No spoiler alert here – the cost of even a small home in Minneapolis is sky-rocketing. While that is daunting to anyone looking to buy, it is especially intimidating for first time homebuyers.
As of June 2020, the median selling price of a home in Minneapolis was $300,000. According to Roxanne Kimball, a supervisor with the City of Minneapolis Community Planning and Economic Development department, that number is twice what it was eight years ago.
“And that,” she said, “is troubling. It means that many Minneapolis neighborhoods are just not within reach of first time homebuyers.”
Funding the affordability gap
Affordability Gap is a term that has been around for a long time. It means the difference between the appraised value of a house and what a buyer can afford to pay for it. Kimball said, “As a city, we are stepping up our commitment to funding that gap.”
Typically, down payment assistance (DPA) programs serve households below 80% of the area median income. For the Twin Cities 11-county area, the median income is $105,000.
Based on a year-long study recently completed by the City of Minneapolis, more than 70% of Black, Indigenous, People of Color, or BIPOC, renters have incomes less than 60% of the area median income. Kimball said, “South Minneapolis is increasingly less accessible to those renters who may want to buy a home. For college graduates, student debt is an additional barrier to home ownership because it makes it harder to qualify for a mortgage.”
DPA programs can help level the playing field for buyers who don’t have inherited wealth or savings to come up with the standard 20% down payment. Some DPA programs allow for combining funds from different sources, once the home buyer has completed requirements for home buyer education and/or financial wellness classes.
Minneapolis currently offers two DPA programs:
• Homeownership Opportunity Minneapolis, which provides up to $10,000 to homebuyers below 80% AMI to purchase any home in Minneapolis.
• The Minneapolis Homes Affordability Gap program, which provides a range of affordability gap assistance to purchase homes developed with Minneapolis Homes financing. Contact the developer for more information about home completion timelines and available financing.
To learn more about DPA programs available through the City of Minneapolis, contact the Minnesota Homeownership Center at www.hocmn.org.