2023 Mississippi First-Time Homebuyer Programs
Mississippi first-time homebuyers can find a range of programs designed to help to achieve the dream of homeownership in the Magnolia State. Programs range from assistance with covering a down payment or closing costs, credits to reduce your tax bill or grants specific to helping teachers buy a home. Qualifications vary, so in this article, we’ll go over each type of first-time homebuyer program, what Mississippi has to offer and what its programs require.
On this page
- First-time homebuyer programs in Mississippi
- Mississippi first-time homebuyer qualifications
- Understanding Mississippi first-time homebuyer down payment assistance
- Other first-time homebuyer loan programs
- Home price trends in Mississippi major areas
- What are the current mortgage rate trends in Mississippi?
First-time homebuyer programs in Mississippi
Mississippi has a variety of down payment assistance options available for first-time homebuyers and repeat buyers alike. The state’s housing and finance authority, the Mississippi Home Corporation, is a great place to start researching your options.
Mississippi’s Smart6 loan program offers homebuyers the opportunity to receive a 30-year, fixed-rate mortgage and $6,000 toward their down payment and closing costs. In this case, the down payment assistance comes in the form of a 0% interest second mortgage loan that only needs to be repaid upon the sale of the house, when it becomes non-owner-occupied, when refinancing or when the first mortgage is paid in full.
- Household annual income cannot exceed $110,000
- Buyer must meet credit score guidelines, as determined by the loan servicer
- Buyer must be legal resident of the United States and reside in Mississippi
- Property must be a single-family home, townhouse or condominium, although some loan servicers may allow manufactured homes
Pros and cons
$6,000 in down payment and closing cost assistance
0% interest loan
No repayment required until resale or refinancing
Must meet income requirements
Can only be used when buying a primary residence
Not all loan servicers allow for use with manufactured homes
Mortgage Revenue Bond 7 (MRB7)
Mississippi’s first-time homebuyers also have access to the MRB 7 program, which offers a 30-year, fixed-rate loan and $7,000 in down payment assistance. This time, the assistance comes in the form of a 0% interest second mortgage loan that offers deferred payments for a period of ten years; after that ten years, the loan is forgiven.
- Household income must fall within the established income limits for the area where the home was purchased
- Must be a legal resident of the United States and be purchasing a home located in Mississippi
- Property must be a single-family home, townhome, condominium or manufactured home permanently affixed to land
- Cost of the home must fall within the maximum allowable acquisition cost for the county in which the property is located
Pros and cons
$7,000 in down payment assistance
0% interest second loan
Loan forgivable after living in the home for ten years
Income limits apply
Property acquisition cost limits apply
Not available to non-U.S. residents
Mortgage Credit Certificate (MCC)
The mortgage credit certificate (MCC) program reduces the amount of federal income tax that borrowers have to pay, which frees up more income for them to qualify for a mortgage. This is a dollar-for-dollar tax credit on a percentage of the annual amount of mortgage interest paid. Each state sets its own allowable percentage — Mississippi allows for 40%.
- Household income may not exceed allowable income limits
- Buyer must be a first-time homebuyer or have had no principal interest in a home in past three years
- Borrower will need to complete a required homebuyer education course
- Property must not exceed allowable property acquisition costs for the area in which it is located
- Property must be a single-family home, although certain types of manufactured homes are also allowed
Pros and cons
Dollar-for-dollar reduction of tax liability
40% of mortgage interest paid can be credited
No repayment required
Income limits apply
Property acquisition cost limits apply
Not all property types are eligible
Housing Assistance for Teachers (HAT)
The Housing Assistance for Teachers program helps teachers with down payment and closing costs in the form of a grant. Teachers willing to live and work in certain Mississippi counties that have school districts experiencing teacher shortages can receive up to $6,000 in down payment and closing cost assistance. The grant will be forgiven as long as the teacher remains employed in the school district for at least three years.
- Eligible teachers must agree to serve in the school district for a minimum of three years, starting at the beginning of the school year
- Borrowers must combine the assistance with either a 25- or 30-year, fixed-rate loan
- Borrowers must contribute at least 1% of the sale price toward the upfront costs of buying a home
- Borrowers must have one month’s worth of reserves
Pros and cons
$6,000 toward the upfront costs of buying
Grant is forgiven after three years
Must live and work in an area of critical teacher shortage
Grant must be repaid if you serve for less than three years
Mississippi first-time homebuyer qualifications
Qualifying for down payment assistance in Mississippi is typically fairly simple, as long as you can qualify for a first mortgage and you fall within the program’s prescribed eligibility requirements. Still, here is an overview of what you can expect as you move through the process:
→ 1. Decide on a down payment assistance program. Aside from the statewide down payment assistance programs offered by the Mississippi Housing Corporation, the Department of Housing and Urban Development (HUD) offers a list of local and community resources to make buying more affordable.
→ 2. Find an approved lender. Once you’ve decided on the right first-time homebuyer program for you, call the governing organization and ask to see a list of approved mortgage lenders. It’s likely a good idea to interview a few lenders before making your decision so that you can find one who is a good fit.
→ 3. Go through the loan approval process. Most of Mississippi’s first-time homebuyer programs require that you’re able to qualify for a first mortgage. To do so, you’ll have to have your finances vetted by an underwriter to ensure that you can comfortably afford your new home; the property will also likely undergo an appraisal.
→ 4. Close on the loan. The final stage of receiving down payment assistance is closing on the loan. After all the paperwork has been signed, the funds will be disbursed and you’ll officially have achieved your goal of becoming a homeowner.
Understanding Mississippi first-time homebuyer down payment assistance
While Mississippi first-time homebuyer programs are aimed at helping buyers cover their down payment and closing costs, this assistance can come in a few different forms. Here’s a look at some of the most common ones:
Deferred second mortgage
Getting a deferred second mortgage means putting an additional lien on your property. However, rather than requiring monthly repayments like your first mortgage, these loans typically only require the loan to be paid off once you sell the home or refinance the mortgage.
Forgivable second mortgage
Forgivable second mortgages means that you won’t be required to repay the money, as long as you agree to live in the home for a set period of time. That said, keep in mind that if you decide to move before that period of time has elapsed, you’ll likely need to repay what you borrowed.
Grants don’t need to be repaid, and they won’t add an additional lien to the property. Be aware that since this is essentially free money, grants are often very sought-after and can be harder to access than other types of down payment assistance — especially in areas that have more limited funding.
Mortgage credit certificate
As highlighted above, the mortgage credit certificate (MCC) offers a dollar-for-dollar tax credit on a percentage of any mortgage interest paid during the tax year. Each state sets its own percentage threshold for this credit, but Mississippi residents can deduct 40% of their interest paid.
How much of a down payment do I need to buy a house in Mississippi?
Each loan program will have its own down payment requirements. However, as a general rule, you’ll need to be prepared to put down at least 3% to 5% of the home’s purchase price. Still, if you can afford it, there are quite a few benefits to putting more money down, including having smaller monthly payments and potentially forgoing any mortgage insurance requirements.
Can I qualify for down payment assistance in Mississippi?
Again, the exact eligibility requirements will vary by program, but here are some general guidelines to keep in mind:
→ You’ll need to be able to qualify for a first mortgage with a participating lender.
→ You’ll likely need to meet certain income limits.
→ You may need to take a homebuyer education course.
→ You may need to be a legal resident of the United States, who intends to reside in Mississippi.
→ The property you’re buying may be subject to certain acquisition cost limits.
How do I apply for Mississippi first-time homebuyer down payment assistance?
Applying for down payment assistance in Mississippi starts with contacting one of Mississippi Home Corporation’s participating lenders. They can help you determine whether you meet their programs’ eligibility requirements and walk you through the options that are available to you.
Other first-time homebuyer loan programs
Put simply, conventional loans are loans that aren’t insured by any government agency. Fannie Mae and Freddie Mac, the two largest buyers of conventional mortgages, both offer first-time homebuyer loan programs that allow borrowers to put as little as 3% down and can be used in tandem with a down payment assistance program.
By contrast, an FHA loan is insured by the Federal Housing Administration (FHA), which allows the organization to be able to offer borrowers more lenient qualifying standards than conventional loans. You may be able to get an FHA loan with only a 3.5% down payment, if you have a minimum credit score of 580. However, you may be able to get approved with a credit score as low as 500, but you’ll need to put down at least 10%.
Similarly, a VA loan is a mortgage insured by the Department of Veterans Affairs (VA). This insurance allows veterans, active-duty service members and qualifying military spouses to access loans with no down payment requirements and, in some cases, no minimum credit score requirements.
Lastly, USDA loans are insured by the U.S. Department of Agriculture (USDA). While these loans also don’t require a down payment, they do require the borrower to meet the program’s income limits and purchase a home within certain specified rural areas.
What are the best first-time homebuyer loans?
At the end of the day, the right first-time homebuyer loan for you is going to be the one that best suits your needs. If you need help weighing the options, one of HUD’s housing counselors can assist. Every HUD counselor is trained and certified to be able to provide you with free or low-cost advice — give them a call at 800-569-4287 to get started.
Home price trends in Mississippi’s major areas
Mississippi has experienced a recent rise in its homes’ values. As an example, in Hinds County — the state’s most populous county and where its capital city is located — the median home value was $150,526 in the third quarter of 2022 (the most recent data available), according to the National Association of REALTORS®; this was up slightly from $150,238 in the fourth quarter of 2021.
In turn, that rise in home values has led to further increases in residents’ mortgage payments. NAR’s Q3 2022 data also notes that Hinds County’s average mortgage payment, at $779, was $272 higher than it was in 2021’s fourth quarter ($507). In second-most populous Harrison County, home to cities Gulfport and Biloxi, the average mortgage payment increased by $380 (from $628 to $1,008) since Q4 2021. This upward movement even occurred in least-populous Issaquena County (home to just 1,338 residents), as mortgage payments there increased to $458 from $288 in that same 2021 fourth quarter, a difference of $170.
Is there a first-time homebuyer tax credit in Mississippi?
Mississippi offers first-time homebuyers a tax credit in the form of a mortgage certificate credit. This credit offers a dollar-for-dollar tax reduction on a percentage of mortgage interest paid. Mississippi residents can deduct 40% of their interest paid each year. The maximum mortgage tax credit permitted is $2,000 annually, so if your credit is greater, you can carry over the remainder to the next year.
What are the current mortgage rate trends in Mississippi?
Overall, mortgage rates are trending upward. As of the time of writing, the average interest rate on a 30-year, fixed-rate loan sits at 6.42%, up from 4.42% from the same time last year. Still, that rate reflects the national trend. You can find out more about Mississippi mortgage rates here.