Compare Current Mortgage Rates in Minnesota

Minnesota mortgage rates are not the same as California mortgage rates or Vermont mortgage rates. That’s because mortgage rates vary by location — not only by state, but also by city, county, or census tract.

If you’re embarking on the exciting (and sometimes stressful) journey of buying your first home in Rochester, St. Paul, or up north, getting up to speed on how mortgage rates work can make things easier and possibly save you money.

No matter where you buy a home, certain factors will always affect mortgage rates. Here are some of the biggest ones:

• The inflation rate: When inflation is high, the Federal Reserve will try to push interest rates higher. Higher rates discourage borrowing. When people can’t borrow, they spend less, which can help bring inflation down.
• The unemployment rate: When unemployment is too low, the Fed takes action to increase rates so inflation doesn’t get out of control.
• The Federal Reserve: The Fed aims to keep inflation and unemployment low. Its steps to pursue these goals tend to influence the federal funds rate that banks pay to lend each other money overnight. The fed funds rate, in turn, affects consumer interest rates, including mortgage rates.
• Political and economic conditions: Factors like whether the U.S. economy is thriving or in a recession, and whether there’s a war or natural disaster in a country whose stability affects the United States, can affect mortgage rates.

These factors are interrelated and constantly changing, which is why mortgage rates tend to change at least once a day.

You’re probably still wondering why mortgage rates aren’t the same nationwide and what local factors could affect your mortgage rate in Minnesota. Here are some reasons why mortgage rates can vary by state:

• Cost of doing business: Operating costs such as office space, employee pay, insurance, and regulatory compliance vary by state and across lenders.
• Unemployment rate: Areas with higher unemployment rates may be less stable economically, putting borrowers at greater risk of struggling with loan repayment. Lenders might need to charge higher rates so investors will buy these potentially riskier loans.
• Foreclosure rate: Some states have higher foreclosure rates than others. Lenders might charge higher rates to borrowers in these states to compensate for the higher risk of lending there.
• Lender risk appetite: A lender might want to do more or less business in a certain state, so it might offer lower or higher rates to achieve its goals. Higher rates would reduce borrower demand, and lower rates would increase it.
• Competition: Rates might be higher in areas with fewer lenders, especially if customers aren’t shopping around or considering online lenders.
• Supply and demand: Higher demand for home loans can increase mortgage rates, especially if lenders are overwhelmed and need to ration their supply of labor (employees) and capital (loan funds).
• Federal designations: If you want to buy a home in a community that has been federally designated as low-income, minority, or disaster-impacted, you may be able to get a lower rate through Fannie Mae’s HomeReady program.

These factors help explain why a 30-year fixed-rate conforming loan in Minnesota could have an interest rate of 6.5% while the same loan might cost 6.375% in Florida. However, rates can also be the same from state to state, and state averages may not differ significantly from national averages.

The Minnesota Housing Finance Agency offers a loan of up to $18,000 toward your down payment and closing costs through its Start Up program. This loan has the same interest rate as your primary mortgage and a 10-year term. 

Your income and home purchase price can’t exceed a specified limit for the county where you’re buying, and you’ll need to complete a homebuyer education course.

As another option, you may be able to find a local program in your area. Here are a few examples: 

• TruePath mortgage from Twin Cities Habitat for Humanity: This program can be used to finance up to 96.5% of the cost of a Twin Cities metro area home. It doesn’t have to be a Habitat home.
• NeighborWorks Home Partners: NeighborWorks compiles a list of down payment assistance programs in certain cities and census tracts. 
• Ramsey County’s FirstHome program: This offers interest-free loans for closing costs and down payment assistance to qualifying first-time homebuyers in certain suburban cities within the county. 
• The Chenoa Fund from CBC Mortgage Agency: This second mortgage can be used to cover the down payment on an FHA loan in Minnesota and many other states. 

These are just a few examples of the local programs that might be able to help you. Don’t limit your search to state programs. It can pay off to search for first-time homebuyer programs in the county and city you want to live in.

No matter which state you want to buy a home in, these tips can help you get the best rate available.

• Work on your credit score: Lowering your credit utilization ratio and making all your payments on time are two of the best ways to improve your credit score. Aim for a score of 760 or higher.
• Shop around: You could shave 50 basis points, or 0.5 percentage points, off your mortgage rate by getting quotes from multiple lenders, according to a study of 2021 mortgage data by the Consumer Financial Protection Bureau.
• Save more for a down payment: Lenders’ best-advertised rates assume a borrower with at least 20% down. It may be hard to save this much for your first home, but it is a strategy for lowering your rate, increasing your options, and avoiding the additional cost of mortgage insurance.
• Get a raise: Easier said than done, we know, and you might have to change companies to significantly boost your income. However, having more income relative to your debt can help you get a better interest rate, not to mention making it easier to afford the costs of homeownership.

In Minnesota and nationwide, there are several types of mortgages available to help borrowers with different circumstances buy a home. There’s a good chance one of these mortgage types can help you become a homeowner. 

Conventional

• Description: Most popular type of mortgage.
• Qualifications: 620 credit score, 3% down.

VA

• Description: Government-backed mortgage for qualifying military service members, veterans, and surviving spouses.
• Qualifications: No minimum credit score, 0% down.

USDA

• Description: Government-backed mortgage for low- to moderate-income homebuyers in rural areas.
• Qualifications: No minimum credit score, 0% down.

FHA

• Description: Government-backed mortgage for credit-challenged borrowers.
• Qualifications: 500 credit score with 10% down or 580 credit score with 3.5% down.

Jumbo

• Description: Larger mortgage that exceeds conforming loan limits.
• Qualifications: Varies by lender, but typically 680 credit score or better and more than 5% down.