Real Estate Financing, Mortgages, and Settlement
Mortgages and Minnesota foreclosure
Minnesota is a lien-theory state: the borrower keeps title and the lender holds a mortgage lien. Minnesota lenders typically use mortgages with a power of sale rather than deeds of trust. Default leads to foreclosure by advertisement (non-judicial, Minn. Stat. ch. 580) or foreclosure by action. The borrower generally has a redemption period after the sheriff's sale - commonly six months for residential property, shortened for abandoned property. Know the sheriff's certificate of sale and the redemption certificate.
Core financing concepts: LTV, PITI, amortization, discount points, PMI and its cancellation, escrow/impound accounts, RESPA, TRID disclosures, and the difference between prequalification and preapproval. Minnesota Housing offers first-time buyer programs and down payment assistance. Contracts for deed are common in Minnesota and are canceled under Minn. Stat. § 559.21 with statutory notice and a cure period - a very different remedy from foreclosure, and a frequent exam distinction.
Traps
- Searching for deeds of trust in Minnesota recordings.
- Assuming deficiency judgments are always available; Minnesota limits them in some residential cases - confirm the fact pattern.
- Treating a contract for deed as a lease (it is not) or as a completed sale (it is not).
- Forgetting mortgage registry tax on the new loan.
Rule of thumb
PITI = principal + interest + taxes + insurance. Lenders qualify borrowers on the whole payment, not just principal and interest.
Worked example
A $240,000 loan at 6% for 30 years produces monthly principal and interest of about $1,439. Add $300 taxes and $100 insurance and PITI is roughly $1,839 - the figure the lender actually underwrites.