Missouri First-Time Home Buying Assistance Programs & Grants for 2023

Missouri First-Time Home Buying Guide

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    By Susan Guillory

    (Last Updated – 08/2022)

    While much of the country experienced surging demand and housing prices, the real estate market in Missouri remained fairly calm.

    Home prices rose 11.5% from May 2021 to May 2022, according to Redfin, to a median sales price of $252,000. The majority of homes sold for their list price, which means less of a chance of a bidding war for first-time homebuyers in Missouri.

    Unless they’re eyeing University City, where home prices were up 40.4% in a year, or Chesterfield, up 36.6%.

    The good thing about being a first-time homebuyer with a low to moderate income is that state and local programs offer mortgages and down payment assistance to those who qualify.

    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 buyers are in the state programs.

    Recommended: The SoFi Guide to First-Time Home Buying

    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.

    Do you know how much you can afford to pay for a home in Missouri? This home affordability calculator provides 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.

    You can first pre-qualify online .

    To apply, contact a participating lender .

    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.

    Here are the income and purchase price limits , or see the brochure .

    To apply, find a participating lender .

    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 . Once you have met a lender’s requirements to get a mortgage, the loan officer is to call Community Development at 573-874-7244.

    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.

    The brochure advises these steps: Get pre-approved by a first mortgage lender; complete the city application with all documents; get the city’s OK to buy; make an offer on the house. Questions? Contact Melissa Barton, Community Development loan officer, at 417-864-1098 or [email protected].

    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, follow the steps described.

    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 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 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, to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay 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.

    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.

    First-Time Homebuyer Stats for 2022

    Here’s some data about Missouri home sales.

    •  Median home sales price in Missouri (May 2022, Redfin): $252,000

    •  3% down payment: $7,560

    •  20% down payment: $47,980

    •  Average credit score in Missouri:711

    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.

    Use this home affordability calculator to see how much you can afford to pay for a home.

    The Takeaway

    First-time homebuyers in Missouri with low to moderate income and decent credit may qualify for help. Other first-time buyers in the Show-Me State can shop for a show-me-the-advantages mortgage on their own.

    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


    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.

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

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

    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 no need to be a first-time homebuyer.

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

    The state agency’s site isn’t too forthcoming about the numbers. Ask a participating lender or call someone connected to a particular program.

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

    The U.S. median age of first-time homebuyers is 33.

    Photo credit: iStock/Lana2011

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