Minnesota Home Loan Programs

The interest rate shifts periodically, increasing or lowering your monthly payment.

With an Adjustable Rate Mortgage (ARM), the interest rate is initially fixed and later adjusted to current market conditions. Some home buyers prefer an ARM because the lower initial interest rate allows them to buy a more expensive home.

The initial fixed rate can run between 1 month to 10 years, depending on the loan. And some ARM loans will allow you to convert to a fixed rate if you decide to switch.

The interest rate is initially fixed, but is followed by a period with an adjustable rate.

A hybrid loan is a blend of a fixed rate and an adjustable rate. It begins as a fixed rate loan and then later is converted to an adjustable rate loan. For example, a 30-year hybrid loan may be designed with a five-year fixed rate and an adjustable rate for 25 years.

A loan that’s insured against default by the Federal Housing Administration (FHA)

An FHA loan is guaranteed by the government and is typically a good option for first-time home buyers or those with a spotty credit history. The benefits include a smaller down payment, lower interest rates, it’s easier on credit-challenged borrowers, and 100% of the down payment can be in the form of a gift.

A guaranteed home loan for veterans that requires no down payment.

Active service members, veterans, and their surviving spouses can purchase a home with a VA loan, which the U.S. Department of Veterans Affairs offers. To qualify, the VA will verify military status. The benefits include no down payment, no minimum credit score, you’re not required to pay Private Mortgage Insurance (PMI), and you can pay off the loan at any time without penalty.

The monthly payment doesn’t include the repayment of principal for a certain period of time.

An interest only loan means your monthly mortgage payment doesn’t include principal for a period of time. When the interest only period ends, your monthly payments significantly increase with the addition of principal. This is an option for those who may want to buy a more expensive home with a lower monthly payment out of the gate.

An initial fixed interest rate, then a balloon payment due at the end of the term.

With a balloon mortgage, once the initial fixed interest rate period ends, a large payment for the remaining balance of the principal is due. At that point, the borrower can either pay off the balance or refinance. Terms are typically between five and seven years.

Allows seniors to convert a portion of home equity into cash while living in their home.

With a reverse mortgage, the lender pays the homeowner (you have to be 62 or older to qualify) each month using the home’s equity. And as long as the homeowner remains in the home, there are no fees, and no principal or interest is due.

Your monthly principal and interest rate stays the same during the life of the loan.

A graduated payment mortgage can make sense when interest rates are high, pushing the cost of a monthly mortgage payment up.

Borrowers should note that the interest owed will increase over time, and the payment shortfall at the beginning could potentially lead to “negative amortization” (you might end up owing more on your home than it’s worth).