Buying a house is the largest purchase most people ever make, and most of the process happens in an order nobody explains up front. You need a number before you can shop. You need a preapproval before an offer gets taken seriously. You need insurance before you can close.
Here is the whole sequence, in the order it actually happens, from a bank that has been financing Minnesota homes since 1935.
Step 1. How much house can you actually afford?
Start with what you can carry, not what you can borrow. Those are different numbers, and the gap between them is where people get into trouble.
Your lender will look at your debt-to-income ratio, which is your total monthly obligations divided by your gross monthly pretax income. Aim for a ratio under 35%, and keep your total obligations at no more than 43% of gross monthly pretax income.
What counts toward that ratio:
- Your rent or house payment
- Alimony or child support
- Student, auto and other loan payments
- Credit card minimum payments
What does not count: groceries, utilities, gas and taxes. Those matter to your actual budget, but they are not in the ratio.
Then add the costs that do not show up in a mortgage calculator. Property taxes, homeowners insurance, HOA fees if the property has them, and maintenance. In Minnesota, budget for a heating season and for the fact that a roof, a furnace and a driveway all age faster here than they do in a mild climate.
Ready to put a real number on it? Look at our home mortgage and home equity options, or get a free prequalification with no cost and no obligation.
Which home loan fits your purchase?
Most buyers use a straightforward first mortgage. Several other structures exist for specific situations, and knowing which one you are in saves a lot of time.
| Loan | What it does | Use it when |
|---|---|---|
| Home mortgage | Long term financing secured by the home you are buying | This is your primary purchase, standard situation |
| Bridge loan | Short term, interest only financing secured by property you already own | You found the next home and your current one has not sold |
| Home equity loan | A fixed amount borrowed once against equity you already have, repaid with fixed principal and interest | You need a known sum and are not selling |
| Construction loan | Short term, interest only, disbursed as the project moves forward | You are building rather than buying |
| Renovation loan | Wraps improvement costs into the total home loan | The house needs work as a condition of the purchase |
The bridge loan, in plain terms
A bridge loan is not an unsecured personal loan. It is secured by property you already own, and it exists to close the gap between buying the new home and selling the old one. Because repayment depends on that sale, we prefer that your permanent financing is already secured before you take one.
If you are weighing a bridge loan or a home equity loan, the difference comes down to whether a sale is coming to repay it. If you are trying to line up both transactions at once, read buying and selling at the same time first, because the sequencing matters more than the financing.
On the tax question
Interest on a home equity loan may be deductible when the funds are used to buy, build or substantially improve the home securing the loan. The rules changed in 2018 and limits apply. Talk with your tax advisor about your circumstances before you count on it.
If you are building or renovating
Building instead of buying is its own process with its own timeline. If you are looking at a new construction home from a builder, that is different again. And if the house you want needs work before you would want to live in it, a renovation loan can fold those costs into the purchase.
If you are buying a property to rent out rather than live in, be aware there are financing limits on rental properties that change what is available to you.
Step 2. What does mortgage preapproval require?
A preapproval is a lender's written estimate of what you can borrow, based on documents you actually hand over. It is stronger than a prequalification, which is a conversation and an estimate.
To get preapproved, expect to provide:
- Employment status and source of income
- Authorization to pull your credit report
- Your Social Security number and personal information
- A ballpark purchase price and loan amount
A preapproval letter tells sellers and agents you are a serious buyer who can finance the purchase. In a market where good listings move fast, that is often the difference between an offer that gets considered and one that does not. Preapproval letters are typically valid for 60 to 90 days, so time it against when you plan to be shopping in earnest.
Step 3. How should you run your home search?
Before you look at a single listing, write three lists: must have, nice to have, and will not accept.
Then work through the practical questions. Detached house or attached unit. Location, which in Minnesota often means school district, commute and how the road gets plowed. Move-in ready or a project. How many bedrooms and baths.
A good real estate agent earns their fee in this stage and the next two. Interview more than one. Ask what they have closed recently in the area you are targeting and how they handle a multiple-offer situation.
It is also worth understanding what actually moves a home's value before you fall for a house. The features that make you love a place and the features that hold its value are not always the same list.
Step 4. How do you make an offer?
Your agent drafts the offer using comparable sales and whatever they have learned from the listing agent. Price is one term among several. Closing date, contingencies and earnest money all carry weight, and in a competitive situation the flexible terms sometimes matter more than the number.
The seller can accept, counter or reject. If they counter, you decide whether to accept, counter back or walk. If they reject outright, ask why. The answer is usually useful for the next offer.
When an offer is accepted, you write your first check. That is the earnest money, and it usually goes into an escrow account. At closing, most buyers apply it toward their cash to close.
Step 5. What happens during the mortgage application?
Preapproval was the estimate. This is the real application, on a specific property.
Have these ready:
- W-2 and 1099 forms from the past two years, more if you changed employers
- Pay stubs from at least the last 30 days, including year to date earnings
- Recent bank and other asset statements
- Details on long-term debts such as car or student loans
- The address and purchase price of the property
Then the file goes to underwriting, where the lender makes the final decision. This is the stage where people get surprised, so a rule worth following: between application and closing, do not open new credit, do not finance a car, and do not change jobs if you can avoid it. Anything that moves your debt-to-income ratio can move the outcome.
If you are curious why the process runs the way it does, much of it traces back to Fannie Mae and Freddie Mac and the standards secondary-market buyers expect.
Working with a lender who makes the decision locally shortens this stage. Talk with a local lender who knows your market.
Step 6. Why do you need homeowners insurance before closing?
Buying insurance for a house you do not own yet feels backward, but lenders require it before they will fund. They are financing an asset, and they need it covered from the moment it becomes yours.
Get a policy with enough coverage to fully rebuild the home. That figure is not the purchase price and not the appraised value, because it excludes the land. Set the effective date to your closing date, not a day later.
While you are at it, understand title insurance, which is a separate product covering a completely different risk.
Step 7. What is the difference between an inspection and an appraisal?
They happen around the same time and people confuse them constantly. They serve two different parties.
The inspection is for you. You choose the inspector, you pay, and you get a report on the condition of the house and its systems. If the property has a specific feature or risk, a pool, a septic system, a retaining wall, or if you are concerned about mold or radon, order the specialized inspection too. In Minnesota, ask specifically about the roof, the foundation, drainage and the age of the furnace.
The appraisal is for the lender. The bank engages the appraiser, who is a disinterested third party, and generally works from recent sales of similar nearby properties to establish market value. The lender wants confirmation that the amount being lent matches what the property is worth. You pay for it, but you are not the client.
If you are paying cash, the appraisal is still worth ordering. It is the only independent check on whether you are paying what the house is worth.
Step 8. Can you negotiate repairs after the inspection?
Yes, and how much leverage you have depends entirely on the market.
In a strong seller's market, expect little movement. The seller can go to the next offer. What does tend to move a seller is a genuine defect that will get flagged on every future inspection, because it is going to cost them with the next buyer too.
In a buyer's market, most of the transaction is negotiable, including seller-paid closing costs, home warranties and HOA fees.
If the house needs work you already planned to do anyway, this is also the moment to think about which home improvement projects actually return their cost in Minnesota, and whether to fold them into your financing rather than negotiate them.
Step 9. What happens at closing?
Closing is the legal transfer of the property from the seller to you.
At least three business days before, your lender provides the Loan Estimate, the Closing Disclosure and the Intent to Proceed. Read the Closing Disclosure carefully and compare it against your Loan Estimate. If a number moved, ask why before you sit down at the table.
At closing you sign the mortgage, sign the transfer documents, deliver your cash to close, and take the keys.
Step 10. Move in
After the paperwork and probably the largest check you have ever written, the house is yours.
What is different about buying a house in Minnesota?
A few things worth planning around.
Season matters. Inventory here is thinner in the winter and heaviest in late spring and summer. Buying in the off season means less competition and less selection. Buying in season means the opposite. Neither is wrong, but they are different games.
Winter hides things and reveals things. A December walkthrough will not show you drainage, grading or how the yard handles a heavy rain. It will show you exactly how the house holds heat and whether the windows are honest.
Closing timelines run against the calendar. Appraisers and inspectors get busy in the same months everyone else is buying. Build slack into your dates.
Who holds your loan matters. When your mortgage is decided locally and serviced locally, the person you call about it works in the same market you just bought into. That is worth something in a year when you have a question about escrow or an issue with your payment.
Common questions about buying a house in Minnesota
How long does it take to buy a house?
From accepted offer to closing is commonly 30 to 45 days, though it depends on the loan, the property and how quickly appraisals and inspections can be scheduled. The search that comes before it can take days or many months.
What is the difference between preapproval and prequalification?
A prequalification is an estimate based on what you tell a lender. A preapproval is based on documents and a credit check, and it is what sellers take seriously. We offer prequalification at no cost so you can find out where you stand before you shop.
How much do I need for a down payment?
It depends on the loan program and the property. Rather than a rule of thumb, get a preapproval and get the actual number for your situation. Remember to plan for closing costs separately, because they are not part of the down payment.
What debt-to-income ratio do I need?
We target a ratio under 35%, with total obligations no more than 43% of gross monthly pretax income. The lower your ratio, the more room you have.
Can I buy a new house before my current one sells?
Often, yes. A bridge loan is built for exactly that gap, and a home equity loan is another route. Which one fits depends on how soon you expect the sale to close.
What documents do I need to start?
To get moving, financial statements, account verifications and tax returns from the past two years. Your lender will tell you what else your specific situation needs.
Let's talk it through
Buying a house is a long sequence of decisions, and most of them are easier with someone local in your corner who has walked other people through the same thing.
We have been lending to Minnesota homebuyers since 1935, we have 21 locations across the state, and your loan is decided by a lender who works in the market you are buying into. Explore personal loans and mortgages, start the conversation with a lender, or find your nearest branch.
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