The 1% Down Loan Explained: A Simple Guide for Minnesota Home Buyers
Saving for a down payment is the part of homebuying that makes everyone sigh. I hear it every day. The good news? You might not need as much as you think.
If you qualify, a 1% down option could help you buy sooner—without emptying your emergency fund or delaying your life for another year. Here’s what that actually means (and how to tell if it’s a fit).
What is a 1% down loan?
Short version: you bring 1%, and your lender provides an additional 2% as a grant to reach the standard 3% minimum on a conventional loan. Some versions also include a temporary interest rate buydown for year one, which can give your budget a little breathing room while you settle in.
*** Heads up: Not all programs are the same. Eligibility, income limits, property type, and loan terms apply. I’ll walk you through what you qualify for based on your situation.
Who might be eligible?
First-time or repeat buyers
Income at or below 80% of the Area Median Income (AMI) for the property address
Owner-occupied, primary residence
Standard underwriting applies (credit, income, assets, appraisal, and program guidelines)
Homebuyer education is often required if you’re putting less than 5% down
Not sure if you’re under 80% AMI? I can run the address and confirm in a few minutes.
Why buyers like it
Smaller upfront cash: Keep more in savings for moving, furniture, and the “oh yeah, we need a snowblower” moment.
Realistic path: It can help if saving 3–5% is the only thing holding you back.
Can pair with assistance: Some buyers also qualify for Minnesota down payment assistance programs that can help with closing costs. We’ll check what’s available based on your income, location, and loan type.
Note: If you put less than 20% down, most loans require mortgage insurance (MI) or a similar coverage cost. We’ll price this out upfront so there are no surprises.
What you’ll still need
Even with 1% down, plan for:
Closing costs (typically ~2–4% of the purchase price, depending on taxes, insurance, and fees)
An emergency buffer (because life)
Homeowner’s insurance + property taxes
Sufficient funds for prepaids/escrows (we’ll estimate this in your Loan Estimate)
Sometimes sellers will offer concessions that can help with closing costs—worth exploring in your offer strategy.
Quick example (purely illustrative)
Purchase price: $300,000
Your minimum down: $3,000 (1%)
Lender grant: $6,000 (2%)
Subtotal down payment: $9,000 (3%)
Estimated closing costs/prepaids (varies): $6,000–$10,000
Actual numbers depend on your rate, MI, taxes, insurance, and the specific program. You’ll get an official Loan Estimate after you apply.
Is 1% down right for you?
This program tends to be a fit if:
The down payment is your main roadblock
You have stable income and want to start building equity sooner
You’re comfortable with MI and understand how it ends (or can be removed on conventional loans once you reach the required equity)
If your income is above the limit or this isn’t the best fit, we’ll look at other options like 3% down HomeReady®/Home Possible®, FHA (3.5% down), Zero Down with a repayable/forgivable second, VA (for eligible service members/spouses), or USDA (for eligible rural areas).
Ready to run your numbers?
If you’re curious (or skeptical—that’s fair!), I’ll put together a side‑by‑side with:
1% down vs. 3% down
Monthly payment breakdown (principal, interest, MI, taxes, insurance)
Estimated cash to close
When/if MI could drop on conventional
No pressure. Just data you can actually use.
Program availability: Not all applicants will qualify. Program terms, income limits (such as ≤80% AMI), property location, occupancy, loan limits, credit, and underwriting requirements apply. Some programs require homebuyer education. Down payment assistance / grants: Grant or lender-paid credits (including 2% contributions) are program‑specific and may not be available in all cases. They may be limited by income, AMI mapping, purchase price caps, or fund availability, and may not be combined with all other assistance. Temporary buydowns: If offered, a temporary interest rate buydown lowers the payment for a limited period (e.g., one year). The note rate, APR, and total finance charges vary by scenario. Costs & MI: If you put less than 20% down, mortgage insurance or similar credit enhancement is generally required (except certain VA loans). Closing costs, prepaids, escrows, and reserves are still required unless covered by seller credits or assistance. Not a commitment to lend: This is for educational purposes only and is not a loan approval or offer to extend credit. All loans subject to credit and collateral approval and final underwriting. Terms, conditions, and program guidelines are subject to change without notice. APR/Payment examples: Any example is illustrative. Your interest rate, APR, MI, and payment will vary based on credit profile, loan type, down payment, property taxes, insurance, and market conditions. Consult your pros: Please consult a tax advisor regarding deductibility and a housing counselor if desired. HomeReady® and Home Possible® are registered trademarks of Fannie Mae and Freddie Mac, respectively. VA and USDA programs have specific eligibility requirements.