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Compare mortgage rates in Minnesota.
Key Points
• For the most part, average Minnesota mortgage rates have tended to fall slightly below the national average.
• Minnesota as a whole is neither high nor low where the cost of living is concerned. It falls in the middle of U.S. states.
• Economic factors, consumer credit scores, and down payment amounts influence mortgage rates in Minnesota.
• Minnesota offers various mortgage types, including fixed-rate, adjustable-rate, FHA, VA, and USDA loans, each with its own characteristics and eligibility requirements.
• Jumbo loans are available for homebuyers who require a loan exceeding $766,550.
Introduction to Mortgage Interest Rates
Minnesota presents a diverse range of mortgage options for homebuyers looking for a home loan>. By staying informed about current mortgage rates, understanding the type of mortgage loans available, and exploring assistance programs, you can set yourself up for homeownership success in the North Star State.
Where Mortgage Rates Come From
The Federal Reserve, also known as the Fed, plays a pivotal role in setting short-term interest rates that banks use. While home loan rates are not directly tied to Fed rates, they generally follow similar economic trends.
The Fed’s actions influence the cost of borrowing for banks, which in turn affects mortgage rates. When the Fed raises interest rates, mortgage rates typically head north as well. But the Fed’s actions aren’t the only influence on mortgage rates. The factors that affect rates can be broadly categorized into two groups: the state of the economy and the borrower’s financial status. Economic factors include inflation, and unemployment rates. Borrower-specific factors encompass credit score, down payment, income and assets, and the type of mortgage loan a borrower chooses.
How Interest Rates Affect Home Affordability
Mortgage rates have a significant impact on home affordability, one that is often overlooked by homebuyers because the costs associated with a mortgage are paid incrementally, one month at a time. A seemingly small difference in interest rate can affect monthly mortgage payments and the overall cost of a home.
Should Homebuyers Wait for Interest Rates to Drop?
Many homebuyers face the dilemma of whether to buy now or wait for interest rates to drop. This quandary is particularly likely if you’re buying your first home (first-timers may be more at the mercy of the market as they typically have smaller budgets than repeat buyers, who tend to be older and more financially established). While it’s tempting to wait for a more favorable rate, it’s essential to consider the opportunity cost of delaying homeownership: Home prices may rise while you’re waiting. Plus you’re delaying building equity” in your home.
Homeowners who buy when rates are on the higher side can later complete a mortgage refinance to secure lower interest rates when they become available, allowing them to benefit from rate reductions without delaying homeownership.
Recommended: Average Monthly Expenses for One Person
Minnesota Mortgage Rate Trends
Understanding historical mortgage rates can provide homebuyers with valuable insights. As you can see from the data below, Minnesota’s average mortgage rate has for the most part been a bit below the national average. (The Federal Housing Finance Agency stopped tracking this after 2018.)
| Year | Minnesota Rate | U.S. Rate |
|---|---|---|
| 2000 | 7.96 | 8.14 |
| 2001 | 6.88 | 7.03 |
| 2002 | 6.37 | 6.62 |
| 2003 | 5.46 | 5.83 |
| 2004 | 5.44 | 5.95 |
| 2005 | 5.62 | 6.00 |
| 2006 | 6.37 | 6.60 |
| 2007 | 6.29 | 6.44 |
| 2008 | 5.94 | 6.09 |
| 2009 | 4.95 | 5.06 |
| 2010 | 4.72 | 4.84 |
| 2011 | 4.45 | 4.66 |
| 2012 | 3.58 | 3.74 |
| 2013 | 3.85 | 3.92 |
| 2014 | 4.19 | 4.24 |
| 2015 | 3.90 | 3.91 |
| 2016 | 3.72 | 3.72 |
| 2017 | 4.01 | 4.03 |
| 2018 | 4.63 | 4.57 |
Historical U.S. Mortgage Rates
For context, it’s also worth looking at the ups and downs of the national average mortgage rate over several decades. Borrowers in 2023 may have lamented “high” rates of, say, 7.00%. But in the past, rates have reached as high as 18% (and as low as 3%).
Factors Affecting Mortgage Rates in Minnesota
Numerous factors influence mortgage rates in Minnesota and nationwide, as noted above. Let’s look more closely at these.
Economic Factors
Economic factors that impact mortgage rates include the federal funds rate, inflation, and unemployment rates.
• The federal funds rate set by the Fed influences the cost of borrowing for banks. As noted above, when the Fed drops its rate, mortgage rates tend to follow.
• Inflation erodes the value of money, prompting lenders to raise interest rates to maintain their profit margins.
• An unemploment rate that is low signals a robust economy. There may be increased demand for housing and limited supply. Unemployment rates also may indirectly affect the Fed’s actions.
Consumer Factors
Borrower-specific factors that influence mortgage rates include credit score, down payment, income and assets, and the type of mortgage loan.
• A credit score that is strong demonstrates responsible financial behavior, making borrowers more attractive to lenders and leading to lower interest rates.
• A larger down payment reduces the loan amount, lowering the lender’s risk and potentially securing a more favorable interest rate.
• A steady income and substantial assets signal financial stability, making the borrower attractive to potential lenders who may offer lower rates to good candidates.
• The type of mortgage loan you choose influences the interest rate you’re offered. Adjustable-rate mortgages (ARMs) often have lower initial rates, while government-backed loans like VA mortgages may offer preferential rates. Shorter loan terms generally come with lower rates compared to longer terms, although they also have higher monthly payments.
Types of Mortgages Available in Minnesota
Minnesota offers a range of mortgage options to meet the needs of different homebuyers, including fixed-rate, adjustable-rate, FHA, VA, and USDA loans.
Fixed-Rate Mortgage
Fixed-rate mortgages provide stability by maintaining the same interest rate throughout the life of the loan, ensuring predictable monthly payments. They come with different loan terms, such as 10-, 15- or 30-year terms, allowing borrowers to choose a repayment period that suits their financial circumstances.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgages (ARMs) offer lower initial interest rates compared to fixed-rate mortgages, but these rates can change over time based on market conditions. They are an attractive option for those planning to sell or refinance before the initial fixed-rate period ends.
FHA Loan
FHA loans, backed by the Federal Housing Administration, are designed to make homeownership more accessible to borrowers with limited resources or less-than-perfect credit. FHA insurance mitigates the risk for lenders, allowing them to offer FHA loans with less stringent requirements.
VA Loan
VA loans are exclusively available to veterans, active-duty military members, certain Reserve and National Guard members, and surviving spouses, offering favorable terms and benefits. A significant advantage of VA loans is the elimination of the down payment requirement, making homeownership more accessible to eligible veterans and military personnel. Getting a Certificate of Eligibility (COE) is the first step on the path to a VA loan.
USDA Loan
USDA loans, backed by the U.S. Department of Agriculture, are tailored to borrowers whose income falls below a certain threshold (which is specific to the location) and who are seeking to purchase a home in a rural area. These loans do not require a down payment and have competitive interest rates as well.
Jumbo Loan
Borrowers seeking financing for homes exceeding the conforming loan limits set by the Federal Housing Finance Agency (FHFA) will need a .
Conventional loans have a maximum loan amount, which may not be sufficient for higher-priced homes. In Minnesota, the conforming loan limit for 2024 is $766,550.
Recommended: Home Loan Help Center
Popular Places to Get a Mortgage in Minnesota
Securing a mortgage with payments you can afford often depends on choosing a location where home prices are affordable. Fortunately, Minnesota is relatively affordable as U.S. states go, ranking 25th on the list of U.S. states ranked by cost of living. The average home value in Minnesota is $336,954. Of course, costs do vary across Minnesota’s cities and towns.
Least Expensive Locations
Areas with a lower cost of living, such as Little Falls (average home value: $265,619), St. Cloud ($247,028), and Duluth ($271,694), offer more affordable housing options and potentially more favorable mortgage terms. Consult SoFi’s list of best affordable places in the U.S. for information about housing-market bargains across the country.
Most Expensive Locations
Cities with a higher cost of living include Minneapolis and North Oaks, and may present challenges for some buyers in terms of housing affordability, although in a large city such as Minneapolis, buyers may find a wider range of options at all price points.
Tips for Securing a Competitive Mortgage Rate in Minnesota
Obtaining a competitive mortgage rate can significantly reduce the overall cost of a home over the life of the loan. Here are some tips on how to help ensure you secure the best available rate for your financial profile.
Compare Interest Rates and Fees
Shopping around and comparing interest rates and fees from multiple lenders is essential to securing a good mortgage deal. Make sure you understand all associated costs, including upfront fees and closing charges, so you can make an informed decision about your lender.
Get Preapproved
Obtaining preapproval for a mortgage strengthens a homebuyer’s position in the market and allows for quicker action when finding the right property. When you go through the mortgage preapproval process and emerge with a letter from a lender, you’re able to demonstrate to a seller that you are financially prepared to buy their home.
Minnesota Mortgage Resources
Minnesota offers various resources and programs to assist homebuyers, particularly if you qualify as a first-time homebuyer. Take a look at these options:
First-Time Homebuyer Programs
Minnesota Housing offers programs tailored to first-time homebuyers. The Start Up program is for first-time homebuyers, which is someone who hasn’t had an ownership interest in a principal residence in the last three years. There are both income and home price limits which can vary by county. (Repeat homebuyers who don’t qualify for Start Up might qualify for Step Up, another program that offers higher income and home price limits.)
Down Payment Assistance
Down payment assistance programs help homebuyers overcome the hurdle of accumulating a substantial down payment. In Minnesota, if you qualify for Start Up or Step Up you may also be able to take advantage of one of the state’s down payment and closing cost assistance programs, which offer deferred payment loans.
Tools & Calculators
Online tools and calculators can help you estimate mortgage payments, compare loan options, and make informed financial decisions.
Run the numbers on your home loan.
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Mortgage calculator
Punch in your home loan amount and a new interest rate, and we’ll estimate your payoff date.
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Down payment calculator
Enter a few details about your home loan and we’ll provide your monthly mortgage payment.
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Home affordability calculator
Provide us with a few details and see how much you can afford to spend on a home purchase.
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
Refinancing Options in Minnesota
Homeowners in Minnesota have the option of refinancing their mortgages to secure a lower interest rate or adjust loan terms. Banks and other lenders offer refinancing options, and those with government loans may be able to take advantage of one of these programs:
• FHA Streamline Refinance offers a simplified process for FHA loan holders to obtain lower interest rates.
• VA Interest-Rate Reduction Refinance Loans provide VA loan holders with an opportunity to lower their monthly payments.
Closing Costs, Taxes, and Fees in Minnesota
Closing costs in Minnesota typically range from 3% to 6% of the home’s purchase price. Closing costs and fees represent a significant portion of the homebuying expenses and should be carefully considered when budgeting for a property purchase. The cost of closing varies depending on the value and location of the property.
The Takeaway
Minnesota’s mortgage landscape offers a range of options for homebuyers, catering to diverse financial situations and homeownership goals. Minnesota provides a variety of mortgage products, assistance programs, and refinancing options to meet the needs of different homebuyers. Homebuyers in Minnesota who do their due diligence and explore not only interest rates but also fees and closing costs can navigate the mortgage process effectively and save money long term.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.FAQ
Will mortgage rates drop in Minnesota?
Predicting future mortgage rate movements is challenging due to the influence of multiple economic factors. Staying informed about market trends and consulting financial experts can help homebuyers make an informed decision.
Will mortgage rates ever go back to normal?
The definition of a “normal” mortgage rate can vary over time. Rates fluctuate, and homebuyers would really be better off focusing on securing the best possible rate within the current market conditions if they need financing for a home.
Will Minnesota home prices ever drop?
Real estate market dynamics are complex and each local area is different. If you want to get a sense of whether prices might drop in a specific town or city in Minnesota, consult a local real estate agent who has expertise in the area.
Is it a good time to buy a house in Minnesota?
Prices in some Minnesota markets have declined in recent months, but others have risen. Whether this is the right time to buy in any given market likely depends more on your financial situation and your personal needs (is your rental lease ending? Is a baby on the way? Are you relocating for work?), and less on the market conditions.
How do I lock in a mortgage rate?
Locking in a mortgage rate usually involves paying a fee to the lender to secure the current interest rate for a specified period. This protects homebuyers from potential rate increases during the lock-in period, which is typically 30 to 60 days, but can sometimes extend longer.
How do mortgage interest rates work?
Mortgage interest rates are influenced by various economic factors, including the federal funds rate, inflation, and unemployment rates. But the specific rate you will be offered is also dependent on your personal financial situation—how much you wish to borrow, how large a down payment you plan to make, your credit score, and other metrics.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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More home loan resources.
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First-Time Homebuyer Guide
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First-Time Homebuyer Programs and Loans
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Mortgage Preapproval Process