and closing costs.
Monthly Payment Loan
This program is designed to aid Minnesota home buyers afford the costs associated with the purchase of their home. Minnesota Housing has a monthly payment loan, and will help with 5% of the purchase price or $5,000 (whichever is greater.) The money is put towards closing costs and the down payment.
Borrowers need to get a Minnesota Housing first mortgage loan as well, which is either a Start Up (first-time home buyers), Step Up (refinancing), or MCC (mortgage credit certificate).
Learn More: Everything You Need to Know About Low-Income Home Loans
Best Federal Mortgage Options for Low-Income Buyers
More first time home buyers take advantage of FHA loans to help them become homeowners than any other type of mortgage program that is available to them.
We can see why; you are only required to put a 3.5% down payment on your new home with an FHA loan, which could really come in handy if savings are tight. That means if your home costs $200,000, you will just need to allocate $7,000 for your down payment. To qualify, you will need to have a minimum credit score of 580.
Here’s an interesting fact about this loan for first-time home buyers: your down payment for an FHA loan can be a gift from a family member or friend. This means you can get into your new home with little, or no money upfront.
This home loan program from the U.S. Department of Agriculture can be utilized by low-to-moderate income home buyers in rural areas of the country, such as Minnesota. USDA mortgage are perfect for first-time home buyers because there is absolutely no down payment required.
Even though it may sound like only very small towns and rural areas will be eligible, almost 97% of the country is in an eligible USDA location.
HomeReady HomePath Mortgage
The HomeReady Homepath program is targeted at first-time home buyers. To be eligible to take advantage of this program, you are required to take a buyer education course.
But trust us, it will be worth your time; the HomeReady Homepath program gives you 3% towards closing costs on a mortgage loan. Sounds like a good deal to us.
That’s not all; a low down payment of just 3% is required for your home purchase, which is even less than FHA loans. This program is exclusively for first-time home buyers who plan to occupy the property as their primary residence. It is also mandatory to have a real estate agent to purchase a home through the HomeReady HomePath Mortgage program.
Borrowers may have the option to cancel their mortgage insurance once their home equity reaches 20%. This can result in lower monthly payments down the road.
Learn More: The Complete Guide to FHA Loans By State
Best Private Lender Programs in Minnesota for Low-Income Home Buyers
In an effort to increase the amount of mortgages offered in the U.S., Fannie Mae and Freddie Mac created a loan program that would could compete with FHA loans. Fannie and Freddie are government-sponsored enterprises — they also happen to be the main buyer of mortgages in the entire country.
Coming up with the down payment is the number one hurdle for first time home buyers; the conventional 97 loan strives to remedy this issue for them by requiring just a 3% down payment.
There is a slightly higher interest rate that comes with the conventional, but don’t shut the door on this option just yet; typically, the spike is no more than a quarter percent higher. The amount of money you will be saving in upfront costs with this loan far exceeds that additional cost.
In case you’re still concerned, here is what you can expect the price rise to truly equate to: the slight increase in the rate will end up costing you roughly $45 per month on a $200,000 mortgage.
Learn More: 7 Easiest Mortgage Lenders for First-Time Home Buyers
Home Buyer Rebate
First-time home buyers currently evaluating their financing options should connect with a top-rated, local real estate agent for guidance. The right agent can assist you with choosing the right lender and mortgage type, and will extend a helping hand throughout the entire home buying journey.
Your real estate agent can help you find additional cost savings by utilizing their expertise with timing the market, property evaluation, negotiating, and tapping into their professional network.
As an extra perk, Clever buyers who spend $150K and above will get a $1K rebate to help cover their closing costs.
Learn More: How to Get a Home Buyer Rebate