First-Time Home Buyer Tips & Tricks

First Time Home Buyer Start up Fund

Minnesota has received national recognition for its’ support of first-time homebuyers and homeownership. There are over 80 different programs in Minnesota to help homeowners, primarily first-time homebuyers, get into homes. Assistance comes in many forms; down payment assistance, reduced mortgage insurance, grants, loan forgiveness, and reduced interest rates. These programs can be based on the location of the place you are purchasing, your income, credit, number of people in household and many other criteria.

The most commonly utilized first-time home buyer program is Minnesota Housing Finance Agency’s home buyer program called Start Up. This is a state-wide program but purchase price and income limits are greater in the 11 county metro area. The 11 county metro area is defined as Anoka, Carver, Chisago, Dakota, Hennepin, Isanti, Ramsey, Sherburne, Scott, Washington and Wright county. If you're out of this area we could refer you to an agent who can help you.

Who is a first-time home buyer?

The states definition is broader than someone who has never owned a home. If it has been 3 years since you have sold your home, we affectionately refer to you as a recycled first-time home buyer. If you have owned a mobile home which is not affixed a permanent foundation, have had a contract for deed for less than 2 years or lived in a place with a lease with an unexercised lease to buy you are able to take advantage of this first–time home buyer program.

The Start-Up fund is designed to help buyers get into a home with less money saved. It provides assistance which can be applied to your down payment and closing costs. In order to qualify you must:

1) Be a first - time homebuyer as defined above.

2) Have a credit score of above 640-660, depending on the program

3) Your household income cannot exceed the income guidelines (which changes every year)

Household size 11 county metro limits
1-2 Person 100,000
3+ person   115,000

4) Purchase price cannot exceed $331,000.

5) At least one purchaser must complete a homebuyer education course through Home Stretch or Home Ready, prior to purchase.

6) You must work with an approved lender - we can recommend lenders that work with this program.

7) You need to have at least $1,000 of your own money into the transaction.

There are several options within the Start-Up program. The one most of our clients’ use is the deferred loan of $10,000. This deferred loan can be used towards your down payment or closing costs, does not accumulate interest and does not need to be paid back until you sell, refinance, or pay off the mortgage on the home.

If you need more cash, there is an option to instead receive a second loan of up to 17,000, however, that loan will need to be paid back with payments starting immediately and will be amortized over a 10 year period of time. This second loan will be at the same interest rate as your first mortgage.

Not all agents and lenders work with the different financing programs. Many agents don’t get involved in the financing and just recommend a buyer to get pre-approved. In order for a lender to be approved to do MHFA loans they need to go through training, their company needs to pay money to be an eligible provider, and the loan officer often works harder and earns less than with other loan programs. So not all lenders will bring the first-time home buyer programs to buyers’ attention.

With interest rates this low, it is a great time to buy. Sometimes there are even additional programs which can be piggybacked on this loan program and further increase the benefits. These loan programs make it so you don’t need to wait on saving up enough money to be able to buy a home but can jump into the market earlier. You might even find that you are paying less to own than you were to rent.


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