Attractive housing options, a pristine natural environment and varied employment opportunities attract many new homebuyers to the state of Minnesota. The choices for home and business purchases include the large metropolitan region of Minneapolis/St. Paul, several smaller cities and towns and wilderness or sports oriented regions. Mortgage rates in Minnesota vary somewhat from the U.S. national average depending on the region and current economic conditions. Many financing options await buyers, however, and continue to attract new residents to the area.
How Minnesota Real Estate Compares Nationwide
As with residents of other states in the U.S., Minnesota homeowners are subject to a fluctuating economy that affects the price of housing. Often tied to the unemployment rate, homes for sale may drop or rise dependent on the state of the U.S. economy. Typically, Minnesota residents enjoy a somewhat lower unemployment rate and therefore a more stable housing market. A higher standard for education, a large number and selection of employers and a desirable standard of living attract new residents to the state and keep Minnesota housing prices at an even level.
Compared to overall housing prices in the U.S., Minnesota real estate falls approximately in the middle or slightly below the national average. Some regions in the state, near the major cities for example, feature real estate priced in the top percentile while several rural regions in the state are well below the nationwide average. Homebuyers will find a wide range of prices and can typically expect to find modest single family homes, townhomes and condos that are affordable for most income levels. Owning property in Minnesota may be easier than in other parts of the country but homebuyers will also find executive level properties and large homes with extensive acreage.
For buyers with superior credit scores, mortgage interest rates in Minnesota are consistent with other parts of the U.S. and vary according to the size of the loan, term length and adjustable vs. fixed options. More lenders may be accessible in the major metropolitan regions and offer a wider selection or programs with attractive interest rates.
Property taxes in Minnesota tend to be lower than in other states and provide a stable base for longtime residents. The cost of living is also somewhat below the national average making the region a good choice for families, young professionals and seniors. Many desirable homes are located near quality schools and adjacent to parks, recreation centers and consumer conveniences. Although real estate in Minnesota follows the national trends to some degree, the quality of living and stable employment centers help regulate excessive fluctuations in the market.
Real Estate Laws
Small business owners and investors will find attractive real estate opportunities and an environment that encourages an entrepreneurial spirit. Minnesota business and real estate law compares favorably to other states in the U.S. such as California and New York. Specific real estate regulations are in place and Minnesota governing agencies encourage new business upstarts and real estate investment.
Popular Minnesota Cities for Relocation
Minneapolis – St. Paul
One of the fastest growing regions in both the state of Minnesota and the U.S. is the Minneapolis/St. Paul region. Composed of both a major downtown central region and dozens of outlying suburbs, the Twin Cities area continues to experience rapid growth and attract new residents. Lakeside real estate, top-rated school districts and close-at-hand recreational areas offer residents a quality lifestyle. The region is connected through major highways and public transportation systems including light rail making it easy for buyers to find a home in the suburb and work in the city. Visitors and residents enjoy shopping and recreation at the Mall of America and the city hosts year-round sports events and features several major theaters and music venues.
The city of Rochester, located approximately 75 miles from Minneapolis/St. Paul, is home to the famous Mayo Clinic and is a favorite relocation destination for workers associated with the facility. Several colleges and universities maintain campuses in Rochester and major manufacturing companies provide additional employment. A popular riverfront district offers walking paths, shops and restaurants and adds to the appeal of this Minnesota town.
A charming old town district and a thriving university can be found in the city of St. Cloud situated 65 miles northwest of the Twin Cities. New home developments stretch along the major highways connecting the two regions and homebuyers will find attractive single family residences and townhomes with modern amenities.
On other parts of the state, the city of Duluth lies on Lake Superior and is a major shipping and transportation hub offering many employment opportunities. Both new and historic lakeside cabins attract buyers looking for a retirement home or vacation property. Homes along the north shore roadway offer stunning views and a pristine natural setting.
Typical Mortgages Offered in Minnesota
Minnesota homebuyers will find mortgages offered from federal and state organizations as well as various public financial institutions. Funding from FHA, USDA and VA programs are available and are granted depending on the buyer’s qualifications and the type of property being financed. Programs for first-time buyers can be found and may also provide a benefit to cover some of the closing costs or down payments. These lower interest rate loans are an attractive option for residents of Minnesota and also provide sellers with a better opportunity to move the property.
Financial Home Owner Assistance
Special programs offered in Minnesota focus on persons with disabilities or who can prove special needs. Educators may qualify for the Extra Credit Teachers Home Purchase Program that allows lower down payment requirements and attractive interest rate benefits. The Interest Only Plus Mortgage features a 35-year loan that is paid back with interest only for the first five years. This desirable program allows families and young professionals to get into a home with affordable payments. Homebuyers who choose this program must be confident that their income will increase after five years or that they have a method to pay back the loan or refinance at that time.
Buyers will find conventional loans that follow national guidelines for both fixed and variable rate financing. In some regions, for example near preferred Minneapolis/St. Paul districts, jumbo loans are granted to buyers qualifying for a property in excess of $420,000, although these limits are subject to change. Jumbo loans typically require a 20% or greater down payment, ideal credit history and proven income and assets to secure the loan. These loans are typically held through private institutions and are over the maximum for government programs such as Fannie Mae and Freddie Mac. In Minnesota, jumbo loans normally have a higher interest rate because of the risks involved and the lender’s financial commitment.
Loan Defaults in MN
In cases of loan default in Minnesota, lenders only have the option of pursuing non-recourse legal action. Buyers are responsible strictly for the original mortgage amount and are not threatened by lawsuits that reach for damages beyond that amount. In the case of foreclosures, lenders may pursue judicial or non-judicial action if a power of sale clause is included in the mortgage terms. Three specific conditions apply to non-judicial foreclosures in Minnesota:
- The property must be free of any pending lawsuits or other legal action to satisfy the defaulted mortgage.
- If new lenders have been contacted and offer assistance with the mortgage, the reduced mortgage and all new terms must be recorded in the appropriate county offices.
- Notice of default must be given to the borrower at least 8 weeks prior to any foreclosure action.
Minnesota Real Estate Law Regulations
Every buyer of property in Minnesota receives confirmation that a Real Estate Transfer Disclosure Statement has been completed. By law, every Realtor in the state is required to complete and submit this form. This ensures that the buyer is purchasing a property with a clear title that is free from any liens and that all pertinent information about the site has been conveyed.
Home Buyer Loan Protections
Buyers are also protected from excessive interest rates through the Minnesota Civil Code Provision of the Real Estate Act which regulates variable interest rates. This updated real estate code, established in 2002, helps borrowers from overextending themselves with large mortgages that become unaffordable. Jumbo loans, for example, are typically only granted using fixed interest rates. Other protections include interest regulated to begin one day prior to the close of the sale regardless of when the loan was approved.
Additional regulations include the prohibition of fees or points in excess of 6% of the total amount of the principal financing. This policy was established to protect buyers against predatory lenders and also helps ensure that loans are not granted to individuals who cannot reasonably pay the mortgage. Minnesota buyers are protected against single-premium credit insurance financing and other excessive payment obligations.
Finding an appropriate mortgage in the state of Minnesota becomes the first step buyers should take to determine their ideal property location and most affordable purchasing price. Homebuyers who are preapproved for a loan amount prior to making an offer stand a greater chance of finding a suitable home and not being in a position to default on a loan. A variety of Minnesota mortgage programs offer abundant options for all lifestyles and budgets. New residents continue to find appealing Minnesota property and affordable housing that provides good options for both family living and future investment potential.