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.
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.