Mortgage Rates Minnesota

Mortgage Rates Minnesota: Understanding Your Choices

The housing market in Minnesota is booming. As a homebuyer, this means you may be facing a lot of competition for your dream home. If you’re looking for a Minnesota home, you need an edge over the other homebuyers – sometimes, knowing the local mortgage rates can be your advantage.

In this guide, we’ll cover all you need to know about the mortgage rates in Minnesota. We won’t just share the latest Minnesota mortgage and refinance rates, we also give out top tips to buy your home at the most affordable price!

Home Loan Options In Minnesota 

As an American homebuyer, there are several loan types you can choose from. These loans all have their own pros and cons as well as different rate & APR calculations. Here, we break down the details of each loan type. 

Conventional Home Loan

Conventional mortgages are home loans that aren’t offered or guaranteed by the government. They’re commonly offered by banks and other private mortgage companies. These loans typically follow local lending limits set by the Federal Housing Finance Agency (FHFA). In Minnesota, the lending limits are $548,250, on par with the national average.

Fixed-Rate Mortgage

A fixed-rate mortgage’s interest rates will never change during its life. The constant rates mean that your monthly payment will stay the same as well. These mortgages are popular because of their stability and predictability. If you’re a new homebuyer or a long-term financial planner, fixed-rate mortgages may be the best option.

30-year fixed mortgage loans are the most common fixed loan offered. However, if you can afford the higher monthly payments, 15-year and 20-year-fixed mortgage loans offer better rates.

Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages are home loans with a shifting mortgage rate & APR. Based on a certain market index, your ARM rate & APR can rise or fall every year. Typically, these loans offer an introductory period with a fixed interest rate at the start of their life. These loans are usually better for short-term savings because the introductory ARM rate is usually better than fixed-rate mortgages.

The common introductory period is 5 years. However, these periods can last anywhere between 3 to 10 years.

Jumbo Mortgage

To buy homes with a higher property value, lenders offer jumbo loans. Jumbos allow you to have a larger loan amount with the tradeoff of a higher interest rate & APR.

Government-Backed Loan

As an alternative to conventional loans, you can also opt for government-backed loans. If you qualify for them, you’ll generally be granted pros such as affordable rates and low down payment requirements.

The major government loans on offer are:

• FHA loan: Because these loans are aimed at lower-income borrowers, they feature lower credit rating and down payment requirements. To offset this ease of qualification, FHA loans require private mortgage insurance (PMI) fees for their entire life.
• USDA loan: If you’re eyeing a home in USDA-approved rural areas, this mortgage can provide you a no-down-payment loan with cheaper PMI fees.
• VA loan: Restricted for military members, VA loans are low-down-payment mortgages without PMI fees. However, you’re charged a cost called a funding fee at the start of the loan.

Mortgage Refinancing

Refinancing a mortgage means taking out a new loan to pay off your current one. Refinancing is usually taken to accomplish one of these two things: 

• Modify your loan details: Rate and term refinances allow you to modify an existing loan, changing its term and type. For example, you can refinance an ARM into a fixed-rate or shorten a 30-year loan into a 15-year. This refinance is typically taken to get better refinance rates and pay off your loan quicker.
• Convert home equity into cash: Cash-out refinances allow you to convert part of your home equity into cash. This works by giving you a larger loan than your current mortgage balance. Once you use the loan to pay off your mortgage, any money left over is yours to use for other things. 

Current Minnesota Mortgage Rates 

Historically, the mortgage rate trends in the state have adhered closely to the national average. For the most recent Minnesota mortgage and refinance rates by loan type, you can refer to the table below. We source this data from a survey of America’s major mortgage lenders.

Today’s Mortgage Rates in Minnesota

Your own mortgage rates & APR may vary depending on your financial condition. Keep in mind that the listed mortgage rate details may change without prior notice.

For a customized look at your Minnesota mortgage rates, we’ve provided an APR & rate tool at the top of this page. Using your financial details, our mortgage calculator can create a Minnesota rate & APR estimate just for you!

First-Time Homebuyer Programs In Minnesota 

Through the Minnesota Housing Finance Agency, the state offers several loan programs for new home buyers. To qualify for them, you must pass several general qualifications:

• Have a credit score of 640 or higher
• Fulfill Minnesota Housing’s income limits
• Complete a mandatory homebuyer education course
• Contribute at least 1% of the loan or $1,000 of your own money

Start Up Mortgage

Minnesota Housing’s primary program offers you four options of home loans: Conventional, FHA, VA, and USDA. These loans feature low rates and can be paired with down payment and closing cost assistance. If you qualify for a Start Up loan, you need to pay at least 3% down.

Monthly Payment Loan Program

If you qualify for the Start Up loan, you can also apply for the Monthly Payment Loan. Through this program, the state offers a loan of up to $17,000 to pay down payment, closing cost, and lender fees. This loan features a 10-year term and has the same APR & rate as your first mortgage.

Deferred Payment Loans

Start Up participants can also apply for Deferred Payment loans. You can borrow up to $10,000 (or $13,000, if you fulfill certain conditions) to pay down payment and closing costs. This state-sponsored loan has no interest rate and only needs to be repaid when your house is sold, refinanced, or paid off. 

Buying A Home In Minnesota 

Spending too much time figuring out what to do might cause your dream house to be snatched up by someone else. To prevent that and make your home buying journey easier, we’ve summarized the entire home purchase process in six simple steps!

Step 1: Prepare Your Mortgage

Before the process can properly start, you should make sure you have a budget. To know how much you can afford, you can get a pre-approval. The pre-approval process begins when you apply for a loan with a lender. After a check of your credit score and other financial details, the lender will give you a pre-approval letter.

This letter contains key details of your loan: Loan amount, terms, interest rates, and other important information. The letter also serves as a sign of financial capability to buy a house that you can show the seller.

Step 2: Look For A Realtor

Researching for potential homes alone can be difficult. Having a real estate agent with local experience can make the process much easier. Good realtors don’t just deal with property – they become experts in the area, able to answer any questions you may have.

Step 3: Search For The Right House

Ideally, your house hunt should begin at the neighborhood level. Pick a neighborhood and find the most affordable house that fits your criteria. If the home price falls below your mortgage ceiling, you can use any leftover money for home improvements and upgrades. 

Step 4: Make An Offer

Since it’s likely you’re not the only one eyeing that house, your offer needs to stand out. One of the best ways to do so is to make a larger offer. Ask your real estate agent how far you should overshoot the listed home price you should offer and follow their advice.

Step 5: Do Your Due Diligence

Part of being a good buyer is to check your purchase. To help examine your new property, schedule an inspection and appraisal. Inspectors help pinpoint issues with your home, while appraisers determine whether the home value equals your purchase price. 

Step 6: Close The Deal

Before scheduling a close date, make sure you have the funds to pay the closing cost and any lender fees. On the day itself, be sure to check every document in detail and run through it with your realtor before signing. As soon as the paperwork is clear, it’s time to make moving arrangements!

How To Get A Better Mortgage Rate In Minnesota

Getting the most affordable mortgage rates allows you to save a lot of money. Here are our top tips to reduce your mortgage rates & APR!

Consider Purchasing Points

Many lenders offer you mortgage points – upfront expenses you can pay to reduce your APR & rate. Points are usually worth 1% of the loan each and provide you with a 0.25% rate reduction. So for example, buying two points on a $400,000 mortgage with a 4% interest rate means you’ll pay $8,000 to reduce your rate to 3.5%.

Points are a large upfront expense, so they’re best used to reduce the rate on long-term loans. However, if you can’t afford full points, you can pay for half-points as well. 

Compare Offers From Multiple Companies

Like in any other market, mortgage lenders are competing for your business. They will often offer you better rates & APR to beat out other lenders. When researching loan options, be sure to review loan estimates and find an offer that represents the best value for you.

Apply For A Shorter Loan Term

Shorter loan terms have lower rates because the lender takes on less risk. If you can afford the higher monthly payments, consider taking shorter loan terms to get a more affordable rate.

Closing Thoughts

To successfully buy a home in Minnesota, you need to be prepared. Two key things you need are knowledge of the local rates and knowing how to make the best offer.

For assistance in finding the best mortgage for your Minnesota home, Wesley LLC is here for you! Contact us today for a personal mortgage consultation.