First Time Home Buyers In Missouri: A Guide To Loans And Grants

First-time home buyers in Missouri can count on a few key facts when they start shopping for a house. The state has a low cost of living and has several helpful programs that can assist prospective homeowners.

The Cost Of Living And Housing In Missouri

In 2023, Missouri had the sixth-lowest cost of living in the nation. Its cost-of-living index rating for housing was 77, making it among the least expensive places in the U.S. for housing costs. It’s also one of the cheapest places to buy a home.

This makes it a great place to be a first-time home buyer. Whether you are Missouri born and raised or buying a house from out of state, there are assistance programs available to aid you in the home buying process.

First-Time Home Buyer Loans In Missouri

Once you’ve decided that homeownership in Missouri is right for you, consider a careful review of your finances. This can help you determine how much house you can afford.

Once you have a price range in mind, it’s time to find a mortgage. There are several nationwide home loan programs for first-time buyers that would apply to a home purchase in Missouri:

• Federal Housing Administration (FHA) loans
• Department of Veterans Affairs (VA) loans
• U.S. Department of Agriculture (USDA) loans

FHA Loans

FHA loans are available through the Department of Housing and Urban Development (HUD). They allow home buyers to secure a mortgage with only a 3.5% down payment, assuming that the borrower has a credit score of 580 or higher.

VA Loans

VA loans are available exclusively to qualified veterans and military personnel and surviving spouses. VA loans are available for up to the full value of a home – no down payment necessary. Even if there is no down payment, there is often a VA funding fee. This fee ranges from 1.25% – 2.15% of the loan value for eligible buyers using a VA loan for the first time, but it is waived for disabled veterans and others approved by the VA as funding fee exempt. Check with your lender to find out if you can waive the VA funding fee.

USDA Loans

USDA loans were created to help encourage home buyers to move to rural areas. These loans can cover 100% of the home’s value – meaning no down payment necessary. However, they are very limited. The home must be in a designated rural area and the household income cannot exceed 115% of the median income in the area where the home is located.

A USDA loan may be a great option if you have a low to medium income and want to buy a home in a rural area. If you’re able to work remotely and are looking to move out of the city, this could be an option for you.

State Of Missouri First-Time Home Buyer Programs, Grants And Down Payment Assistance

Becoming a homeowner in Missouri is possible through many assistance programs, grants and other resources. First, we’ll review the eligibility requirements and then dive into the opportunities that are available.

MHDC Mortgage Eligibility Requirements

The Missouri Housing Development Commission (MHDC) runs many of the first-time home buyer assistance programs in Missouri. The MHDC defines a first-time home buyer as someone who has not owned a home in the past 3 years.

Many of the programs will also have requirements surrounding the following topics, including:

• Home buyer must meet the minimum credit score.
• Home buyer must meet income requirements (varies by household size and location).
• Home must be the buyer’s primary residence in Missouri.
• Home buyer must complete an education course.

Be sure to check for other specific requirements of programs that might meet your interest.

MHDC First Place Loan Program

The MHDC First Place Loan program provides cash assistance for down payments and closing costs to first-time home buyers and veterans in Missouri, up to 4% of the loan value. This is given in the form of a loan that will be forgiven if the homeowner stays in the home for 10 years.

The First Place Loan program also offers a Non-Cash Assistance Loan in the form of a lower interest rate for first-time home buyers who do not need down payment assistance.

MHDC Cash Assistance Loan (CAL)

The MHDC Cash Assistance Loan (CAL) program is an aspect of the MHDC First Place program. This loan covers closing costs and down payments, up to 4% of the loan value, to first-time home buyers.

MHDC Next Step Loan Program

The Next Step Loan program is very similar to the First Place Loan program in that it allows home buyers to apply for up to a 4% cash assistance loan to use for down payment and closing costs when buying a home. This is also considered a second mortgage that is forgiven after living in the home for 10 years.

The main difference between the First Place and Next Step loan programs is the income and house price requirements. The Next Step program is, in general, open to more home buyers due to its higher income limit and house price limit. You can see all current limits on the MHDC website.

MHDC Next Step Cash Assistance Loan

The MHDC Next Step Cash Assistance Loan program is an aspect of the MHDC Next Step Loan Program and provides down payment and closing cost assistance to those with slightly higher incomes or housing costs.

Mortgage Credit Certificate (MCC)

The Mortgage Credit Certificate (MCC) program converts a portion of mortgage interest paid into a non-refundable tax credit.

The credit is worth up to $2,000 per year and is calculated as:

• 25% MCC Stand Alone
• 35% if used with the Next Step Cash Assistance Loan Program
• 45% if used with the Next Step Non-Cash Assistance Loan Program

How To Apply To Missouri Programs For First-Time Home Buyers

Your lender should be able to help you determine which assistance programs you might qualify for and assist you in filling out any relevant applications.

First-Time Home Buyer Programs From Missouri Cities

Some Missouri cities also offer first-time home buyer assistance programs. Let’s explore a few examples. Be sure to consult your real estate agent about programs in areas you’re considering.

City Of Springfield Down Payment Assistance Loan

The City of Springfield and HUD provide up to $9,000 interest free. The city will forgive the loan as long as the program participant uses the home as their primary residence for 10 years. The home must be less than $150,000 and located in a specific part of Springfield.

To take advantage of the program, you must be a first-time home buyer or a displaced person.

City Of Columbia Homeownership Assistance Program

The City of Columbia offers $5,000 – $10,000 via a 10-year forgivable loan at 0% interest. The Homeowners Assistance Program requires that participants use the funds for either a down payment and closing costs or, to reduce the principal loan amount. The buyer must provide at least $500 in cash.

The program is open to first-time home buyers who meet the HUD income guidelines, as well as to “displaced homemakers.”

FAQs: First-Time Home Buyer Missouri Programs And Grants

There are a lot of considerations when choosing a first-time home buyer program. Here are a few things to keep in mind.

Does Missouri have first-time home buyer programs?

First-time home buyers in Missouri can take advantage of several programs. The Missouri Housing Development Commission (MHDC) offers several statewide programs, while some cities also offer assistance. Check with your real estate broker or mortgage lender for information about programs that might help you become a homeowner.

Can I buy a house without a down payment in Missouri?

Generally, Department of Veterans Affairs (VA) loans allow qualifying borrowers to buy a house without a down payment. If you aren’t eligible for a VA loan, several first-time home buyer assistance programs available from the Missouri Housing Development Commission (MHDC) might help reduce your upfront cost to buy a home.

Who can I contact for questions about Missouri housing programs and grants?

Your mortgage lender should be able to answer your questions. You can also contact the MHDC directly with questions about their programs.

Can I get approved with no money down?

You can use down payment assistance funds to cover down payments and closing fees, but most loans will still have fees of some sort. The loans with the lowest possible out-of-pocket costs are usually VA loans and USDA loans. If you have no cash saved up, you may need to spend some time saving for a down payment.

Should I take first-time home buyer classes?

If you feel lost and confused on your journey to home ownership, first-time home buyer classes can be a great way to get a stronger understanding of the process.

The Bottom Line: Missouri Is A Great Opportunity For A First-Time Home Buyer

Missouri can be a great place to live and buy a home. Home buyers can take advantage of the statewide programs and grants available to help first-time home buyers.

If you’re ready to make Missouri your home, start the approval process with Rocket Mortgage^® today.