Minnesota is known as the Land of 10,000 Lakes. You can choose between urban living or the wide-open spaces of rural landscapes if you’re buying a home there. Let’s take a look at the mortgage rates Minnesota homebuyers should expect.
The Best Mortgage Lenders in Minnesota for Rates:
What Is a Mortgage Rate?
Your mortgage rate is the amount of interest you pay on your home loan. When you buy a home, unless you pay cash, you get a mortgage through a lender. The lender essentially buys the house for you and you pay back the lender. The lender charges interest to cover the costs of servicing the loan and to make a profit.
What Factors Impact Your Mortgage Rate?
Several factors impact your mortgage rates. Some factors influence the rates everyone receives. Other factors affect the rate that lenders offer you:
The economy impacts interest rates across the board. When the unemployment rate is low and the economy is booming, interest rates tend to go up. When the economy isn’t doing as well, interest rates tend to drop to encourage more people to buy homes.
Your Credit History
Lenders look at how you’ve handled credit in the past to get an idea of how you’ll handle your mortgage. Lenders may offer you a higher rate if you have issues such as late payments or collection accounts on your credit report.
Your Debt and Income
Lenders want to be sure you can handle your mortgage payments. Lenders add up your debt payments, including your mortgage payment, and compare it to your pre-tax income. Ideally, your debt payments add up to 43% or less of your pre-tax income. Some lenders allow up to 50%.
Your Down Payment
The more you pay in advance as a down payment, the less lenders have to pay on your mortgage. This lowers the risk to your lender. Since the risk is lower, lenders may offer you a lower interest rate.
Your Loan Type and Term
You’ll be offered a higher interest rate if you have a longer loan term. Government-backed mortgages may have higher interest rates than conventional mortgages in some circumstances.
Interest rates also vary from lender to lender, so it’s best to get a purchase quote from more than one lender.
What Is a Mortgage Type?
Not all mortgages are the same. Mortgages come in a variety of types, each of which has different features:
Many lenders offer conventional mortgages. The government doesn't insure conventional mortgages. That means lenders may have higher minimum standards for those loans. You may need to have a higher credit score to qualify for a conventional mortgage, for example. You may need to make a 20% down payment on a conventional mortgage. Each lender has its own requirements.
The Federal Housing Administration insures FHA loans. This allows lenders to offer mortgages to people with lower credit scores. You can have a credit score as low as 580 and qualify for an FHA loan. If you can make a 10% down payment, you can have a credit score as low as 500. FHA loans also have a low minimum down payment requirement — 3.5%. FHA loans may have a higher interest rate than conventional loans.
The U.S. Department of Agriculture backs USDA loans. These loans are designed to help moderate- and low-income borrowers buy homes in rural areas. Some USDA mortgages don’t require any down payment. You do need to meet income requirements to qualify for a USDA mortgage. You also need to buy a home in designated rural areas.
The Department of Veterans Affairs insures VA mortgages. Current service members, veterans and some spouses may qualify. VA mortgages don’t require a down payment. VA loans typically have competitive rates. You also don’t have to pay for private mortgage insurance, which can drive up your monthly mortgage payments.
You may also see most of these mortgage types when you get a refinance quote.
What Is a Mortgage Term?
A mortgage term is how long your mortgage will last if you just make the required monthly payments. The mortgage term impacts your interest rate. Longer terms typically have higher interest rates.
Here are a few common mortgage terms:
A 30-year fixed-rate mortgage offers the same interest rate for the entire term. Your monthly payments are also the same. If you just pay your required monthly payments, your loan will be paid off in 30 years.
A 15-year fixed-rate mortgage also offers the same interest rate for the entire term. You have the same minimum monthly payment for 15 years. At the end of 15 years, you’ll have your home paid in full.
A 5/1 ARM is an adjustable-rate mortgage. Adjustable-rate mortgages typically offer an introductory period with a fixed rate. After the introductory period, rates adjust on a schedule your lender establishes. With a 5/1 ARM, you have a 5-year introductory period. After that, your rates adjust up or down once per year. The introductory period may have a lower interest rate than a comparable fixed-rate mortgage.
A 15-year fixed-rate mortgage will usually have a lower interest rate than a 30-year fixed-rate mortgage. Ask lenders for quotes for the same type of mortgage. This allows you to easily compare terms and go with the lender with the best rates. If you get quotes for different types of mortgages, it’s more challenging to make an apples-to-apples comparison.
Current Mortgage Rates in Minnesota
Mortgage rates change daily. Lenders adjust mortgage rates up or down to reflect market conditions. These changes might seem small, but even a small interest rate can make a big difference in how much interest you pay over the life of your mortgage. At Benzinga, we update these rates regularly to reflect these frequent changes.
Calculating Interest in MN
Your lender calculates your interest every month. As you make your monthly payments, your loan balance gets lower. This means that each month, more of your monthly payment goes to your balance and less goes to interest. You pay more in interest if you have a longer loan term. Here’s a look at how much you’ll pay in interest over the life of your mortgage in 4 Minnesota cities:
|City||Average Home Value||Loan Term||Current Rate||Downpayment (20%)||Monthly Payment||Total Interest Paid|
|Saint Paul||$220,600||30-year fixed||6.531%||$44,120||$1,119.07||$226,385.20|
|St. Cloud||$156,100||30-year fixed||6.328%||$31,220||$775.25||$154,210.00|
Lender Credit Score Minimums in MN
Your credit score is a 3-digit number that gives lenders a snapshot of your credit history. The higher your credit score is, the better. Making late payments, having accounts in collections and using a lot of your available credit all bring down your score. Lenders have minimum credit scores they will accept to consider you for a mortgage.
If you’re below the minimum, you may need to work on your credit before you can get a mortgage.
5 Best Mortgage Lenders in Minnesota
You should contact multiple lenders to get the best mortgage rate. We’ve researched and rounded up the 5 best mortgage companies in Minnesota to help you start your search.
1. Best Overall: Rocket Mortgage®
Rocket Mortgage® offers a seamless, entirely online experience. It also offers excellent customer service via chat or phone around the clock.
This makes it easier to get in touch with than most mortgage companies.
Rocket Mortgage® offers conventional and government-backed mortgages. Start your refinance or purchase with Rocket Mortgage® by Quicken Loans®.
2. Best for Low Credit Scores: Bell Bank
If you have a low credit score, FHA mortgages may be your best option.
Bell Bank is a regional bank with branches throughout Minnesota. It offers expertise in the FHA mortgage process.
It’s also an approved lender for Minnesota’s homebuyer assistance programs, which may offer help with your down payments.
3. Best for First Time Homebuyers: US Bank
It offers a painless, online prequalification process.
It also has branches throughout Minnesota for in-person education and guidance. You can also easily reach its loan officers by phone or email. U.S. Bank offers conventional, FHA and VA mortgages.
4. Best for Mobile: Fairway Independent Mortgage Corporation
You may already do lots of things with your phone.
You can even apply for a mortgage with Fairway’s mobile app. Fairway’s app also allows your loan officer to communicate with you quickly so you can get your loan ASAP.
Fairway has branch offices throughout Minnesota if you prefer an in-person experience.
5. Best for VA Mortgages: Veterans United
VA mortgages are complex.
If you qualify, you may want to work with a lender that specializes in VA mortgages.
Veterans United provided more VA loans than any other lender in 2018. It has a user-friendly website and excellent customer service ratings.
Finding the Right Minnesota Mortgage
Finding the right Minnesota mortgage takes time. Talk to multiple lenders and review each quote carefully. Look for expenses like origination fees and application fees. Take all the costs into account when deciding on a lender.
If you’re a first time homebuyer, let lenders know that too. They may be able to connect you with resources to help you through the mortgage process.
Frequently Asked Questions
How do I get pre-approved?
First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!
How much interest will I pay?
Interest that you will pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here
How much should I save for a down payment?
Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first time buyers. Check out the lenders that specialize in making the home buying experience a breeze.
Get Ready for Take Off
Rocket Mortgage® is an online mortgage experience developed by the firm formerly known as Quicken Loans®, America’s largest mortgage lender. Rocket Mortgage® makes it easy to get a mortgage — you just tell the company about yourself, your home, your finances and Rocket Mortgage® gives you real interest rates and numbers. You can use Rocket Mortgage® to get approved, ask questions about your mortgage, manage your payments and more.
You can work at your own pace and someone is always there to answer your questions — 24 hours a day, 7 days a week. Want a fast, convenient way to get a mortgage? Give Rocket Mortgage® a try.