Current Mortgage and Refinance Rates in Minnesota

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Current Minnesota Mortgage Rates

Minnesota has a longstanding history of low rates. However, in 2023, mortgage interest rates shot up, causing homeowners in the state to pay more for their mortgage than they have since 2000. Currently, mortgage rates are averaging 6.87% for a 30-year fixed mortgage and 6.13% for a 15-year fixed mortgage, according to data from Freddie Mac.

These rates make it difficult for many homeowners in Minnesota to secure affordable mortgages and save money through refinancing. Even though it’s unclear how mortgage rates will change over time, economic experts believe that—for the foreseeable future—they’ll continue to remain higher than they were over the last few years. In addition to the higher mortgage rate environment, Minnesota’s housing prices remain high, adding to the challenge of purchasing a home.

Refinance Mortgage Rates in Minnesota

Refinance rates in Minnesota have increased significantly in the past few years, making refinancing a less common strategy among current homeowners in the North Star State. However, while a mortgage refinance may be tough in today’s high-rate environment, you may still be able to save thousands of dollars if you can lock in a lower rate.

If you’re looking to lower your interest rate, reduce your monthly payments or pay off your mortgage sooner, refinancing is worth exploring—especially if you have good to excellent credit or your credit has improved since you first took out your mortgage.

Vault’s Viewpoint: Minnesota Mortgage Rates Trends in 2024

Minnesota has a track record of low interest rates for mortgages and refinancing. In 2023, however, there was a noteworthy surge in rates, changing the way homeowners approach home purchases and mortgage refinancing. While the future of mortgage rates in the state is unpredictable, there’s a good chance they’ll continue to rise or remain higher than they were due to factors like inflation and surging home prices.

The good news is Minnesota offers several mortgage options and first-time home buyer programs to make homeownership more attainable. As long as you do your research and explore all of your options, you may be able to secure a competitive interest rate and save money on your mortgage or refinance.

Mortgage Options Available in Minnesota

Minnesota homeowners come from all walks of life. Fortunately, there are a variety of mortgage loans that meet varying financial needs and preferences. Here’s a brief overview of the mortgages available in the North Star State.

Conventional Loan

A conventional loan is a home loan offered by a private lender instead of the government. However, these loans are often guaranteed by a government-sponsored enterprise (GSE) such as Fannie Mae or Freddie Mac. Interest rates may be fixed or adjustable, and many lenders will allow you to take out a conventional loan with as little as 3% down. With that said, you’ll likely be charged private mortgage insurance (PMI) until you have 20% equity in your home.

FHA Loan

Backed by the Federal Housing Administration (FHA), an FHA loan is ideal for first-time homebuyers—especially those with poor or fair credit and a small down payment. FHA loans require a minimum FICO Score of 580 and 3.5% down to get approved. However, if you have a down payment of at least 10%, you may qualify with a FICO Score of 500.

USDA Loan

Guaranteed by the U.S. Department of Agriculture (USDA), a USDA loan is for rural properties. Eligibility for a USDA loan requires that your home be located in an eligible area and that your income is below certain thresholds. Although USDA loans may not require a down payment, these loans come with both upfront guarantee fees and annual fees.

VA Loan

Offered by the Department of Veterans Affairs (VA), a VA loan is for members of the military community. With a VA loan, you won’t have to worry about a down payment or private mortgage insurance. The caveat, however, is that you’ll owe a funding fee, which will be charged as a percentage of the loan amount.

Jumbo Loan

A jumbo loan is a large mortgage that goes beyond the limits set by Fannie Mae and Freddie Mac. If you’re in the market for an expensive luxury home in Minnesota, a jumbo loan may make sense. Remember that you’ll likely have to come up with a substantial down payment. Also, not all lenders offer jumbo loans, so you may have to do extra research to find some options.

First-Time Home Buyer Programs Available in Minnesota

Homeownership can be particularly challenging for new homeowners in Minnesota. That’s where first-time home buyer programs come in. Offered by the Minnesota Housing Finance Agency, these programs can make it easier and more affordable to purchase your first home in Minnesota.

• Start Up: Start Up offers low interest rates on conventional, FHA, VA and USDA loans. To qualify, you must be a first-time homebuyer who meets certain income and purchase limits in your county. You’ll also be required to complete a homebuyer education course. This program is only available to those who haven’t owned a home in the last three years.
• Step Up: Step Up may be a good fit if your income exceeds the limits of Start Up or if you are already a homeowner. You may be able to secure competitive rates on a number of mortgage types. As with Start Up, you’ll need to take a homebuyer education course if this is your first time buying a home.
• Monthly Payment Loan: If you take advantage of Start Up or Step Up, the Monthly Payment Loan can provide up to $18,000 in down payment and closing cost assistance. To keep long-term debt to a minimum, you can make monthly payments over a 10-year term.
• Deferred Payment Loan: Only available with Step Up, the Deferred Payment Loan offers down payment and closing cost assistance of up to $16,500. If you meet certain criteria, you may qualify for Deferred Payment Loan Plus, which distributes up to $18,000 in funding. There are no monthly payments or interest charges, but you must make a balloon payment at the end of your mortgage term.

How To Find the Best Mortgage Rates in Minnesota

These tips can help you hone in on the best mortgage rates in Minnesota for your particular situation.

1. Improve your credit score. Before you go ahead and apply for a mortgage, make sure your credit is in good shape. Visit AnnualCreditReport.com to pull free copies of your credit reports and dispute any errors with the appropriate credit bureau. Also, do your best to pay your bills on time, keep debt to a minimum, leave old accounts open and only apply for new credit when you absolutely need it.
2. Determine your budget. Take a close look at your monthly income and expenses. Don’t forget to consider your short and long-term financial goals. Use this information to determine a mortgage you can afford. You can always work with a financial advisor or use a mortgage calculator for guidance on the ideal housing budget.
3. Review your mortgage options. In Minnesota, you can choose from a conventional loan, jumbo loan or a government-backed mortgage (such as an FHA loan, USDA loan or VA loan). The ideal option depends on factors such as how much you’ve saved for a down payment, the type of home you hope to purchase, your income, your credit score and your personal preferences.
4. Save for a down payment. Unless you qualify and get approved for a 0% down mortgage, you’ll need to save for a down payment. Remember, the higher your down payment, the less you’ll need to borrow and the more you’ll save on interest fees. Since a substantial down payment can significantly reduce the overall cost of your home, it may make sense to delay your home purchase until you’ve saved enough cash.
5. Shop around. While it may be tempting to go with the first mortgage you find, doing so can cost you. Instead, compare mortgage rates and terms from at least three different mortgage lenders or companies. This way, you can find the most affordable loan for your needs.
6. Get preapproved. A mortgage preapproval will tell you how much you may borrow when you apply for a loan. It usually involves a hard credit check but can position you as a more serious buyer and make it easier to land the property you desire. Note that a preapproval is not a guarantee you’ll receive a loan, but it is a good indication of whether or not you’ll get approved for a mortgage.
7. Take advantage of a rate lock. With a mortgage rate lock, the mortgage rate you receive will stay the same from the time you make an offer until you close on your home. If your lender offers this option, you can protect your rate from market fluctuations for 30, 45 or 60 days. Unless you have a rate lock, your interest rate and monthly payment may increase as you go through the mortgage process, potentially costing you thousands of extra dollars over the life of your loan.

How To Pick a Mortgage Lender

As you shop around for the best mortgage lenders, you’ll notice that not all lenders are created equal. In fact, there are a number of differences between them. You’ll find that rates, terms and perks vary greatly between lenders, making it essential to compare your options. Once you receive mortgage quotes from banks, credit unions and online lenders, closely review the loan terms—including loan amounts, interest rates and annual percentage rates (APRs).

You should also pay attention to down payment requirements, as some lenders will require more money down than others. Mortgage points, mortgage insurance, closing costs and other lending fees are also vital since they’ll influence the overall cost of your mortgage. In addition, it’s a good idea to read lender reviews to ensure you choose a reputable lender with a seamless application and closing process as well as strong customer service.

Mortgage Statistics in Minnesota

These figures explain the mortgage and housing environment in Minnesota:

• The current mortgage tax rate for all Minnesota counties is 0.23%. Hennepin and Ramsey counties also charge an Environmental Response Fund tax of 0.01%.
• In 2023, sales for properties under $500,000 dropped by 17.0%. Sales for luxury homes over $1 million also decreased by 4.0%.

Frequently Asked Questions

How Can Minnesota Residents Prepare for the Mortgage Application Process To Ensure They Receive Favorable Rates?

To lock in competitive interest rates on a mortgage in Minnesota, increase your credit score and ensure you have a stable income. Also, only apply for a mortgage amount that you can comfortably pay back. Don’t forget to shop around and explore mortgage terms with multiple lenders.

Can I Still Refinance My Mortgage With a Bad Credit Score in Minnesota?

While it is possible to refinance a mortgage with poor credit in Minnesota, this strategy may not make sense. Unless you can land a lower interest rate than the rate you’re currently paying, refinancing is unlikely to save you money. In fact, it can actually cost you more in the long run.

What Strategies Can Minnesota Residents Use To Improve Their Chances of Getting Lower Mortgage Rates?

To land lower mortgage rates in Minnesota, improve your credit, make a larger down payment and shop around. You can also buy mortgage points and lock in your mortgage interest rate to ensure it will stay the same until you close on your property. In addition, a first-time homebuyer program in Minnesota can lead to more competitive rates.

Article Sources

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