Owning a home is a big part of the American Dream, but it can be overwhelming if you’re not familiar with the process.
We have gathered some helpful tips and resources to guide you through the basics, learn about mortgages, or apply for government assistance if you’re struggling with your loan or rent payments. We also cover alternative paths to homeownership such as Contracts for Deed.
Mortgage Loans
Looking to buy a home?
The homebuying process can be confusing. We are here to help you understand the basic steps from pre-approval to homeownership.
Step 1: Check your credit score
First, check your credit score and fix any issues and correct any issues you may have. Learn more on our credit scores page.
Step 2: Determine your budget
How much can afford to borrow? Home affordability depends on factors like down payment, debt, and your monthly net income. Learn more about budgeting and how to fit a mortgage payment into your finances.
Step 3: Explore loan options
There are a variety of loans that fit different situations and budgets. Make sure to find the one that works best for you.
- Conventional loans with private mortgage insurance (PMI)
- VA loans for active service members and veterans
- FHA loans (loans through the Federal Housing Administration)
- USDA loans for rural homebuyers
Make sure to talk to multiple lenders to compare interest rates and understand how they’ll affect your budget.
The down payment amount (how much money you pay up front) impacts your loan. You might need 20% down, but some loans allow for as little as 3%. If you pay less than 20%, you’ll need to pay for PMI (private mortgage insurance), which adds to your monthly cost.
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Step 4: Get pre-approval
A pre-approval letter helps you show sellers that you are a serious buyer before fully committing to a lender.
Step 5: Find your home and make an offer
This is the fun part. Shop around for the right home, in the right neighborhood, with all the right features, at a price you can afford.
Step 6: Compare loan offers
Compare offers from different lenders to choose the best loan for your budget.
Step 7: Close on your new home
Complete a home inspection, shop for homeowner’s and title insurance, and sign the paperwork. You are officially a homeowner!
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Understanding Your Mortgage Loan
Already own a home? Understanding your mortgage is key to managing your payments and avoiding issues like foreclosure. The Consumer Financial Protection Bureau (CFPB) provides a checklist for making your monthly mortgage payment.
Refinancing
Refinancing allows you to get a new mortgage to pay off your current one. This can be a way to lower monthly payments, but be sure to compare the pros and cons. This CFPB worksheet can help you make your decision. Additionally, Minnesota law prohibits mortgage originators from making a new mortgage loan unless the new loan provides a reasonable and tangible net benefit to the borrower. This must be documented in writing and signed by a borrower.
Mortgage Assistance
If you are struggling with payments, communicate with your lender right away to explore assistance programs. If you can’t reach an agreement with your lender, explore the options below.
Housing counselors
Housing counselors can provide advice on buying a home, renting, foreclosures, evictions, and credit issues. The U.S. Department of Housing and Urban Development (HUD) offers a list of approved housing counselors that to help you.
Note: Make sure you select an approved counselor, as scammers are waiting to take advantage of people who are struggling. They may claim to provide mortgage relief, counseling services, or even loan forgiveness. If you suspect that you have been a victim of financial fraud, file a complaint with Commerce at consumer.protection@state.mn.us or 651-539-1600 or 800-657-36002. You can also file a complaint if your loan provider is using unlawful, unfair, abusive, or deceptive practices. if your loan provider is using unlawful, unfair, abusive, or deceptive practices.
Government agencies
There are state and federal programs that can help homeowners and renters. Visit the following for more information:
- Minnesota Housing Finance Agency (MFHA)
- Consumer Financial Protection Bureau (CFPB)
- U.S. Department of Housing and Urban Development (HUD)
- U.S. Department of Veteran Affairs (VA)
- U.S. Department of Agriculture (USDA)
Lawyers
If you need a lawyer, there may be resources available to assist you through the state or a local bar association, legal aid or, if you are a servicemember, your local legal assistance office.
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