Minnesota Housing Financial Administration

Minnesota Housing Financial Administration (MHFA) Down Payment Assistance

MHFA Down Payment Assistance is the most commonly used assistance program that is used by our past clients.

It is a great program to cover the upfront costs of buying a home. It can cover the down payment and any closing costs - title fees, the appraisal, underwriting costs, the 1st year of home insurance and setting up an escrow account to pay for future property taxes and home insurance. This is NOT a Grant program and you will be required to pay the assistance loan back one of two ways:

1

Through the Monthly Payment Program - This program offers up to $18,000 in assistance. You will be required to pay this back over a 10 year term. We will use the same interest rate as your main mortgage loan.

2

Through the Deferred Payment Program - This program offers up to $16,500 in assistance. You will be required to pay this back when you sell or refinance the home. No addition to the monthly payment which is nice.

I like the deferred program because of home appreciation - your home will go up in value (on average 3%- 5% in MN) so when you go to refinance or sell the home you can use the appreciation proceeds to pay off the assistance loan. Now, sometimes $16,500 is not enough to cover the costs of a home, so the Monthly Payment Program would be the better program in that case.

**With both of these programs you are required to give at least $1,000 of your own money before closing**

There are a few requirements that will need to be met in order to qualify:

A Credit Score of 640 will qualify you for a Conventional Mortgage, which has higher interest rates than a FHA Mortgage with down payment assistance. You can see the interest rates by going to http://www.mnhousing.gov/sites/lenders/rates 

A Credit Score of 650 will qualify you for a FHA Mortgage, but you are only able to go up to a 45% debt-to-income ratio, which is your monthly debt payments + new monthly mortgage payment / monthly income

A Credit Score of 660+ will qualify you for an FHA Mortgage up to 50% debt-to-income ratio

Income Limits

These programs are an incentive for people that want to get into home ownership, but don't have the funds to do so. The State of Minnesota does limit the clientele who can use the programs by their annual income. These income limits do change frequently and it depends the county you would like to buy in and the program you would like to use. You can see the most up-to-date income limits by following the link below http://www.mnhousing.gov/sites/lenders/mortgage/income

Asset Limits

Another limit that the MHFA implements are your liquid assets - money in bank accounts. If you have the lesser of $8,000 or 8 months of mortgage payment reserves in your bank account you are not eligible for a MHFA Down Payment Assistance Loans.

Home Buyer Education

You will be required to take a home buyer education course. It is a free self paced course that will require testing at the end. You can access the course by following the link - https://homeready.frameworkhomeownership.org/

Other Assistance Programs -

There are other down payment assistance programs that we have to offer. Most are County specific and share the same requirements as the MFHA D.P.A. Program.

One of the more popular programs is the Dakota County Down Payment Assistance Program. If you plan on buying in Dakota County Minnesota you will be able to qualify for this program. You can research the specifics of this program by going to https://www.co.dakota.mn.us/HomeProperty/BuyerPrograms/Pages/default.aspx

*Other states other than Minnesota offer down payment assistance programs as well. If you plan on buying in a different state that Minnesota please google - down payment assistance in that state.*

Grants

Minnesota and other states do offer home buyer grants - typically for low income housing areas and new construction homes. Feel free to research the grants available in MN by following this link - http://www.mnhousing.gov/sites/multifamily/gettingstarted

Have Questions?

Read our other blog posts or reach out to us directly.

Benson Ringle
Loan Officer NMLS #1516626
GA Lic. # 1516626
(218) 507-0429
Benson.Ringle@supremelending.com