First Time Homebuyers are eligible to apply for downpayment and closing cost assistance loans of $8,500, depending on household size and income.
Downpayment & Closing Cost Assistance 2nd Mortgage Loan Terms
- 0% interest deferred
- No monthly payments
- Borrowers must contribute a minimum of $1,000 towards the purchase of their home.
- Loan is repaid when the primary mortgage is paid off upon sale of the home, refinancing or the primary loan is paid in full.
The loan can always be pre-paid in full or in part at any time.
First Time Homebuyers may be eligible for a Mortgage Credit Certificate. The Mortgage Credit Certificate benefits can provide thousands of dollars in savings on interest over the life of a homeowners’ mortgage.
A Mortgage Credit Certificate (MCC) is a certificate provided by the IRS that allows homebuyers to take 30% of their first mortgage interest, up to $2,000 each year, as a credit against what is owed on their Federal income taxes. This is a special program provided by the IRS that is not available to all homeowners.
Example of the maximum benefit
Below is a table that provides an example of the maximum benefit a MCC can provide to borrowers over the life of their first mortgage.
Please note: this is only an example and does not guarantee that every borrower will be able to take full advantage of the MCC each year that they own their home.
| Amount of First Mortgage Loan |
$175,000 |
$200,000 |
$250,000 |
| |
First Mortgage Interest Rate |
4.25% |
4.25% |
4.25% |
| Year 1 |
Interest Paid after 1 year |
$7,380 |
$8,435 |
$10,544 |
| |
MCC Benefit at Year 1
(30% of interest paid, up to $2,000/year) |
$2,000 |
$2,000 |
$2,000 |
| Year 10 |
Interest Paid after 10 years |
$67,332 |
$76,952 |
$96,190 |
| |
MCC Benefit at Year 10
(30% of interest paid, up to $2,000/year) |
$19,525 |
$20,000 |
$20,000 |
| Year 30 |
Interest Paid after 30 years |
$134,922 |
$154,197 |
$192,746 |
| |
MCC Benefit at Year 30
(30% of interest paid, up to $2,000/year) |
$39,801 |
$43,174 |
$47,329 |
The First Time Homebuyer Program may only be used with 30-year amortizing fixed-rate FHA or VA mortgage loans or HFA Preferred conventional mortgage loans.
- FHA/VA: 2.75% – Effective rate as low as 1.93% with Mortgage Credit Certificate
- Conventional HFA Preferred:
- 3.25% (80% AMI and below) – Effective rate as low as 2.28% with Mortgage Credit Certificate
- 3.625% (above 80% AMI) – Effective rate as low as 2.54% with Mortgage Credit Certificate
Interest rates are subject to change.
The Dakota County CDA partners with mortgage lenders to qualify homebuyers for the First Time Homebuyer Program loans. The program is not accepting new mortgage lenders at this time, but individual loan officers who work for a participating mortgage lender may become qualified to use the program by taking the online trainings available on the program website below. Loan officers should also review the program guidelines and forms to ensure they are familiar with all program requirements. Program loan reservations are also made directly by the participating lender at this program website.
To take the online Trainings and review Lender Guidelines & Forms, click on the link below:
Training, Guidelines, and Forms
If you have additional questions, contact Karly Schoeman at kschoeman@dakotacda.state.mn.us.
