Minnesota First Time Home Buyer Loans

2025 presents a promising opportunity for first time homebuyers in Minnesota, especially those who are prepared. The RefiGuide offers strategic mortgage advice and connect Minnesota first time buyers with competitive lenders online.  The housing market is showing signs of moderation after years of rapid price growth. Home prices in Minnesota have continued to rise, but at a slower pace, with a modest 1.8% increase over the past year.  Minnesota mortgage rates remain steady, but most economists predict that interest rates will be declining in 2025 and 2026.  Analysts expect mortgage rates to stabilize around 6% as the Federal Reserve plans several rate cuts in 2025.

The Twin Cities region, in particular, has seen increased listings and pending sales, signaling renewed buyer and seller engagement. Minnesota First-time buyers face steep down payments and competition from cash buyers. Still, with more homes entering the market and slower price growth, 2025 offers a window for buyers to find value—especially if they act decisively and work with knowledgeable agents.

Top Minnesota First Time Home Buyer Loan Programs in 2025

Minnesota’s housing market, with a median home price of $362,000 as of December 2024, presents challenges for first-time home buyers, particularly in high-demand areas like Minneapolis, St. Paul, and Rochester.

The median down payment was approximately $35,585 in 2024, a significant barrier for many.

Fortunately, Minnesota offers a robust array of state, local, and federal programs through the Minnesota Housing Finance Agency (Minnesota Housing) and local initiatives, providing down payment assistance (DPA), grants, and low-interest loans. A first-time home buyer, per HUD guidelines, is someone who hasn’t owned a principal residence in the past three years, though some programs extend eligibility to repeat buyers in targeted areas or specific professions.

The RefiGuide published this article to outline Minnesota’s top 2025 first-time home buyer programs, highlighting state and local initiatives, presents two case studies, and addresses the request for local MN brokers by providing a list of top Minnesota-based lenders specializing in first-time home buyer financing.

Statewide First-Time Home Buyer Programs

Minnesota Housing oversees the state’s primary home buyer programs, offering 30-year fixed-rate mortgages (FHA, VA, USDA, or conventional) paired with DPA and tax credits. Eligibility typically requires a minimum credit score of 640, a debt-to-income (DTI) ratio of 45–50%, completion of a Minnesota Housing-approved homebuyer education course (e.g., Home Stretch or Framework), and a minimum borrower contribution of $1,000. Income limits range from $111,800–$124,200 (higher in the Twin Cities metro), and purchase price limits vary from $349,525–$637,950 by county. The maximum loan amount is $806,500.

1. Minnesota Housing Start Up Program

The Start Up Program offers affordable fixed-rate mortgages (FHA, VA, USDA, or conventional) for first-time buyers, with a focus on low- to moderate-income households. It supports single-family homes, condos, townhomes, and duplexes (if owner-occupied). The program pairs with DPA options and requires a 640 credit score and homebuyer education. Details at Minnesota Housing Start Up.

2. Minnesota Housing Monthly Payment Loan

This program provides up to $18,000 as a 10-year second mortgage for down payment or closing costs, with monthly payments at the same interest rate as the first mortgage. It pairs with Start Up or Step Up mortgages, requires a 640 credit score, and mandates homebuyer education. Learn more at Minnesota Housing Monthly Payment Loan.

3. Minnesota Housing Deferred Payment Loan

The Deferred Payment Loan offers up to $16,500 at 0% interest, with no monthly payments, repayable upon sale, refinance, or when the home is no longer the primary residence. It pairs with the Start Up program, requires a 640 credit score, and homebuyer education. Details at Minnesota Housing Deferred Payment Loan.

4. Minnesota Housing Deferred Payment Loan Plus

This program provides up to $18,000 at 0% interest, with no monthly payments, for first-time buyers meeting stricter criteria (e.g., single parents, veterans, or households with dependents). Repayment is due upon sale or refinance. It requires a 640 credit score and homebuyer education. Details at Minnesota Housing Deferred Payment Loan Plus.

5. Minnesota Housing First-Generation Homebuyers Community Down Payment Assistance Fund

This program offers up to 10% of the purchase price (capped at $32,000) as a 0% interest, forgivable loan, forgiven at 20% per year over five years, for first-generation buyers (neither the buyer nor their parents owned a home, or lost it to foreclosure). Income limits are $111,800–$124,200, and a homebuyer education course is required. Details at First-Generation DPA Fund.

6. Minnesota Housing Mortgage Credit Certificate (MCC)

The MCC Program provides a federal tax credit of up to 35% of annual mortgage interest (capped at $2,000) for first-time buyers, increasing disposable income. It cannot pair with Minnesota Housing loans and is unavailable as of December 31, 2017, but may be reinstated in 2025. Check status at Minnesota Housing MCC.

Local First-Time Home Buyer Incentives

1. Minneapolis Homeownership Opportunity Minneapolis (HOM)

The HOM Program offers a 0% interest, deferred loan of $10,000 for buyers at 61–80% AMI or $20,000 for those below 60% AMI, repayable upon sale, refinance, or after 30 years. Financial wellness counseling is required. Details at Minneapolis HOM.

2. St. Paul Homebuyer Assistance Program

St. Paul provides up to $40,000 in DPA as a 0% interest, deferred loan, forgiven after 20 years, for first-time buyers with incomes at or below 80% AMI. A homebuyer education course is required. Contact St. Paul Homebuyer Assistance.

3. Anoka County First-Time Homebuyer Program

Anoka County offers up to $18,000 in DPA as a 0% interest, deferred loan, repayable upon sale or refinance, paired with a Minnesota Housing Start Up mortgage. Homebuyer education is mandatory. Details at Anoka County FTHB.

4. Ramsey County FirstHOME Buyer Assistance

Ramsey County provides up to $15,000 in DPA for first-time buyers outside St. Paul, requiring a homebuyer education course and income eligibility (80% AMI). Funds are reserved for 60 days. Details at Ramsey County FirstHOME.

5. Dakota County First-Time Homebuyer Program

Dakota County offers up to $10,000 in DPA as a 0% interest, deferred loan for first-time buyers, with income limits and a homebuyer education requirement. Contact Dakota County CDA.

6. NeighborWorks Home Partners Down Payment Assistance

Serving Hennepin, Ramsey, Washington, Dakota, and Anoka counties, this program provides up to $20,000 in DPA as a deferred or forgivable loan, requiring a 640 credit score and homebuyer education. Details at NeighborWorks Home Partners.

Federal and National Programs Available in Minnesota

1. FHA Loans

FHA loans require a 3.5% down payment with a 580 credit score, ideal for buyers with limited savings. They pair with Minnesota Housing DPA. Details at FHA.com.

2. VA and USDA Loans

VA loans (for veterans) and USDA loans (for rural areas like Olmsted County) require no down payment. VA loans have no PMI, while USDA loans have income limits ($110,650 for 1–4 person households). Both pair with Minnesota Housing DPA. See VA Home Loans and USDA Rural Development.

3. Fannie Mae HomeReady and Freddie Mac Home Possible

These conventional loans require 3% down and a 620 credit score, with a $2,500 credit for low-income buyers (50% AMI) through February 2026. Details at Fannie Mae HomeReady and Freddie Mac Home Possible.

4. New American Funding Pathway to Homeownership

Offers up to $6,000 in assistance, combinable with Minnesota Housing DPA. Details at New American Funding.

5. Chenoa Fund

Provides up to 3.5% in DPA as a forgivable or repayable second mortgage for FHA loans. Contact Chenoa Fund.

Case Study 1: The Thompson Family in Minneapolis, MN

The Thompsons, a family of three earning $70,000 annually, sought a $300,000 condo in Minneapolis. As first-time buyers, they qualified for the Minnesota Housing Start Up Program with an FHA loan requiring a 3.5% down payment ($10,500). They received a $16,500 Deferred Payment Loan (0% interest, repayable upon sale) and a $10,000 HOM Program loan (0% interest, deferred). The New American Funding Pathway added $6,000 for closing costs. After contributing $1,000 and completing a Home Stretch course, they closed in March 2025. The $32,500 in assistance covered their down payment and $5,000 in closing costs, with no immediate repayments, enabling them to afford a home in a high-cost city.

Case Study 2: Maria Chen in St. Paul, MN

Maria, a first-generation buyer earning $55,000, wanted a $250,000 home in St. Paul. She used the Minnesota Housing First-Generation Homebuyers Community DPA Fund, securing a $25,000 forgivable loan (10% of the purchase price, forgiven over five years). She paired this with a Start Up FHA Loan (3.5% down, $8,750) and a $6,000 Chenoa Fund forgivable loan for closing costs. After contributing $1,000 and completing a Framework course, Maria closed in April 2025. The $31,000 in assistance covered all upfront costs, leveraging her first-generation status for affordability and stability.

Top 10 Local Mortgage Lenders in Minnesota for First-Time Home Buyers

The original request for Connecticut lenders appears to be a typo, as the focus is Minnesota programs. Below are the top 10 Minnesota-based lenders specializing in first-time home buyer financing, based on Minnesota Housing approval, market presence, and DPA expertise (verified via Minnesota Housing Lenders):

1. Bell Bank Mortgage (Fargo, MN): Offers Start Up and Deferred Payment Loans with local expertise. Bell Bank.

2. Bremer Bank (St. Paul, MN): Specializes in Minnesota Housing DPA and FHA loans. Bremer Bank.

3. Affinity Plus Federal Credit Union (St. Paul, MN): Provides low-down-payment options and DPA. Affinity Plus.

4. Lake Area Mortgage (Arden Hills, MN): Offers Minnesota Housing programs and local DPA. Lake Area.

5. Tradition Mortgage (Edina, MN): Specializes in Start Up and First-Generation DPA. Tradition Mortgage.

6. Hiway Credit Union (St. Paul, MN): Supports FHA and Minnesota Housing DPA. Hiway Credit Union.

7. Frandsen Bank & Trust (Arden Hills, MN): Offers Minnesota Housing loans and local grants. Frandsen Bank.

8. American Mortgage & Equity Consultants (Bloomington, MN): Specializes in first-time buyer programs. AMEC.

9. Summit Mortgage Corporation (Plymouth, MN): Provides DPA and FHA/VA loans. Summit Mortgage.

10. Marketplace Home Mortgage (Edina, MN): Offers Minnesota Housing and Chenoa Fund DPA. Marketplace Home.

Tips for Minnesota First-Time Home Buyers

1. Get Pre-Approved: Work with a Minnesota Housing-approved lender to clarify your budget. Find lenders at Minnesota Housing Lenders.

2. Combine Programs: Pair Minnesota Housing DPA with local incentives (e.g., Minneapolis HOM, St. Paul) or Chenoa Fund for maximum assistance.

3. Complete Education Courses: Home Stretch or Framework courses ($75) are required. See Minnesota Housing Education.

4. Check Targeted Areas: First-time buyer requirements may be waived in designated zip codes. Check Minnesota Housing Targeted Areas.

5. Monitor Credit and DTI: Aim for a 640+ credit score and DTI below 45%. Use LendingTree for credit monitoring.

Challenges and Considerations for MN Home Buyers

Minnesota’s home prices rose nearly 5% in 2024, with a two-month housing inventory supply indicating a competitive market. Programs like the First-Generation DPA Fund are limited, with funds exhausted by December 2024, though new allocations may occur in 2025. Deferred Payment Loans require repayment upon sale or refinance, and Monthly Payment Loans add to monthly expenses. USDA loans are restricted to rural areas (e.g., Olmsted), and VA loans require military eligibility. Buyers should verify funding availability and review repayment terms with lenders.

Takeaways on First Time Home Buying in Minnesota

Minnesota’s 2025 first-time home buyer programs, including Minnesota Housing’s Start Up, Deferred Payment Loans, and First-Generation DPA, alongside local initiatives in Minneapolis, St. Paul, and Anoka County, offer robust support for overcoming high upfront costs. Combining these with federal options like FHA or HomeReady loans maximizes affordability. The top 10 Minnesota-based lenders, such as Bell Bank and Lake Area, enhance access to these programs. Act quickly, complete required education, and consult lenders to secure a home in Minnesota’s competitive market.

FAQs for Minnesota First Time Home Buyers:

What are the qualifications for first-time homebuyer grants in Minnesota?

Minnesota offers programs like the Start Up and Step Up loans for first-time buyers who haven’t owned a home in the past three years. You’ll need to meet county-based income and purchase price limits, complete a homebuyer education course, and work with a participating lender. Start Up provides interest-free deferred assistance up to ~$18,000, while Step Up supports buyers above income thresholds. Additional funds exist for first-generation homebuyers, requiring at least one applicant without parental homeownership history.

What credit scores do I need to qualify for down payment assistance in Minnesota?

Most Minnesota down payment assistance programs require a minimum credit score of 640, especially for Start Up and Step Up loans. If your debt-to-income ratio exceeds 45–50%, some lenders may ask for a score of 660 or higher. You must also complete a homebuyer education course, meet income limits, and ensure purchase price caps are within regional thresholds. These requirements help ensure creditworthy borrowers and reduce program risk.

How soon can first-time buyers get a HELOC in Minnesota?

In Minnesota, first-time buyers typically need to close their Minnesota Housing (Start Up or Step Up) mortgage and occupy the property before accessing a HELOC. Most lenders require sufficient home equity to develop after purchase, which may take six months to a year, depending on home value appreciation or principal reduction. Equity access timing varies—check with your lender for their specific waiting period policies and eligibility requirements.

What is Minnesota’s unemployment rate?

As of mid‑2025, Minnesota’s overall unemployment rate is around 3.0% to 3.3%, a historically low level and notably below the national average. However, demographic variations exist: teen unemployment (ages 16–19) sits near 7.9%, while Black Minnesotans face rates approaching 7.8% and native populations around 11.4% over multi-year averages. Overall labor participation remains strong across most demographics Minnesota Housingmn.gov.

What is the average age of a first-time homebuyer in Minnesota?

Minnesota stands out with younger buyers: among those under 35, over 50.8% already own homes, higher than any other state. Based on this trend and the national median first-time buyer age of 34, it’s likely Minnesota homebuyers tend to enter the market in their early-to-mid 30s, possibly even younger. Robust youth ownership suggests affordability and market dynamics encourage earlier entry into homeownership.

How many people rent vs. buy homes in Minnesota?

In Minnesota, approximately 65.2% of occupied housing units are owner-occupied, leaving 34.8% occupied by renters. This rate aligns closely with national figures and reflects a stable mix of suburban, urban, and rural housing types. While overall homeownership is solid, younger and lower-income segments may still lean toward renting, and racial disparities in ownership remain evident across demographic groups

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