2024 Mississippi First-Time Homebuyer Programs and Loans

Mississippi offers several first-time homebuyer programs through its state housing agency, the Mississippi Housing Corporation (MHC). You’ll be able to find down payment assistance and financing for closing costs via forgivable second mortgages, deferred second mortgages and a relatively generous mortgage credit certificate. Income limits aren’t terribly exclusive, generally starting at 100% of the area median income (AMI). These programs are available for any number of loans, including FHA loans, VA loans, USDA loans and even some conventional loans.

First-time homebuyer programs in Mississippi

If you qualify as a first-time homebuyer under any of the MHC programs, you may be purchasing your first-ever home. Or, you can qualify as a first-time homebuyer if it’s been at least three years since you last “owned a principal interest in a residence.” If you’re purchasing in one of MHC’s target areas, you can bypass the first-time homebuyer requirement.

Note that purchase limits for all of MHC’s programs are $275,000. They bump up to $332,000 if you’re in one of the target areas. Here is a list of the first-time homebuyer programs available in Mississippi:

• Easy8 deferred second mortgage
• Trusty10 second mortgage
• Smart6 deferred second mortgage
• Mortgage credit certificate

Easy8 deferred second mortgage

The Easy8 program gives conventional conforming, FHA, VA or USDA borrowers an $8,000 loan at 0% interest which can be used for your down payment or closing costs. You will have to repay this loan when you sell the house, refinance, pay off the mortgage or rent it out to someone else. There are no asset tests for an Easy8 mortgage, and you must meet the credit score requirements with a participating lender of the first-mortgage loan you choose.

Requirements

• Qualify as a first-time homebuyer under the MHC definition — or purchase in a target area. Veterans also qualify regardless of first-time homebuyer status.
• Household income does not exceed income limitations
• Must live in the home as your primary residence
• Take a homebuyer education course

Trusty10 second mortgage

If you need more money for closing costs or down payment assistance, you might look to MHC’s Trusty10 program. It’s a second mortgage that you’ll pay off over 15 years. You can secure up to $10,000, and the interest rate is low at 2%. Like the Easy8 program, there are no additional credit requirements beyond those set by the first-mortgage lender. Eligible borrowers can qualify with an FHA loan, USDA loan, VA loan or a conventional mortgage backed by Fannie Mae or Freddie Mac. There are no asset limits.

Requirements

• You must be a first-time home buyer, a veteran or be purchasing a home in a target area
• Meet MHC income requirements
• Live in the property as your primary residence
• Participate in a homebuyer education course

Smart6 deferred second mortgage

You don’t have to be a first-time homebuyer to qualify for the Smart6 program, but first-time homebuyers can apply. This product is akin to the Easy8 second mortgage with 0% interest, and the balance due when you sell the property, pay off the primary mortgage, refinance or otherwise move out of the home. The same types of mortgages qualify when you get them through a participating MHC lender, and there is no asset limit.

There are three big differences with a Smart6 second mortgage, aside from the lack of a first-time homebuyer requirement. The first is the amount: $6,000. The second is that you can use the Smart6 program in conjunction with the mortgage credit certificate, which we’ll cover next. Finally, income limits stretch to $122,000 for some households.

Requirements

• Single-family homes, townhouses and condominiums qualify. Manufactured homes can qualify, depending on the servicer.
• Available to homebuyers purchasing a home in Mississippi, regardless of first-time homebuyer status
• Cannot exceed income limits, which can be as high as $122,000 per year.
• Must be a legal resident of the United States

Mortgage credit certificate

In Mississippi, mortgage credit certificates (MCCs) allow you to claim up to 40% of your annual mortgage interest as a tax credit, up to $2,000. This can lower your federal tax due down to $0. If 40% of your annual mortgage interest is more than $2,000, you can carry over the remainder to the following tax year.

The MCC can be used with any 15-, 20-, 25- or 30-year mortgage that’s backed by the FHA, USDA, VA or Fannie Mae or Freddie Mac. However, the only MHC program it can be used in conjunction with is the Smart6 program. The MCC is only available to first-time homebuyers — unless you’re buying in one of MHC’s target areas. You do also need to meet the program’s income limitations.

Requirements

• Must be a first-time homebuyer or purchasing in one of MHC’s target areas
• You will have to pay a $300 non-refundable reservation fee to participate in this program
• If you are purchasing a manufactured home, you must also own the land it sits on
• Must submit past three years of federal tax returns
• Must participate in a homebuyer education course

Mississippi first-time homebuyer qualifications

When you apply for a Mississippi first-time homebuyer program run by MHC, you actually won’t interact with MHC all that much. Instead, you’ll want to check out the eligibility standards yourself, then select an approved lender. The lender will serve as your go-between with MHC regardless of which program you’re using.

Steps to apply for a first-time homebuyer program

Step 1: Assess your own eligibility.

Beyond first-time homebuyer status requirements, you’ll also want to assess your income eligibility for each specific program.

Step 2: Get pre-qualified.

If you can get prequalified for the right type of mortgage with one of MHC’s approved lenders, you’ll be able to move on to the next step.

Step 3: Complete a homebuyer education course.

You’ll have to choose one from an approved list.

Step 4: Shop for a home that meets MHC program requirements.

Be careful to shop for homes that meet the standards of your desired first-time homebuyer assistance program.

Step 5: Return to your lender.

At this point, you’ll submit your full documentation to your lender, proving your income and credit history in order to secure a mortgage. Credit score requirements will vary by lender and mortgage type. Mississippi’s average credit score in 2023 was 680, according to Experian.

Step 6: Complete the closing process.

The final step of the process is the signing of papers to complete the transfer of ownership and for you to pay any closing costs. Your MHC-approved mortgage lender will be with you every step of the way.

Understanding Mississippi first-time homebuyer down payment assistance

Mississippi offers three different types of down payment assistance explicitly set aside for first-time homebuyers. They include deferred second mortgages, forgivable second mortgages and MCCs.

Deferred second mortgage

You typically don’t have to make monthly payments with a deferred second mortgage. Instead, the entire balance is due in one lump sum upon a certain event. With the MHC, triggering events include paying off the first mortgage, refinancing, selling the home or renting it out to a tenant.

Forgivable second mortgage

A forgivable second mortgage is much like a deferred second mortgage, but the difference is that the loan doesn’t have to be repaid if you remain in the home for a set period of time. However, should you move, refinance or pay off your mortgage before that set period of time ends, the second mortgage is no longer forgivable.

Grant

A grant is money that you don’t typically have to pay back, though you will have to meet program-specific eligibility criteria. MHC doesn’t run any first-time homebuyer programs through grants, but it does offer grants to teachers through the HAT program. You must work and live in a school district with a critical shortage of qualified educators for at least three years — otherwise, you’ll owe the grant money back.

Mortgage credit certificate

A mortgage credit certificate (MCC) allows first-time buyers to reduce their tax burden annually. It’s a tax credit anywhere from 10% to 50% of the homebuyer’s annual mortgage interest, turning what would normally be a deduction into a dollar-for-dollar tax credit. Mississippi’s program is fairly generous at 40%. You can only claim up to $2,000 annually, but if 40% of your annual mortgage interest is more than $2,000, you can carry the excess over to the following tax year.

Keep these things in mind about DPA programs

Down payment assistance isn’t always free. While some assistance programs — like grants and forgivable second mortgages — may provide conditional cancellation of your debt, other financial products like deferred second mortgages will eventually require repayment in full. These lump sum payments are something to be aware of should you ever find yourself buying a new home at the same time you’re selling the one which received MHC down payment assistance.

How much of a down payment do I need to buy a house in Mississippi?

LendingTree’s latest first-time homebuyer study reveals that the average down payment for a first-time homebuyer in Mississippi was $18,328 in 2023. Depending on your home’s price point, the loan type you choose and whether or not you use down payment assistance programs, the amount you need for your down payment may be more or less. Also remember to factor in closing costs, and be aware that some lenders may require you to have two to six months’ worth of payments in mortgage reserves on top of your down payment.

Can I qualify for down payment assistance in Mississippi?

There are more down payment assistance programs available in Mississippi if you’re a first-time homebuyer. However, if you’re buying in one of MHC’s target areas — or in many cases, if you’re a homebuying veteran — the first-time homebuyer requirement can usually be removed. You will want to check the maximum income eligibility and the maximum property value for your county to see if you qualify.

Read more about VA loans for military members and their families.

How do I apply for Mississippi first-time homebuyer down payment assistance?

After you’ve determined whether or not you qualify for an MHC down payment assistance program, you will get pre-qualified with a participating lender. Then, you’ll take a homebuyer education course, shop for a home and submit your final application. Your lender will guide you through the process of securing the down payment assistance.

 Here’s what you need to know about the process of applying for a home loan.

Other first-time homebuyer loan programs

Conventional loans

A conventional loan isn’t guaranteed by a federal agency like the FHA, VA or USDA, but it does still conform to Fannie Mae and Freddie Mac standards. Conventional loan rates tend to be a little higher than government-guaranteed mortgages.

FHA loans

FHA loans are guaranteed by the Federal Housing Administration (FHA). They offer low down payment and credit score requirements and FHA interest rates, but you will have to pay two forms of FHA mortgage insurance premiums.

VA loans

Mortgages backed by the U.S. Department of Veterans Affairs (VA loans) come with no down payment requirement. VA credit score requirements and interest rates can be a little more lenient than with conventional mortgages, closing costs are capped and there is no mortgage insurance. However, VA borrowers must pay a funding fee.

USDA loans

USDA loans are for lower- to moderate-income homebuyers who are purchasing, renovating or building a property in targeted rural areas. They come with no down payment requirements, but you can only qualify for one if you do not otherwise qualify for conventional financing with private mortgage insurance.

What are the best first-time homebuyer loans?

First-time homebuyers are lucky in that there are multiple mortgage options for them to consider. Each option below comes with limited down payment requirements, and for two programs, no down payment requirement at all. Of course, down payments aren’t the only consideration.

Here are four options and who they might be best for.

Home price trends in Mississippi’s major areas

In Mississippi as a whole, the Federal Housing Finance Agency (FHFA) reported that home prices went up by 9.69% between Q4 2022 and Q4 2023. This was the sixth-highest increase in the nation during that time period. Of the three largest metro areas, and using a $100,000 purchase price, home prices in Hattiesburg saw the largest year-over-year increase at 11%, while the Gulfport-Biloxi metro area saw an increase of 5%, Jackson only went up by 2%.

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

Mississippi has a first-time homebuyer state income tax deduction. Any money you deposit into a savings account that’s designated for the sole purpose of purchasing your first home can be deducted on your state tax returns. Interest the account accrues can be deducted, too. There used to be a federal tax credit for first-time homebuyers, but that’s long gone. However, you can claim the MCC on your federal taxes instead. Be sure to educate yourself on all the possible tax breaks for buying a house.

What are the current mortgage rate trends in Mississippi?

Overall, Mississippi fixed mortgage rates are up from where they were three months ago. Thirty-year mortgage rates are up nearly 30 basis points, and 15-year mortgage rates are up by nearly 50 basis points over the same time period.