Mississippi First-Time Home Buying Assistance Programs & Grants for 2022

Mississippi First-Time Home Buying Guide

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    By Susan Guillory

    (Last Updated – 08/2022)

    Looking to buy a house in Mississippi? Here’s what you need to know: The median sale price of homes in the state is $257,400, an increase of about 16% from May 2021 to May 2022, according to Redfin, a brokerage that tracks real estate data. And houses are going fast. The number of homes for sale in Mississippi has fallen by more than 26%, and houses are only on the market for nine days.

    As a first-time home buyer in Mississippi, it’s possible to find a great deal, but you’ll need to act fast. Use this home buying guide to find an affordable mortgage, plus help with your down payment and closing costs.

    Who Is Considered a First-Time Homebuyer in Mississippi?

    A person who has never owned a home, or who hasn’t owned one in the last three years, qualifies. The U.S. Department of Housing and Urban Development (HUD) also considers the following people first-time homebuyers:

    •   A single parent who has only owned a home with a partner while married

    •   A displaced homemaker who has only owned a home with a spouse

    •   Someone who has owned a principal residence not permanently affixed to a permanent foundation

    •   Someone who has only owned a property that wasn’t in compliance with state, local, or model building codes

    Recommended: First-Time Homebuyer’s Guide

    3 Mississippi Programs for First-Time Homebuyers

    Here are a few of the programs available to the first-time homebuyer in Mississippi. You’ll find some low-interest mortgage loans and down payment assistance options that you may qualify for.

    1. MHC: Mortgage Revenue Bond 7 (MRB7)

    This program from the Mississippi Home Corporation provides $7,000 in down payment assistance to first-time homebuyers in Mississippi. This comes in the form of a 30-year fixed rate loan. The $7,000 is deferred and forgivable after 10 years.

    To qualify, you must meet income, purchase price and credit requirements.

    2. MHC: Smart6

    A 30-year fixed rate second mortgage loan of $6,000 that you can use for your down payment is offered through Smart6 . To qualify, your income cannot exceed $110,000, and you may need to have a certain credit score.

    3. MHC: Housing Assistance for Teachers

    If you’re a teacher working in an area where there is a shortage of educators in Mississippi, you may qualify for a special down payment loan. This program provides a 25- or 30-year fixed loan of up to $6,000.

    To qualify, you must have taught for three years in a designated district. And in this case, your loan can be forgiven. Also, you must provide at least 1% of the home’s sale price and one month’s reserves.

    How to Apply to Mississippi Programs for First-Time Homebuyers

    If you qualify for any of the programs for the first time home buyer in Mississippi, contact a participating
    lender
    to start your application process. Also, you can use this mortgage calculator to see how much your monthly payments might be.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA lending limits by area.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae, or formally, the Federal National Mortgage Association, is a publicly traded government-sponsored enterprise that dates back to the Great Depression.

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Unlike an FHA loan, the 97 LTV loan has no upfront mortgage insurance fee and does have cancellable mortgage insurance. The loan is for just one-unit single-family homes, co-ops, condos, and planned unit developments.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans, to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. For most applicants, there is a one-time funding fee that can be rolled into the mortgage.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee. For more information, contact [email protected]

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years. Contact the Mississippi HUD office .

    Mississippi Homebuyer Stats for 2022

    •   First time home buyers nationwide: 34% of all home buyers

    •   Average age of first-time home buyers in U.S.: 33

    •   Median home price in Mississippi: $257,400

    •   Average down payment in Mississippi (20%): $6,982

    •   Average credit score of home buyer in Mississippi: 683

    Not sure how much home can you afford? Use this home affordability calculator to find out.

    Additional Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. After reading up on how to choose a mortgage term, check out these tips on how to lower your mortgage payment:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    Finally, this home affordability calculator can show you how much you can afford to spend on a home.

    The Takeaway

    Homes in Mississippi are selling fast, but if you’re a first-time buyer in the state, you may be able to take advantage of programs that can offer you a low-interest mortgage and assistance with down payment and closing costs.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

    View your rate


    FAQ

    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for some government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications. That’s why it’s important to take all possible steps to improve your credit standing before you go house hunting.

    Is there a first-time homebuyer tax credit in Mississippi?

    Yes, there is a mortgage credit certificate program for first-time homeowners and those who buy in certain areas in Mississippi. With it, you can claim a portion of your mortgage interest as a tax credit, up to $2,000.

    Is there a first-time veteran homebuyer assistance program in Mississippi?

    The VA offers low-interest loans to active military members and qualified veterans.

    What credit score do I need for first-time homebuyer assistance in Mississippi?

    It depends on the program. Some Mississippi programs require a credit score of 640 or higher to qualify. Federal programs can differ. For instance, the FHA program requires a minimum credit score of 500 to qualify.

    What is the average age of first-time homebuyers in Mississippi?

    In the U.S., the median age of first-time homebuyers is 33.


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