How to Buy a House in Minnesota: A Homebuyer’s Guide
Updated: March 25, 2024
Advertising & Editorial Disclosure
The best place to buy a house in Minnesota will be the location that suits your needs and offers access to public services and other amenities.
MoneyGeek analyzed Zillow’s home value index and found that a home in Minnesota costs an average of $333,985. The value of a home in the state has increased by 7.4% over the last year.
It’s slightly cheaper to buy a home in Minnesota than in the rest of the country, as the average home value in the U.S. is $357,589, which has increased by 13.5% year-over-year.
Besides choosing the perfect location, you should also know mortgage rates, get pre-approved, conduct a home inspection and meet other lender requirements.
Choose an Ideal Location
You must consider the property's location when purchasing a home, as it significantly affects your mortgage rates and the purchase price. The homes in a neighborhood close to public services, schools, amenities and other facilities will often have a higher cost.
To choose the best place to buy a house in Minnesota, start by analyzing your needs and assessing which attributes are the most important for you.
Calculate Mortgage Rates
It’s important to know that lenders offer several types of mortgages to homebuyers in Minnesota and charge different interest rates for each. Besides loan type, factors like your home’s location, credit history, property purchase price, down payment and other loan details significantly affect your rates. Shop around and compare rates from different lenders to get the best deal.
Prepare Down Payment Requirements
The lender’s down payment requirements vary based on the type of mortgage loan. You must understand that your down payment significantly affects your monthly payments and the loan’s total cost. A 20% down payment is typically recommended if you get a conventional loan, as this amount will allow you to avoid private mortgage insurance (PMI). On the other hand, VA and USDA loans do not require any down payment.
Get Pre-Approved for a Mortgage
You should get pre-approval for a mortgage to demonstrate to the seller that you are financially capable of repaying it. To get pre-approval, you will have to provide various documents to the lender that help them understand your financial situation. The lender will then verify that information and let you know how much money you can borrow.
However, know that pre-approval is different from prequalification, which generally involves providing the lender with information about your financial details. The lender then gives you an estimate of your loan amount. Pre-approval lends more credibility to a buyer than prequalification, as pre-approval takes a deeper look at your financial status.
Conduct a Home Inspection
It’s always a good idea to conduct a home inspection before finalizing a purchase, even if it looks perfectly fine from the outside. A thorough home inspection can reveal critical issues with the home’s structure, safety hazards and other life-threatening issues. Some lenders make home inspections mandatory to qualify for a mortgage.
Close Your Mortgage Loan
You can proceed with the closing of your mortgage loan after you review the essential details and conduct a home inspection. This process will involve signing a lot of paperwork and paying closing costs, which are usually 3% to 5% of the loan amount. The closing costs refer to fees and expenses like taxes, attorney fees, mortgage insurance premiums and other expenses.
Minnesota Homebuying Details
Although this state is not one of the most affordable options for purchasing a home, you can still find affordable places to buy a house in Minnesota. However, you might have to compromise on the quality of amenities and access to public services.
Many organizations offer homeownership programs for first-time homebuyers in the state if they need financial assistance to afford a down payment on a mortgage.
Start Up
You can benefit from the Minnesota Housing Finance Agency’s Start Up program if you’re a first-time homebuyer and meet their eligibility requirements. This program offers down payment and closing cost assistance loans of up to $17,000.
Step Up
Additionally, if you’re a repeat homebuyer, the MHFA’s Step Up program can help you purchase your next home. Like the Start Up program, Step Up also provides assistance of up to $17,000.
Frequently Asked Questions About Buying a Home in Minnesota
You can look at MoneyGeek’s analysis of the most frequently asked questions about homebuying in Minnesota to understand how the process works.
sources
- Minnesota Department of Employment and Economic Development. "Cost of Living in Minnesota." Accessed November 21, 2022.
- Minnesota Housing. "Minnesota Housing's Homeownership Programs." Accessed May 11, 2023.
- U.S. Department of Housing and Urban Development. "Homeownership Assistance: Minnesota." Accessed October 24, 2022.
- Zillow. "Minnesota Home Values." Accessed October 24, 2022.
- Zillow. "United States Home Values." Accessed October 24, 2022.