Missouri First-Time Home Buying Assistance Programs & Grants for 2024

Missouri First-Time Home Buying Guide

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    By Susan Guillory

    (Last Updated – 03/2024)

    If you’re planning to buy a home in Missouri, you may be heartened that the average home price is $234,949 vs. the national average of $342,941, according to Zillow. However, when you factor in the impact of cost of living and note that prices rose 4.5% year over year, you may find it challenging to purchase a property.

    That’s why it can be wise to acquaint yourself with the programs available to help first-time homebuyers with low to moderate incomes. You might qualify for local, state, federal, or private offers that help make your dreams of homeownership come true.

    Who Is Considered a First-Time Homebuyer in Missouri?

    The definition of first-time buyer is broader than it seems at, well, first. A first-time homebuyer in Missouri and elsewhere is someone who hasn’t owned a primary home in the last three years.

    The U.S. Department of Housing and Urban Development (HUD) also includes:

    •  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

    Veterans and people buying in federally targeted areas are eligible for the same advantages as first-time homebuyers are in the state programs.

    💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.

    3 Missouri Programs for First-Time Homebuyers

    The Missouri Housing Development Commission leads the way in providing low-interest mortgage loans and financial assistance to those who meet the standards.

    Before reviewing those opportunities, however, do you know how much you can afford to pay for a home in Missouri? An online home affordability calculator can help provide an estimate.

    1. MHDC: First Place Program

    Missouri Housing provides a pool of money at below-market interest rates that lenders can use to provide 30-year, fixed-rate FHA, VA, USDA, and HFA Advantage conventional loans to first-time homebuyers and qualified veterans.

    The First Place program also offers cash and non-cash assistance loans.

    The cash assistance loan is a forgivable second mortgage of 4% of the first mortgage amount that can be used for closing costs and a down payment. The loan will be forgiven after 10 years as long as you live in the home.

    The non-cash assistance loan, also forgivable after 10 years, has a lower interest rate. The loans are best for buyers who can pay their own down payment and closing costs.

    Credit score? Missouri Housing simply says that applicants must have “qualifying credit.” Income and purchase price limits apply. Learn more about the program by visiting the Missouri Housing website .

    2. MHDC: Next Step Program

    The Next Step program allows higher income and purchase price limits for first-time and repeat buyers. A 30-year fixed-rate mortgage can be used along with the mortgage credit certificate, an annual dollar-for-dollar tax credit.

    Next Step also gives borrowers the opportunity to receive cash assistance for a down payment and closing costs in the form of a 10-year forgivable loan.

    Read more about the Next Step Program to learn about qualifications.

    3. Local Assistance

    It’s a good idea to look into any city or county assistance available where you plan to put down roots.

    For first-time buyers and some single parents and displaced homemakers, the city of Columbia offers down payment/closing cost assistance of $5,000 to $10,000 in the form of a 10-year forgivable loan at 0% interest. The minimum credit score is 600. There are income and purchase price limits. Learn more at the city’s Community Development site.

    Springfield offers help with a down payment or closing costs in the form of a 10-year loan for up to $9,000 with no interest or payments. You must be a first-time homebuyer or a certain displaced person with household income under 80% of the Springfield median income. The home mustn’t cost more than $150,000 and must be within a target area in Springfield.

    You can learn more from the City of Springfield Planning and Development site.

    How to Apply to Missouri Programs for First-Time Homebuyers

    Contact a participating lender for the Missouri Housing programs. The lender will let you know if you qualify and, if so, will guide you through the whole process.

    For the city programs, visit the links above to read more about qualifying and next steps.

    Recommended: Understanding the Different Types of Mortgage Loans

    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 FHA loan program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers, who typically need FICO® credit scores of 580 or higher. If you have a lower credit score (500 to 579), you must put at least 10% down.

    In addition to examining your credit score, lenders will look at your debt-to-income ratio (DTI, your monthly debt payments compared with your monthly gross income). FHA loans allow a DTI ratio of up to 57% in some cases, vs. a typical 45% to 50% maximum for a conventional loan.

    Also worth noting: 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 these loans, including FHA loans for refinance and rehab of properties, by reading up on FHA requirements, loan limits, and rates.

    💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.1

    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 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.

    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, which can be used to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. It’s worthwhile to note these points:

    •   Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    •   VA loans do not require private mortgage insurance (PMI) for borrowers who make a down payment of less than 20%.

    •   These loans have more flexible credit score requirements. In some cases, even those who have previously been in foreclosure or bankruptcy can qualify.

    Borrowers applying for a VA loan will need a Certificate of Eligibility from the VA so make sure to review a guide to qualifying for a VA loan as a first step in the process.

    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. To learn more, contact [email protected].

    US Department of Agriculture (USDA) Loans

    No down payment is needed for 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 firefighters, police officers, teachers, and emergency medical technicians 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.

    First-Time Homebuyer Stats for 2024

    Here’s some data about Missouri home sales.

    •  Median home sales price in Missouri: $234,949

    •  3% down payment: $7,048.47

    •  20% down payment: $46,989.80

    •  Average credit score in Missouri: 692

    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 permits qualifying first-time homebuyers a one-time, penalty-free withdrawal of $10,000 or less 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 can 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 will allow 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 or even 25 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.

    A few considerations: 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 homebuying education courses. Once you know how much house you can afford, this could be a valuable option.

    •  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.

    The Takeaway

    First-time homebuyers in Missouri with low to moderate income may qualify for help with a mortgage, down payment, and closing costs. There are local and state programs available. In addition, federal and commercial lenders may be able to make homeownership dreams a reality.

    Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

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    Should I take first-time homebuyer classes?

    Yes, these can benefit you. Good information is key to a successful home-buying experience for anyone, but especially for newcomers. Also, these classes 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.

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

    Missouri Housing allows veterans who qualify by income, purchase price, and credit to partake of its mortgage and assistance programs. There is typically no need to be a first-time homebuyer.

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

    Ask a participating lender or contact a representative associated with a particular program to learn what score is needed. A few programs may have no minimum credit score requirement.

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

    While stats on the average age of first-time homebuyers are hard to come by, the U.S. median age of first-time homebuyers is 35.

    Photo credit: iStock/Lana2011

    *SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

    †Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

    ¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

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