Most of the first time buyer assistance programs require that the assistance you receive, for down payment and/or closing costs, is paid back. Usually it’s paid back over a period of time or the repayment of it is deferred until the house is sold or no longer your primary residence. Either way, the entity providing the funds gets their money back to help the next home buyer in need.
MN Housing just announced a new grant program which doesn’t require any money to be paid back! As with all MN Housing programs, there are eligibility requirements. These vary depending on WHICH MN Housing program you use and there are three of them – Start Up, Step Up and MCC (Mortgage Credit Certificate). The grant works with all three of their programs AND you can pair it WITH the assistance!
In any case, you still must meet guidelines set forth by the underlying loan type you are securing — FHA, VA, RD (Rural Development) or conventional. If you meet those guidelines, then we look to see if we can layer the loan type with the MN Housing program.
Generally speaking, they have income limits that your household must be under, and as with the underlying loan program, there are minimum credit score requirements. Being a first time home buyer is a pre-requisite for two of the three programs – Start Up and MCC. And the definition of a first time home buyer is not having ownership interest in a principal residence in the last three years.
The grant is only available when using a conventional loan with your MN Housing program. It cannot be used with VA, FHA or RD. The grant amount will differ depending on which guidelines your underlying loan is following – Fannie Mae or Freddie Mac. Who are Fannie and Freddie you ask? These are the agencies that provide the guidelines lenders follow for conventional financing. Your lender will determine the best underlying loan for your needs and situation.
To be eligible for the grant, you must have annual qualifying income under $72,320. Qualifying income is the income your lender uses to determine your qualifications for your loan. For instance, if you are the only one on the loan, but your spouse is not, then the qualifying income is just your income. This limit is for the 11-county metro area, which encompasses Anoka, Carver, Chisago, Dakota, Hennepin, Isanti, Ramsey, Scott, Sherburne, Washington and Wright Counties. Income limits are lower in the remaining MN counties.
If using Fannie Mae, the grant amount is a flat $1,500 to use toward your closing costs only.
If your lender determines Freddie Mac guidelines are your best fit, the grant will vary based on the loan amount you’re securing and qualifying income – (which still needs to be below the aforementioned limits). The grant can be used for BOTH closing costs and down payment. Minimally, you would be looking at ½% of the loan size, but you could be eligible for a larger grant if your income meets lower limits set for the program. Any lender participating with MN Housing can give you further details.
As always, when working with a lender, make sure they offer these great programs with MN Housing and any other agencies to help you get into your house with as much assistance as possible. And who can say “no” to grant money!?!