Minnesota First-Time Home Buying Assistance Programs & Grants
Minnesota First-Time Home-Buying Assistance Programs & Grants
(Last Updated – 06/2025)
If the Land of 10,000 Lakes is where you’d like to buy your next home, it can be a good idea to arm yourself with data and strategies to make it as affordable as possible. The average Minnesota home value is $346,239 as of April 2025, according to Zillow, reflecting a 2.2% increase over the prior year. As a point of comparison, the average price in the U.S. is $367,711.
While home values in Minnesota may be below the national average, it can still be a challenge to become a homeowner. Fortunately, there are opportunities for the first-time homebuyer in Minnesota through state programs that give assistance with mortgage rates and down payment and closing costs to those who qualify. There are also other avenues to make a property purchase more affordable. Read on to learn the details.
Who Is Considered a First-Time Homebuyer in Minnesota?
The definition is broader than you might realize. You are considered a first-time homebuyer in Minnesota if you haven’t owned a home in the last three years. That means you may be eligible for certain types of mortgage loans.
The U.S. Department of Housing and Urban Development (HUD) also classifies the following as first-time homebuyers:
• A single parent who has only owned a home with a partner while married
• A displaced homemaker who has only owned a home with a spouse
• Someone who has owned a principal residence not permanently affixed to a permanent foundation
• Someone who has only owned a property that wasn’t in compliance with state, local, or model building codes
Also worth noting: Veterans often qualify for the same programs as first-time buyers.
💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you through the process.
Minnesota Programs for First-Time Homebuyers
There are a couple mortgage loans and down payment assistance programs for the first-time homebuyer in Minnesota.
1. Minnesota Housing: Start Up for First-Time Homebuyers
Minnesota Housing has partnered with participating lenders to offer low-interest mortgage loans to first-time homebuyers. There is typically a 3% down payment, affordable interest rates, and income limits (up to $142,800 in 2025, for example).
To qualify, you must meet income and purchase price limits .
2. Minnesota Housing: Down Payment and Closing Cost Loans
Minnesota Housing can also help with down payment and closing costs through a loan that is available along with the Start Up loan. The monthly payment loan option is available up to $18,000.
There is also an interest-free deferred payment loan option, with repayment due if you move, sell the home, refinance, or pay off your first loan.
As you are weighing your home-buying options, consider using an online mortgage calculator to help you determine what your monthly payments will be.
How to Apply to Minnesota Programs for First-Time Homebuyers
Pay careful attention to the criteria to qualify for any first-time homebuyer program in Minnesota. Some may have income or purchase-price limits. Contact [email protected] with any questions about eligibility you may have.
In addition, it’s a good idea to understand mortgage basics before applying for a loan.
Federal Programs for First-Time Homebuyers
Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.
The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes. It’s important to check details to make sure you access the right programs for your needs and situation.
Federal Housing Administration (FHA) Loans
The FHA, which is part of HUD, insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the FHA loan program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers, who typically need FICO® credit scores of 580 or higher. Those with low credit scores (meaning between 500 and 579) as low as 500 must put at least 10% down.
In addition to examining your credit score, lenders will look at your debt-to-income ratio (DTI, your monthly debt payments compared with your monthly gross income). FHA loans allow a DTI ratio of up to 57% in some cases, vs. a typical 45% to 50% maximum for a conventional loan.
Gift money for the down payment may be allowed from certain donors and will be documented in a gift letter for the mortgage.
Worth noting: FHA loans do always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. To learn more about these loans, including FHA loans for refinance and rehab of properties, read up on FHA requirements, loan limits, and rates.
Freddie Mac Home Possible Mortgages
Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.
The Home Possible mortgage is for buyers who have a credit score of at least 660.
Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.
Fannie Mae HomeReady Mortgages
Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.
For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .
Fannie Mae Standard 97 LTV Loan
The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.
Unlike an FHA loan, the 97 LTV loan has no upfront mortgage insurance fee and does have cancellable mortgage insurance. The loan is for just one-unit single-family homes, co-ops, condos, and planned unit developments.
Department of Veterans Affairs (VA) Loans
Eligible active-duty members of the military, veterans, reservists, and surviving spouses may apply for loans backed by the Department of Veterans Affairs. Here’s a closer look:
• VA loans, which can be used to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment.
• Most borrowers pay a one-time funding fee that can be rolled into the mortgage.
• VA loans do not require private mortgage insurance (PMI) for borrowers who make a down payment of less than 20%.
• The loans have more flexible credit score requirements. In some cases, even those who have previously been in foreclosure or bankruptcy can qualify.
Borrowers applying for a VA loan will need a Certificate of Eligibility from the VA so make sure to review a guide to qualifying for a VA loan as a first step in the process.
💡 Quick Tip: Apply for a VA loan and borrow up to $1.5 million with a fixed- or adjustable-rate mortgage. The flexibility extends to the down payment, too — qualified VA homebuyers don’t even need one!†^
Native American Veteran Direct Loans (NADLs)
Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee. For more information about this program, contact [email protected].
US Department of Agriculture (USDA) Loans
If you are finding it challenging to accumulate a down payment, consider this option. No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.
The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .
HUD Good Neighbor Next Door Program
This program helps first responders, such as police officers, firefighters, and emergency medical technicians, as well as teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years. Find out more from the Minnesota HUD office in Minneapolis by calling (612) 370-3000.
First-Time Homebuyer Stats for 2025
Here’s some data about Minnesota home sales. As you think about homeownership, it can be wise to check out a first-time homebuyer guide, to learn more about the process and lingo used.
• First time homebuyers nationwide: 24% of all homebuyers
• Median age of first-time homebuyers in U.S.: 38
• Median down payment in Minnesota: $43,850
• Average home price in Minnesota: $346,239
• Average credit score in Minnesota: 742 (vs. 715 nationwide)
Financing Tips for First-Time Homebuyers
In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. After reading up on how to choose a mortgage term, check out these tips on how to fund your home purchase.
• Traditional IRA withdrawals. You can tap this kind of IRA/ The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. For the purpose of IRA withdrawals for a home purchase, the IRS considers anyone who has not owned a primary residence in the past two years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may set your retirement savings back.
• Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years.
You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, take note: Homebuyers will pay income tax on earnings withdrawn.
• 401(k) loans. If your employer allows you to borrow from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000 in a 12-month period, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 or even 25 years to repay.
• State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.
• Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.
• Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.
The Takeaway
As a first-time homebuyer in Minnesota, there are several state and federal financial assistance programs that can help you pay for a home, as long as you qualify. These include programs that can assist with mortgage, down payment, and other costs. In addition, there are conventional loan options that might also be right for your needs.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
Should I take first-time homebuyer classes?
Taking a class designed for first-time homebuyers can be a smart move. Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon and details. Also, these classes are required for some government-sponsored loan programs.
Do first-time homebuyers with bad credit qualify for homeownership assistance?
Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores (in the 500s). And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores.
Is there a first-time veteran homebuyer assistance program in Minnesota?
Yes. The U.S. Department of Veterans Affairs offers home loans to servicemembers, veterans, and eligible surviving spouses.
What credit score do I need for first-time homebuyer assistance in Minnesota?
It varies, depending on the program. For example, FHA loans require a minimum credit score of 500, though you will have to make a larger down payment with a lower score.
What is the average age of first-time homebuyers in Minnesota?
While data about the age of Minnesota first-time homebuyers is hard to come by, in the U.S., the median age of first-time homebuyers is 38, an all-time high.
Photo credit: iStock/JenniferPhotographyImaging
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