First-generation homebuyer assistance now available to Minnesotans

For many folks, buying a home is the “American Dream.” With inflation, student loans, medical bills and all other financial responsibilities that an individual or family faces, this dream can seem impossible to reach. However, Minnesota just launched two new programs that specifically help first-generation homebuyers purchase their first home. 

What is it?

Minnesota Housing explains that the First-Generation Homebuyer Loan Program offers a 20-year deferred, interest-free and forgivable loan for down payment and closing costs up to $35,000.

You must take out one of Minnesota Housing’s Start Up First Mortgage loans to buy your home in order to use the First-Generation Homebuyer Loan. You can use the loan for a variety of expenses, including downpayment and closing costs.

How do I get the loan forgiven?

Half of the loan is eligible for forgiveness after 10 years and the rest after 20. To be eligible for this forgiveness, you must live in the home through the forgiveness date AND meet all the terms of the agreement.

Would I ever have to pay it back?

The First-Generation Homebuyer Loan balance becomes due immediately and in full if the property converts to non-owner occupancy or if you sell or refinance your home.

What are the eligibility requirements?

Eligibility requirements include the following:

• Income limits: Minnesota Housing has a webpage with that information.

  For example, a household of three or more in the Twin Cities Metro Area can earn up to $142,800.

• A minimum credit score of at least 640. (A higher score might be required for certain loan types, and applicants with no credit score might also be considered.)
• The completion of a homebuyer education course.
• You must also be a first-generation homebuyer, which means that you and your parents/legal guardians have never owned a home OR you or your parents/legal guardians owned a home and lost it to foreclosure.

How do I get started?

Take these steps below to get started:

• Connect with a participating lender who can answer your questions about the program and eligibility requirements.
• Take a homebuyer education class, since completion of a homebuyer course is required for the program.

New down payment assistance program can also help

Another state program provides zero interest loans for down payment assistance to prospective Minnesota homeowners who qualify. The First-Generation Homebuyers Community Down Payment Assistance Fund requires borrowers to be a first-generation homebuyer, complete a homebuyer education course, and meet income guidelines. Individuals who use the Homebuyer Loan Program are not eligible for the Down Payment Assistance Fund.

Act NOW!

According to Minnesota Housing, these funds are available for a limited time. The First-Generation Homebuyer Loan Program has funding to serve approximately 1,500 eligible borrowers on a first-come, first-served basis. So don’t wait…take action today!

If you want more support in your homebuying journey, we offer homeownership counseling where you work one-to-one with one of our HUD-certified homeownership counselors. Call us to schedule your free counseling session at 888.577.2227. Your counselor will review your income and credit report/score, and they will work with you to create a realistic budget so you can determine what you can afford for a mortgage payment.

Author Elaina Johannessen is the program director for Debt Management Plan operations with LSS Financial Counseling.