Despite the freezing weather and long winters, Minnesota has long been deemed one of the best states in which to purchase real estate. This is especially true for those looking to settle down in a place of their own. There are few states that are better suited to raising a family. After all, Minnesota has consistently ranked at the top of Morgan Quitno's list of "most livable states." Public education in this state is second to none-many of the top school districts in the nation are located in or around the Twin Cities area. Healthcare is also excellent, perhaps owing to the esteemed Mayo Clinic located in Rochester, Minnesota. Other highlights of living in Minnesota include low crime rates, a variety of career opportunities, and the unparalleled natural beauty of the state’s 10,000 pristine lakes.
Minnesota is known as the Land of 10,000 Lakes, and the gorgeous scenery paired with the many attractions for people to visit and the broad cultural mix makes this an excellent place to raise a family. From big cities to open farmlands, The Land of 10,000 Lakes seems to have it all.
People come to this state for a variety of reasons. Rochester's Mayo Clinic is known globally for its groundbreaking treatments, and for being a top-notch teaching hospital. Additionally, the Mall of America is one of largest shopping centers in the nation with over 12,000 employees, and it can be found in this state. People move to Minnesota for the jobs opportunities, the cultural events, excellent educational institutions, and a huge variety of entertainment venues ranging from music to opera to ballet. Also, there is a broad range of small towns, suburbs, and big cities to choose from, along with hundreds of lakes and more remote areas that could be perfect to build a home.
However, people move out of Minnesota because of the air pollution levels and traffic congestion. Many areas in this state suffer from high ozone and air pollution levels. Another contributing factor can be finding affordable housing, as there is a shortage of homes to buy or rent, with many buyers and tenants vying for the ones that are available.
Depending on where you want to purchase a home, you may have difficulty finding one. In places like the Twin Cities or the more populated areas of the state are currently experiencing a buyer's market. This means that the people who want to purchase a home are facing steep competition from other buyers, and this is driving property prices up.
The University of St. Thomas released a study about the current housing trends in Minnesota. Their study found that there are almost half of the homes for sale currently as there were before the housing bubble burst, and this is making people compete for what houses are available. This is also causing sellers to increase the prices on the homes that are listed for sale, and this decreases the lower priced homes available throughout the market. In turn, this makes it even more difficult for people with low incomes or first-time home buyers to get the financing they need to purchase a property.
Statewide, home prices have been recovering since 2012 with some minor setbacks here and there. As of 2015, Minnesota was listed as the fourth most expensive real estate market in the nation. This trend has continued into 2016 and 2017, with projections showing no sign of slowing down.
The early 1990s until around 1999 saw steady growth in the Minnesota real estate prices. Between 1993 and 1996 home ownership jumped from 65.8% to 75.4%. Ownership peaked at 77.3% in 2002 and has since retreated to 72.4% in 2016.
By mid-1999, the real estate saw the beginning of a rapid increase in home prices, and these prices continued to climb at a rapid pace until they plateaued in late 2005. This plateau lasted until the middle of 2006, then Minnesota residents saw the real estate prices jump in price once again, hitting their peak in the third quarter of 2007.
Once home prices hit their peak, they began a rocky descent with small gains and losses with the first gain being in 2008. After that slight gain, housing prices dropped once again until mid-2009 when they went up at a sharp increase. This gain and loss phenomenon went on until 2011 and early 2012 when home prices bottomed out. Since then, they have seen a steady increase statewide.
On the other hand, Minneapolis home prices began rapidly rising in the late 1990s and continued this rise until April 2006 when the housing market in the city peaked. After they peaked, the home prices experienced a small drop until November of that same year. Then they had a slight resurgence until March of 2007. Once March was over, housing prices began a rapid descent until June 2009. The housing prices again experienced a small gain until early 2010; then they descended until they bottomed out in May 2011. The market has been steadily climbing, with a large increase in 2015 that has continued into 2017.
Real estate prices vary greatly throughout the state of Minnesota. Overall, Minnesota real estate prices tend to be slightly lower than the United States median. Of course, real estate listings of the entire Midwest region of the nation are consistently much lower than the nation's averages. In fact, homes in Minnesota are on average, listed for almost twice the price of those in Michigan, Ohio and Indiana.
Statistics regarding real estate prices tend to be misleading in Minnesota. The data is highly skewed by the difference in prices between real estate located in or around the Twin Cities metro area, as opposed to real estate elsewhere in the state. Listing prices in Minneapolis, St. Paul and the surrounding suburbs are significantly higher than the nation's average. Average homes sell for over $300,000, a figure that has remained surprisingly stable, even throughout the fallout from the Great Recession.
The expensive real estate in the Twin Cities stems from the area's growing demand. The metro area was one of few cities to retain a relatively low unemployment rate and a high standard of living during the recession. Many people are relocating to the Twin Cities in search of jobs and this demand is driving up real estate prices, even in the midst of a housing crisis.
One region that features surprisingly high priced real estate is the land along the Canadian border, especially in Koochiching County. Typically, those who choose to invest in real estate in this area do so in hopes of owning a vacation home. Many of the expensive houses sold here sit empty most of the year.
Housing prices in the western and southern regions of the state are on average, significantly lower than average listing prices in the rest of the United States. This is especially true of the counties that border North and South Dakota. Homes typically sell for under $100,000 in these regions.
The Mecca of this northern state is a thriving metropolis known as the "Twin Cities." These two cities are surely fraternal twins, for despite a few similarities, Minneapolis and St. Paul differ greatly. St. Paul is the quietest of the pair. Visitors come for the historic architecture and sprawling parks, but stay for the serenity. Minneapolis, on the other hand, is flashy and exciting, with a thriving nightlife scene. The Twin Cities prove the cliché "opposites attract" true. Despite striking differences, the two cities complement each other perfectly.
Minneapolis and St. Paul are continuing to expand, if that is possible. As of 2016, the metro area's population was 3.551 million and growing rapidly. Currently, seven counties fall within the metro area. This number may increase as demand for housing in the sprawling Twin Cities suburbs continues to grow.
|MN Rank||US Rank||Metropolitan Area||2010 Pop||2016 Pop||Change||% △|
|1||16||Minneapolis-St. Paul-Bloomington, MN-WI Metro Area||3,348,859||3,551,036||202,177||6.04%|
|2||171||Duluth, MN-WI Metro Area||279,771||279,227||-544||-0.19%|
|3||192||Fargo, ND-MN Metro Area||208,777||238,124||29,347||14.06%|
|6||302||La Crosse-Onalaska, WI-MN Metro Area||133,665||136,936||3,271||2.45%|
|7||374||Grand Forks, ND-MN Metro Area||98,461||102,743||4,282||4.35%|
|24||881||Wahpeton, ND-MN Micro Area||22,897||22,711||-186||-0.81%|
The state of Minnesota has several large cities that are all popular for their entertainment venues, job outlook, and educational opportunities.
The city of Minneapolis has 413,651 residents as of 2016, and this makes it the 16th largest Metropolitan area in the nation. It is also the largest city in the state of Minnesota, and the 46th largest city in the United States. Additionally, Minneapolis is part of the Twin Cities Metropolitan area, and the combined population of this city and St. Paul is just over 3.5 million people.
Minneapolis is home to the fifth-largest group of Fortune 500 companies, and it has a strong economy. There is a large variety of technology companies, healthcare companies, trucking and rail services, and finance round of the top sectors for work. In 2016, Minneapolis ranked as one of the 25 richest cities in the United States at 19.
This city is a humid continental climate zone with hot, humid summers and cold, snowy winters. The months of June through September typically see temperatures in the upper 70s to low 80s, with minor precipitation, with December through January falling on the other end of the spectrum with highs in the upper 20s.
You'll find a very diverse population in this city, and there are dozens of cultural attractions to visit. Minneapolis ranks second when it comes to live theatre per capita, and it's second only to New York. The Guthrie Theater draws people from all over for its performances, and the Walker Art Center is one of the five largest modern art museums in the nation. Additionally, philanthropy is a large part of this city's heritage, with the American Refugee Committee helping over two million people each year.
The University of Minnesota dominates Minneapolis with over 50,000 enrolled students in a variety of fields. It is a Big 10 university; and it is the fourth largest public university campus in the United States. You can also find several technical colleges and colleges for the arts in this city.
Minneapolis is home to several Fortune 500 companies, and there are several other companies who have their headquarters here as well. A few notable companies that employ thousands of people are US Bank, the Target headquarters, 3M, and General Mills.
The median home price in Minneapolis is $221,672, and this is an increase of 5.6% over the past year with a projected rise of 2.4% in the coming year. The price per square foot is $233, and this puts it higher than the Minneapolis-St.Paul Metro area as their price per square foot is $188. However, housing overall is more expensive in the Metro area at $264,000.
The second largest city in Minneapolis is St. Paul with a population of 302,398 people. It is affectionately billed as “The Most Livable City in America.” This city is the second most populated in Minnesota; it is the second half of the Minneapolis-Saint Paul Metro area. This metro area is also known as the “Twin Cities, ” and it has a combined population of over 3.5 million residents.
The local economy is very strong with dozens of different employment sectors available including manufacturing, retail, education, and several large corporations contribute to the economic health and growth. There is a large opportunity for growth, and this makes it an excellent place for the younger generation to work.
If you live or visit this area for an extended amount of time, you'll encounter its continental climate. Residents of St. Paul typically experiences long, hot and humid summers with frigid, snowy winters. May through September usually sees temperatures in the mid to upper 80s, and November through March features temperatures ranging from the low 20s to mid-40s. It also isn't unusual to experience thunderstorms, sleet, ice, rain, fog, and tornadoes.
The winter months brings the St. Paul Winter Carnival that draws over 350,000 people each year. Additionally, the Como Zoo and Ordway Center for the Performing Arts are huge tourist attractions that bring people in year round. There are plenty of parks and museums to visit, as well as live performances, theaters, and shopping centers placed all around the city.
St. Paul has a very high education per capita count, and it is home to three public universities and eight private universities. Additionally, the public school system serves over 42,000 students each year. You can find Concordia University here with over 80 academic programs to choose from. The University of St. Thomas is also based in St. Paul, with more than 10,000 students currently enrolled.
Employing over 1,000 residents and named one of the top ten best places to work in the state, Ecolab has its headquarters here. You'll also find the headquarters sporting goods and retail store Gander Mountain in this city. Finally, Securian Financial Group also has its headquarters here, and it employs over 1,000 people.
The median home price in St. Paul is just under $190,000, with a price per square foot of $175. Over the past year, home prices have gone up 9.0%, and they are projected to rise 2.7% in the upcoming year. The home prices here are less expensive than the Metro area, as their prices average around $209,500 with a price per square foot of $188.
Rochester is the third-largest city in Minnesota with a population of 114,011 people, and it has been consistently ranked as one of the best places to live in the nation. This city offers many attractions for visitors and residents alike including cultural events, one of the best medical facilities in the country, several parks, and stunning scenery.
At the core of Rochester's economy lies the Mayo Clinic. This top-ranked medical facility draws over 2 million people every year, and it employs over 30,000 people. There are also several agricultural influences, and companies geared toward this industry help to keep the local economy strong and sustained. Another advantage of moving to Rochester is that it offers the sophistication of the Twin Cities, minus the traffic.
This city has a humid continental climate that is characterized by long, hot and humid summers and very cold, snowy winters. You'll find four distinct seasons, and on average, this city sees 30 inches of rainfall per year. June through August are the hottest months with temperatures reaching into the mid-80s, and December through February are the coldest months with temperatures in the mid-to-low 20s.
There are several buildings in Rochester that belong to the historic registry, and the city has saved them for preservation. The Rochester Art Center puts on performances that draw large crowds, and the Rochester Orchestra has been putting on performances since 1919.
There are 23 primary and secondary schools here, and they have around 23,000 students. For secondary education, Rochester has a host of technical colleges and universities to choose from. The University of Minnesota-Rochester is a premier undergraduate university that focuses on health sciences. Additionally, the city is home to the Rochester Community and Technical College as well.
As stated earlier, the Mayo Clinic is the focal point of the economy and the largest employer with over 30,000 employees. The Rochester Public School System is the second-largest employer with over 2,700 employees, and software company IBM rounds out the top three largest employers with 2,500 people employed.
The median home price for Rochester is around $180,000, and the price per square foot is $201. Rochester is part of the Rochester Metro area, and the median home prices there are higher at $240,000. However, the price per square foot is lower in the Metro area at $177.
Duluth has a population of 86,293 people, and it is an important port city in Minnesota. This city makes of half of The Twin Ports Metropolitan area with Superior, WI. Together, this Metropolitan area makes up the largest port in the Great Lakes. The Twin Ports Metro area has a population of 279,771 making it the second-largest Metro area in Minnesota.
Duluth serves as a hub for the greater cities like St. Paul and Minneapolis, and the economy is made up of higher education, healthcare, business services, and retail venues. Additionally, Duluth acts as a major transport center, and it is home to several prominent engineering firms that keep the economy thriving and healthy. Tourism is another important piece of the local economy, and the scenic locations and routes draw thousands of people each year.
This area is categorized as a humid continental climate with interference from its proximity to Lake Superior. The summers are cooler because of the lake effect and range around 55 degrees, making Duluth the fifth-coldest city in the United States. The winters are frigid with temperatures staying below 32 degrees around 106 days every year. The annual snowfall average is 81 inches, with parts of the city closer to the Great Lakes averaging up to a foot more snow each year.
This city has several gorgeous parks that draw tourists all year round for the beautiful trails and waterfall views. The Great Lakes Aquarium is the largest all freshwater aquarium in the nation, and it has over 205 fish species for visitors to enjoy. There are also numerous outdoor and recreational activities to enjoy, and you can look for Lake Superior Agates as well. The Bentleyville Tour of Lights starts in the middle of November and runs through Christmas each year, and it draws over 150,000 people.
Duluth is home to several large public, private, and charter schools that serve thousands of students throughout the city. The University of Minnesota Duluth is a prominent university the features a medical school on its campus. The College of St. Scholastica, and the Lake Superior College can also be found here.
There are dozens of companies and industries to choose from in Duluth, and this city attracts a wide range of people looking for employment. The largest employer is St. Mary's Duluth Clinic (SMDC) with over 12,000 employees including 1,500 doctors. The University of Minnesota-Duluth comes in second with around 3,000 employees, and Allete rounds out the top three largest employers with 1,200 employees.
If you're looking for a home in Duluth, expect to pay around $133,000, or about $193 per square foot. These prices have gone up about 5.1% in the past year, and they're projected to rise another 3.4% in the oncoming year. These prices are still lower than the Duluth Metro area, as their median home prices are $141,000 with a price of $164 per square foot.
St. Cloud has a population of just shy of 68,000 people, and this count makes this city Minnesota's tenth-largest city. This city has a rich history and a diverse culture to draw from. This city has a large Somali population; overall the population is expected to continue to grow steadily.
The local economy relies heavily on the healthcare and education industries, and it is also home to a few large companies. However, the majority of the economy comes from the VA and other health centers that are located throughout the city. This is an excellent place to raise a family or for a young person to begin their career with plenty of opportunities for advancement.
If you're looking for warm summers and a city that's in a humid continental zone, St. Cloud is it. You'll experience hot, humid summers with the average temperature sitting in the low 80s, and the cold winters bring heavy snowfall and temperatures in the low 20s.
There are many theaters, cultural events, festivals, and shopping destinations in St. Cloud, and they draw tourists each year. These larger venues trickle down to the retail and restaurant businesses as well. The Munsinger-Clemens Gardens are a beautiful exhibit that showcases dozens of flower and plants, and the Stearns History Museum is a fun and educational place to visit to take in the history of brewing.
This city is part of the larger St. Cloud Area School District with eight elementary schools, one K-8 school, and two public high schools. There are also private, and Catholic schools students can attend. When it comes to secondary education, you have several to choose from. The St. Cloud State University has over 16,000 students enrolled, and you'll also find Rasmussen College and an array of technical and community colleges here.
The city's economy is largely based around health care, with the largest employer being CentaCare Health System/St. Cloud Hospital with 4,110 employees. The second-largest employer is the St. Cloud State University with 2,036 employees, and the St. Cloud VA Medical Center rounds of the top three largest employers with 1,360 people employed.
The St. Cloud area has a median house price of $144,300, and this works out to $131 per square foot. These prices have increased 7.0% over the past year, and they're going to continue to increase another 1.8% in the upcoming year.
Many people move to St. Cloud with the intention of commuting to the Twin Cities. Given the growing suburban sprawl, the city is actually closer to the metro area than several of the suburbs located in the seven county Twin Cities metro area. Additionally, St. Cloud is a quiet haven among the growing bustle of the Twin Cities. It is mere minutes away from the rural farmland of central Minnesota. However, if the population surge seen in recent years continues, this may no longer be the case.
According to the United States Census an estimated 5,519,952 people live in the state of Minnesota. The state has 79,626.74 mi² of land area, which gave it a population density of 69.32 per mi². Here is a list of cities, towns, villages & Census Designated Places with more than 2,500 residents, with their estimated population as of June 2016 & the 2010 United States Census. For Census Designated Places (CDP) where there was no population estimate available for 2016 the 2011-2015 American Community Survey 5-Year Estimates data was used.
All table columns are sortable. Click on the column headers to sort by that column. Click again to sort low to high. Cities with higher levels of population growth typically see the increased demand drive faster real estate price appreciation.
|Rank||Geography||County||2016 Pop||2010 Pop||Change||% △||Land mi²||Pop Den mi²|
|10||St. Cloud||Stearns, Sherburne & Benton||67,641||65,842||1,799||2.73%||40.04||1,689.34|
|13||Blaine||Anoka & Ramsey||62,892||57,186||5,706||9.98%||33.85||1,857.96|
|20||St. Louis Park||Hennepin||48,747||45,250||3,497||7.73%||10.64||4,581.48|
|22||Mankato||Blue Earth, Le Sueur & Nicollet||41,720||39,309||2,411||6.13%||17.91||2,329.42|
|28||Inver Grove Heights||Dakota||35,077||33,880||1,197||3.53%||27.76||1,263.58|
|40||White Bear Lake||Ramsey & Washington||25,634||23,797||1,837||7.72%||8.02||3,196.26|
|41||Chanhassen||Carver & Hennepin||25,469||22,952||2,517||10.97%||20.44||1,246.04|
|49||Hastings||Dakota & Washington||22,602||22,172||430||1.94%||10.24||2,207.23|
|54||Northfield||Rice & Dakota||20,445||20,007||438||2.19%||8.56||2,388.43|
|55||South St. Paul||Dakota||20,217||20,160||57||0.28%||5.65||3,578.23|
|56||West St. Paul||Dakota||19,746||19,540||206||1.05%||4.91||4,021.59|
|65||Sartell||Stearns & Benton||17,147||15,876||1,271||8.01%||9.8||1,749.69|
|77||North Mankato||Nicollet & Blue Earth||13,619||13,394||225||1.68%||5.87||2,320.10|
|80||Fergus Falls||Otter Tail||13,419||13,138||281||2.14%||14.11||951.03|
|87||North St. Paul||Ramsey||12,338||11,460||878||7.66%||2.85||4,329.12|
|92||White Bear township||Ramsey||11,621||10,949||672||6.14%||7.3||1,591.92|
|104||St. Anthony||Hennepin & Ramsey||9,007||8,226||781||9.49%||2.25||4,003.11|
|107||Thief River Falls||Pennington||8,796||8,573||223||2.60%||5.02||1,752.19|
|108||East Grand Forks||Polk||8,699||8,601||98||1.14%||5.91||1,471.91|
|118||Big Lake township||Sherburne||7,757||7,386||371||5.02%||38.58||201.06|
|120||New Prague||Scott & Le Sueur||7,635||7,321||314||4.29%||3.81||2,003.94|
|121||St. Francis||Anoka & Isanti||7,466||7,218||248||3.44%||23.53||317.30|
|129||Spring Lake Park||Anoka & Ramsey||6,472||6,412||60||0.94%||1.98||3,268.69|
|137||Lower Red Lake UT||Beltrami||5,854||5,790||64||1.11%||140.79||41.58|
|141||First Assessment UT||Crow Wing||5,519||5,424||95||1.75%||32.09||171.99|
|142||Credit River township||Scott||5,516||5,096||420||8.24%||23.37||236.03|
|146||Dayton||Hennepin & Wright||5,387||4,671||716||15.33%||23.25||231.70|
|147||St. Paul Park||Washington||5,381||5,279||102||1.93%||2.99||1,799.67|
|154||Lake City||Wabasha & Goodhue||5,042||5,063||-21||-0.41%||4.5||1,120.44|
|156||Redwood Falls||Redwood & Renville||5,015||5,254||-239||-4.55%||5.25||955.24|
|159||Oak Park Heights||Washington||4,845||4,339||506||11.66%||2.98||1,625.84|
|160||La Crescent||Houston & Winona||4,822||4,830||-8||-0.17%||2.94||1,640.14|
|162||Chisago Lake township||Chisago||4,710||4,656||54||1.16%||43.26||108.88|
|163||Princeton||Mille Lacs & Sherburne||4,707||4,698||9||0.19%||4.96||948.99|
|167||Elko New Market||Scott||4,625||4,110||515||12.53%||3.35||1,380.60|
|175||Rockford||Wright & Hennepin||4,357||4,316||41||0.95%||2.61||1,669.35|
|177||La Grand township||Douglas||4,248||4,210||38||0.90%||24.9||170.60|
|179||Wadena||Wadena & Otter Tail||4,134||4,088||46||1.13%||5.38||768.40|
|180||West Lakeland township||Washington||4,133||4,046||87||2.15%||12.32||335.47|
|181||Rice Lake township||St. Louis||4,119||4,095||24||0.59%||32.41||127.09|
|189||Le Sueur||Le Sueur & Nicollet||3,979||4,058||-79||-1.95%||5.37||740.97|
|196||Rainy Lake UT||Koochiching||3,732||4,048||-316||-7.81%||351.7||10.61|
|198||Norwood Young America||Carver||3,680||3,549||131||3.69%||2.52||1,460.32|
|200||Spring Lake township||Scott||3,640||3,631||9||0.25%||28.2||129.08|
|203||New Market township||Scott||3,567||3,440||127||3.69%||32.47||109.86|
|205||Deer Lake UT||Itasca||3,519||3,495||24||0.69%||183.3||19.20|
|215||Hanover||Wright & Hennepin||3,360||2,938||422||14.36%||5.45||616.51|
|216||Pine Island||Goodhue & Olmsted||3,360||3,263||97||2.97%||5.59||601.07|
|226||White township||St. Louis||3,223||3,229||-6||-0.19%||105.37||30.59|
|Arnold CDP||St. Louis||3,071||2,960||111||3.75%||11.54||266.12|
|237||New London township||Kandiyohi||2,949||2,943||6||0.20%||24.91||118.39|
|241||Staples||Todd & Wadena||2,898||2,981||-83||-2.78%||4.66||621.89|
|242||Cedar Lake township||Scott||2,883||2,779||104||3.74%||35.12||82.09|
|243||Mountain Iron||St. Louis||2,869||2,869||0||0.00%||68.52||41.87|
|248||Chatfield||Fillmore & Olmsted||2,804||2,779||25||0.90%||2.64||1,062.12|
|250||Grand Lake township||St. Louis||2,789||2,779||10||0.36%||65.88||42.33|
|253||Granite Falls||Yellow Medicine & Chippewa||2,757||2,897||-140||-4.83%||3.59||767.97|
Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2016
Source: U.S. Census Bureau, Population Division
Release Date: May 2017.
For townships & CDP with fewer than 5,000 residents, the 2011-2015 American Community Survey 5-Year Estimates was used.
As of 2020 the conforming loan limit across the United States is set to $510,400, with a ceiling of 150% that amount in areas where median home values are higher. High local affordability makes the $510,400 ceiling apply statewide for single unit homes. Dual unit homes have a limit of $653,550, triple unit homes have a limit of $789,950 & quadruple unit homes have a limit of $981,700. Residents buying premium properties in the Twin Cities may be above these thresholds, requiring a jumbo loan. Jumbo loans typically have a slightly higher rate of interest than conforming mortgages, though spreads vary based on credit market conditions.
Several different types of home loans are available in the Land of 10,000 Lakes. Fixed-rate loans are very common, and the terms include thirty, twenty, fifteen, and ten years. The longer the life of the mortgage, the lower the monthly payment will be, which is why the 30-year loan is the most popular. The downside of this, however, is that the APR is higher compared to shorter-term loans. The difference can be as large as a full percentage point.
In addition to conventional 30-year and 15-year fixed-rate mortgages, lenders offer a wide variety of adjustable rate mortgages (ARM’s). While these instruments have lost some of their attractiveness during the recession, there are still circumstances where they offer the only way for a borrower to qualify. Properly structured (that is, with strict limits on how much the rate can fluctuate), such loans are still a legitimate way for borrowers to purchase a home and start building equity while establishing their credit so as to qualify for conventional loans upon the ARM’s expiration. These loans provide interest rates that fluctuate, as the name implies. The APR is usually fixed for an initial term, such as three, five, seven or ten years. Then the rate adjusts depending on the performance of a referenced index rate, usually once per year; but it can change more frequently. The loan agreement may state in detail how frequently the APR can change, and it may also include a rate cap to prevent large changes.
Balloon mortgages are another route for aspiring homeowners. Balloon mortgages are when a large portion of the borrowed principle is repaid in a single payment at the end of the loan period. Balloon loans are not common for most residential buyers, but are more common for commercial loans and people with significant financial assets.
A few lenders in the Land of 10,000 Lakes offer interest-only loans, but usually only for periods of three years. These are mortgages where payments are applied only to interest for a period of time. The loan's principal isn't paid down, so the monthly payments are very low. The low monthly payments only lasts a few years, however. Typically, it's about three years. After this period, monthly payments spike because the loan's principal hasn't been reduced & the remainder of the loan must be paid off in a compressed period of time. For example, on a 3 year IO 30-year loan, the first 3 years are interest only payments, then the loan principal must be paid in full in the subsequent 27 years.
When qualifying for a loan, a credit score of 720 or better can help secure a favorable loan. Some mortgage lenders in the the Twin Cities have approved borrowers with credit scores around 640. The best rates and deals will be obtained with a score above 740. There is a lot of competition among lenders, and this environment can create nice perks for borrowers. For example, some banks will offer special deals on closing costs for borrowers who qualify. The cost might be added to the mortgage or the bank will pay the closing costs but add a few basis points to the APR.
A debt-to-income ratio of 40% and a down payment of 20% are what most banks want to see on a home loan application. They will accept worse numbers, but fees and APR's could go up as a result. Also, a down payment of less than 20% typically results in required mortgage insurance. This down payment requirement does not apply for Federal assistance programs such as FHA, in which applicants can have a lower credit score and income but still receive financing.
The piggyback loan is another type of mortgage which is simply two mortgages in one. The piggyback loan can eliminate the need for private mortgage insurance by covering 80% of the home's value with the first loan, while the second loan helps to pay for part of the down payment.
Prospective home buyers who don't find what they're looking for at one of the state's private banks may want to take a look at some of the mortgage options the federal government offers. One of them is the loan program at the Veterans Administration, which provides mortgages with zero down. On top of that great deal, VA loans do not require private mortgage insurance. The agency does, however, charge a funding fee, and this varies from 1.2% to 3.3%. Making a voluntary down payment will reduce this charge. And in case you're wondering, yes you do have to be a qualified veteran to get one of these unbeatable deals.
If you're not a vet, you may want to consider the Federal Housing Administration's home loan services. The FHA offers loans to people who have a credit score of at least 580 and who can put at least 3.5% down. The government agency also offers mortgages for lower credit scores, but it requires more money down with these loans.
USDA loans can help people with low incomes in rural parts of the state qualify for a subsidized low-interest loan.
State & Local Financial Assistance Programs
With the rising cost of homes in this state, more and more people will be turning to state assistance programs for help with their mortgages or down payments. However, it can be hard to find these programs and know if you qualify, so we did the work for you.
Minnesota Start-Up Program
If you are a first time home buyer, the Start Up Loan Program can help you get into a home with smaller down payments and fixed interest rates for as long as you have your mortgage. This program will pay your closing costs and down payments up to $12,000, and you may be able to get a loan with either low or no private mortgage insurance. To be eligible, must meet a few qualifications including:
Mortgage Credit Certificate
The Mortgage Credit Certificate program is a statewide tax credit program that operates in Minnesota. This program is aimed at first time home buyers, and it helps them get a larger Federal tax cut or reduce what they'll owe. You'll have to meet the eligibility requirements and be a first time home buyer to qualify. However, once you qualify, this program offers:
Homebuyer Initiated Program
The Homebuyer Initiated Program is designed to help low income families purchase fixer-upper homes in Minnesota. There are two grants this program offers for families, and they help to cover the purchase price and renovations to the property. The Affordability Investment Grant will pay between $25,000 and $60,000 toward the purchase price of a home, and this reduces the borrowers amount they'll have to finance. The home must be owned in trust by City of Lakes Community Land Trust to be eligible for these grants.
The Rehab Grant is the second grant this program offers, and it gives people who purchased their fixer-upper homes through the original grant $25,000 toward making the home stable and safe. You can use these funds to repair any structural, mechanical, or safety issues that may be present in the home at the time of purchase. Examples would be roof repair, electrical or plumbing updates, storm door and window replacement, and more.
The City Living program is an assistance program for first-time homebuyers that want to purchase a home in the St.Paul or Minneapolis areas. In 2010, over $41 million was allocated to this program, and it helps with things like getting a low-interest rate mortgage and closing costs. As always, you will have to meet certain eligibility requirements, and the income limit for the household is just over $90,000 annually. Additionally, a single-family home has a cap of $276,870.
Homeowner's insurance policies typically do not cover flooding. Most of the state of Minnesota is considered to have a very low flooding risk. The following counties have a low flooding risk: Sherburne & Washington. Anoka, Benton, Chisago, Clay, Goodue, Isanti, Mille Lacs, Norman & Pine counties have a moderate flooding risk.
Home buyers with mortgages in high-risk areas are required to buy flood insurance. Most flood insurance policies are sold by the United States federal government through The National Flood Insurance Program. Under-priced flood insurance in high-risk areas act as a subsidy to wealthy homeowners.
The NFIP does not charge nearly enough to cover the expected costs of its liabilities. The assessments are not sufficient to build any buffer to cover an extraordinary year, such as what occurred with Hurricane Katrina in 2005 or Hurricane Sandy in 2012. Because homeowners don't incur the full cost of building in a flood zone we end up with more houses there than if homeowners incurred the full cost of the flood risk, which exacerbates the government's costs in the next disaster.
Homeowners who live in lower risk areas & are not required to purchase flood insurance heavily cross-subsidize homeowners who are in areas where floods are more common.
The risk of wildfires is considered moderate in the northeast portion of the state. Fire damages from wildfires & other types of fires are typically covered in most homeowner's insurance policies. If you own expensive items you may want to keep an up-to-date household inventory list which lists specific valuables, such as fine art & jewelry.
Parts of the state are considered to have a moderate to high tornado risk. A basic homeowners policy should cover financial damages from tornadoes.
Hail damage is common across the state. Damage from hail is typically covered by home insurance policies.
When it comes to property taxes, Minnesota ranks as the 19th state for the highest property taxes. On average, you can expect to pay around 1.06% of your property's assessed market value. Typically, this works out to just over $2,000 per year. When you compare this rate to a national level, Minnesota ranks as the 21st state out of 50 for property taxes as a percentage of the average income & 31st overall. Higher property prices in the Twin Cities lead to an annual expense of around $3,500 for residents of the metro area.
In Minnesota, judicial and non-judicial foreclosures are both allowed. Those who choose judicial foreclosures must file a lawsuit. They are also required to obtain a court order for the foreclosed property to be sold. Mortgages that include power of sale clauses can be foreclosed by advertisement, provided the house is in default and there is no current lawsuit surrounding the foreclosure.
The entire foreclosure process in Minnesota typically takes 13 months from the date of your first missed payment. However, every foreclosure is different, and the timeline could vary depending on what happens. Minnesota is a non-recourse state. A rough timeline of the foreclosure process is listed below.
Month Zero: First Missed Payment
The entire foreclosure process begins when you have difficulty making your payments, and you begin to miss them entirely. Your mortgage lender will try to contact you by phone first; then they'll mail a letter. This is also the point where they have to offer you a loan modification option as well, and you'll receive an “Intent to Foreclose” letter. If you ignore it, you proceed to the next step.
Month Three: Foreclosure Attorney
Usually, if the lender hasn't heard from you and you've stopped making payments, they'll send your case to a foreclosure attorney around the third-month mark. Once the attorney gets your case, they'll try to contact you by phone first, then by mail to attempt to get you to resume your payments.
Month Four: Publication and Service
In a Foreclosure by Advertisement, the lender is required to serve you with foreclosure papers, and they usually do this through a trustee who is acting on their behalf. The foreclosure papers must like the date of the auction or sale, and this must be at least six weeks in advance. Once they do this, they have to publish a notice of foreclosure for six consecutive weeks in a local newspaper. If a lender fails to do any of these steps, the homeowner may take them to court.
Month Six: Sheriff's Auction or Sale
The auction or date is extremely important because this is the last date for the homeowner to bring their mortgage current and stop further foreclosure proceedings. It is also the last day the homeowner can use bankruptcy to help catch up on their missed mortgage payments.
Month 12: Redemption Period Ends
Any homeowner who loses their homes to foreclosure gets a six-month redemption period that starts the day of the Sheriff's sale or auction. The homeowner can continue to live in their home until the six-month window is up, and it is too late to catch up on the mortgage. However, if the homeowner can pay the entire Sheriff's sale amount plus any additional fees, they can redeem the property and keep it.
Month 13: Eviction
The final step in the foreclosure process is the eviction. By this time, the lender wants you out of the home and off the property, and if you haven't left by the time you six-month redemption period is up, they'll file an eviction notice with the local courts. This process may take another month to fully complete, and most people move out on their own before it gets this far.
Minnesota prohibitted "no documentation" and "low documentation" mortgages and loans in 2007 in response to the skyrocketing rates of loan defaults.
Once the housing crisis hit, thousands of people lost their homes. Minnesota introduced the Chapter 115 law. This law provides a few layers of protection for a homeowner in the event their home goes into foreclosure. This law could potentially make it harder to foreclosure on a home.
One of the biggest regulations of this law was the loan modification rule. Before foreclosing, the lender has to offer the defaulted borrower a chance to modify their existing loan, and the lender must help the borrower with the application and the proper paperwork. Additionally, the homeowner can submit a bid for loan modification up to seven days before the Sheriff's auction on the property. If the homeowner does this, the lender is required by law to stop foreclosure proceedings until they see if the borrower is eligible for a loan modification or not. If there are, the loan is modified, and the foreclosure is stopped. However, if the homeowner is found not to be eligible, the foreclosure and auction may proceed.
Statute 580.07 – Foreclosure Postponement
When your home sells at a Sheriff's Auction or Sale, the homeowner has until the day of the sale to request a foreclosure postponement. This will allow the homeowner additional time to catch up on their mortgage. You can do this one time, and it will delay the sale by an additional five months. However, if you do this, you're trading your redemption period in. It'll go from a six month redemption period down to just five weeks. You have to request this postponement between the time the first notice is published in the paper and 15 days before the sale's date.
If you want to learn more about assistance programs in Minnesota, or realtor associations for the state, check out the links below.
US 10-year Treasury rates have recently fallen to all-time record lows due to the spread of coronavirus driving a risk off sentiment, with other financial rates falling in tandem. Homeowners who buy or refinance at today's low rates may benefit from recent rate volatility.
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