Minnesota Mortgage Rates

Living in Minnesota

For homebuyers, Minnesota offers plenty of pluses, such as a strong business climate, often-envied quality of life and, of course, that famous “Minnesota nice” vibe.

Known as the “Land of 10,000 Lakes,” the state draws outdoor adventurers looking for opportunities, such as hiking, biking, kayaking and even climbing frozen waterfalls. Minnesota also offers a thriving arts-and-culture scene, especially in the Twin Cities metropolitan area made up of Minneapolis, the largest city in the state, and Saint Paul, the state capital.

Minnesota is currently a seller’s market with homes in high demand and fewer homes for sale than in years past. During the first quarter of 2019, the median home sale price in Minnesota was $240,000, up 6.7% from $225,000 a year earlier. At the same time, the percentage of original list prices received by sellers was down just slightly, 96.6% versus 96.8% the previous year.

Lately, the inventory of homes for sale in Minnesota has been trending downward. According to the Minnesota Association of Realtors, as of March of 2019, there were 15,963 homes for sale in the state, compared to 20,474 in 2017. Demand in March was strong, too, with homes staying on the market an average of just 60 days, an increase of three days from the same time last year.

The rules and costs of buying a home in Minnesota

As with many states, buying a home in Minnesota means abiding by certain laws and regulations. Here’s what you need to know:

Home seller and buyer laws

Minnesota requires home sellers to fill out a seller disclosure form. Sellers are specifically required to disclose a long list of potential issues about their homes that includes informing buyers about air and noise pollution, cracks, diseased trees, ice damage, mold, soil or settling problems, and sewer backups. They also have to indicate whether certain components of the home, such as plumbing, heating and electrical systems, are (or aren’t) in working order.

Minnesota allows both judicial and non-judicial foreclosures, which means lenders are not required to take homeowners to court in order to foreclose, as they are in some states. However, Minnesota requires a process known as “foreclosure by advertisement.” It basically requires lenders to first notify homeowners that they intend to foreclose, and then forward the delinquent account to a foreclosure attorney, along with a pre-foreclosure notice. The attorney then schedules a “sheriff’s sale,” or public auction to sell the home unless the homeowner pays up.

Minnesota is not a community property state where all assets acquired during the marriage belong equally to both spouses and get divided in half. Instead, it is an “equitable distribution” state, which means property does not have to be divided 50/50. In Minnesota, marital assets get divided in a way that is determined by a judge to be fair and equitable. This typically includes considering factors such as individual incomes, the length of the marriage and whether the couple had children.

Minnesota does not require a lawyer to represent the buyer during the closing process. Instead, state law allows buyers to choose a closing agent, such as a licensed real estate broker or title company, to prepare closing documents, help with title work and guide the buyer through the process. The Minnesota Attorney General’s office recommends buyers shop around to find a qualified closer at the best price.

Taxes

Minnesota has both a mortgage registry tax (MRT) and a deed tax that factor into home purchases. The MRT is based on the amount of mortgage debt and is paid by buyers when the mortgage gets recorded. The deed tax is based on the value of the real estate being transferred and is usually paid by sellers, although a buyer may have to pay it to expedite recording of the deed.

The MRT is 0.23% of the debt, and the deed tax is 0.33% of the price paid for the home. This means a couple buying a $150,000 home with a $20,000 down payment would owe an MRT of $299 and possibly a deed tax of $495. Don’t worry about calculating these numbers on your own. Mortgage lenders are responsible for properly disclosing the exact amount of transfer taxes you might owe with a home purchase.

In Minnesota, property taxes vary by county, and they range from $641 in Koochiching County, a sparsely populated county that sits near the Canadian border, to $2,992 in Carver County, a fast-growing suburban area located just southwest of the Twin Cities. The median property tax in Minnesota is $2,098 per year.

For homeowners looking to pay less property tax, Minnesota does offer a property tax exclusion that reduces the market value of a home subject to property taxes. However, the exclusion is available only to qualifying disabled veterans and their primary caregivers or surviving spouses. The state also offers a property tax deferral to seniors who can’t pay their property taxes and have household incomes of $60,000 or less.

Conforming loan limits

The conforming loan limit in Minnesota in 2019 is $484,350 for a single-family home in every county in the state. Conforming loans adhere to guidelines set by Fannie Mae and Freddie Mac, and conforming loan limits represent the maximum amounts these two government-sponsored enterprises are willing to insure on conventional mortgages, the most popular type of mortgage with consumers. For homebuyers who have good credit, conforming loans generally offer the best interest rates.

Programs for homebuyers in Minnesota

Minnesota offers a variety of programs designed to make homebuying both more accessible and affordable.

Start Up

The Start Up program helps first-time homebuyers by offering more affordable, fixed-rate mortgages, as well as loans up to $15,000 for down payment and closing costs. The program requires buyers to put as little as 3% down on their mortgage and are aimed at helping buyers pay either little or no mortgage insurance.

To qualify for the Start Up program, you must:

  • Be a first-time homebuyer who has not owned a home for the past three years
  • Meet certain income limits, which vary by county and range from $84,200 for a one or two-person household in many counties to $108,400 for a household of three or more people in the Twin Cities metro area
  • Meet the purchase price limit of $328,200 in the Twin Cities metro area or $271,100 in the rest of Minnesota
  • Meet minimum credit score requirements

Learn more

Step Up

The Step Up program provides assistance to repeat homebuyers or homeowners who wish to refinance their mortgage. The program offers many of the same benefits as Start Up, including down payment and closing cost loans up to $15,000, down payments as little as 3%, low or no mortgage insurance and fixed-rate loans.

To qualify for the Step Up program, you must:

  • Meet income limits, which vary by county and range from $125,900 to $141,000
  • Meet the purchase price limit of $328,200 within the Twin Cities metro area or $271,100 in the rest of the state
  • Meet minimum credit score requirements

Learn more

Monthly Payment Loan and Deferred Payment Loan

These Minnesota programs offer down payment and closing cost assistance to homebuyers or homeowners who are participating in the Start Up or Step Up programs and meet certain income requirements.

The Monthly Payment Loan program offers a loan up to $15,000 that has an interest rate equal to that of your mortgage and gets repaid with equal monthly payments over 10 years.

The Deferred Payment Loan offers no-interest loans up to $8,000 (or $10,000 for Deferred Payment Plus, which is open to qualifying borrowers). You repay the loan when you move, sell, refinance or pay off your mortgage.

Learn more

Rate shopping tips

To get the best mortgage rate, follow these shopping tips:

Contact at least three lenders on the same day.

By contacting multiple lenders, you’ll up the chances of getting the best possible deal on a mortgage. Because rates change from day to day, it’s important to contact every potential lender on the same day. Also, ask each lender if the rate they quoted you is their lowest rate for that day.

Give each lender the same information.

To draw up a rate quote, a lender will usually ask you to provide information such as your name, Social Security number, income, the address of the property and a desired mortgage amount. Make sure you give each lender the exact same information so you can accurately compare rates.

Add up all lender fees to get the full cost of a mortgage.

It’s important to include lender fees in your calculations when comparing rates. A rate can look deceptively low when you don’t factor in fees. Look at points, which are fees you pay to a lender to secure a better rate. Other fees may include origination fees, broker fees and settlement costs. To make the best comparisons, ask lenders to quote you an annual percentage rate (APR), which is an interest rate that includes any fees that might come with your mortgage.

Know when to lock in the rate.

A mortgage rate lock lets you “lock in” a desirable mortgage rate, and it can also help you avoid an unpleasant rate hike should interest rates rise while your mortgage is being processed. Consider locking in your rate when you find the house you want and go under contract. Your lender may also be willing to “float” your rate if interest rates drop.

The information in this article is accurate as of the date of publishing.