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2022 First-Time Homebuyer Programs in Missouri

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Missouri offers first-time homebuyer programs to potential borrowers who need financial assistance. If you struggle to make a 20% down payment, are concerned your credit score is too low to qualify for a mortgage or need cash assistance to purchase a home, these programs may work for you. The first step to living in the “Show-Me” state is understanding the eligibility and other requirements to qualify for one. Here’s what you need to know.

Missouri statewide and local first-time homebuyer programs

Most of the main first-time homebuyers in Missouri are funded by the Missouri Home Development Commission (MHDC), which uses specific lenders to facilitate and administer down payment assistance and other help.

The MHDC provides a list of lenders for all its programs. If you take out a First Place mortgage or cash assistance second-mortgage, the MHDC sets the interest rates and loan limits, plus the price of your closing costs. You can reach out to county and city housing authorities as well to find out about specific local aid for homebuyers and owners as well.

Below is a quick look at the main MHDC programs, how much assistance you may be eligible for, the type of assistance, and where you use it within the state.

Program nameAssistance amountAssistance typeWhere it’s available
First Place Loan programN/ALow interest rates on mortgagesStatewide/targeted areas
First Place Loan Cash Assistance LoanUp to 4% of the loan amount10-year forgivable second mortgageStatewide/targeted areas
*Next Step Cash Assistance Loan4% of the loan amount10-year forgivable mortgageStatewide
Next Step MortgageDepends on the mortgageInterest rate reductionStatewide
Mortgage Credit Certificate program**Federal tax credit of 25%, 35% or $45 of the annual mortgage interest paidTax creditStatewide

*Can be used with a Next Step low-interest 30-year mortgage. 
**The percentage varies when combined with a Next Step Cash Assistance Loan or Next Step loan. You can receive a non-refundable tax credit of 25, 35 or 40% of the total amount of mortgage interest depending on the Next Step program you use. CAL users get 35% and an MCC without a Cash Assistance Loan receives 45%. 

WHAT TO KNOW ABOUT DIFFERENT TYPES OF DOWN PAYMENT ASSISTANCE

Most first-time homebuyer programs include down payment assistance in the form of a cash grant or a forgivable second mortgage. Here’s how each type of down payment assistance works.

Low- or no-interest mortgage. This type of loan often is offered with low interest or no interest to qualified first-time homebuyers. You may be required to make monthly payments or pay the loan outright when your home is sold or refinanced.

Forgivable second mortgage. A forgivable mortgage is a second mortgage lien secured against your home in addition to your mortgage. Like a grant, you are usually required to stay for a specific number of years before the mortgage is forgiven. If you refinance or move before the required period, you may be asked to pay back some or all of the loan.

Grant. Housing grants usually provide cash assistance to help pay for down payments or other homebuying costs. There may be rules surrounding the grant money, such as requiring a buyer to stay in the home for a designated number of years.

How Missouri first-time homebuyer programs work

Unlike some states, Missouri doesn’t note in any published materials that it requires you to attend homebuying education courses. However, you need to meet the income and credit requirements, and your home’s purchase price must be approved. These are the steps you need to take if you want to take advantage of Missouri’s first-time homebuyer programs.

  1. Get a mortgage approval. Missouri Housing Development Commission may fund the loans, but approved lenders facilitate and manage them. The programs come with a list of lenders who received MHDC’s stamp of approval. An approved lender should be able to answer questions about first-time homebuyer programs and walk you through the mortgage application process.
  2. Learn the income limits.First-time homebuyer programs are for individuals and families with low- to-moderate incomes. You can ask your loan officer about a program’s income limits as they pertain to your situation, or check the program’s website. Some programs offer more or less money based on where in the state you choose to purchase.
  3. Know the payback requirements before you sell or refinance.If you use a forgivable second mortgage to help you finance your home, you will be required to stay put there, at least for a few years or more. If you move out or refinance before the time is up, chances are you will be required to pay back some or all of the money.

Missouri first-time homebuyer program requirements

Program name Credit score minimumDTI ratio maximumMaximum income limitHow long you have to live in home
First Place Loan programDepends on the type of mortgageAsk your lender$72,300 to $121,240 (depending on area/family size)Nine years in order not to pay a recapture tax
First Place Loan Cash Assistance LoanDepends on the type of mortgageAsk your lender$72,300 to $121,240 (depending on area/family size10 years
Next Step MortgageDepends on the type of mortgageAsk your lender$86,760 to $121,240 (depending on area/family size)As long as the loan exists
Next Step Mortgage Cash Assistance LoanDepends on the type of mortgageAsk your lender$86,760 to $121,240 (depending on area/family size)10 years
Mortgage Credit Certificate programN/AN/AThe income limits are the same as the First Place loans; $72,300 to $121,240 (depending on area/family size)N/A

THINGS YOU SHOULD KNOW

It’s important to understand the median income limits for the area in which you want to live. Because if you earn too much, it could render you ineligible for a particular first-time homebuyer program.

Search the recent Missouri income limits using the Department of Housing and Urban Development (HUD) website’s lookup tool and enter your state and county information.

In addition, the MHDC’s website has information on the program’s income limits, and lenders should be able to help you understand those limits as well.

National first-time homebuyer programs

You need to obtain a mortgage to use the Missouri-based programs. The MHDC programs allow you to use a USDA Rural Development loan, an FHA, VA or a Freddie Mac HFA Advantage Conventional loan program. All of these can provide savings to first-time home buyers. Many of these national programs don’t require a large down payment or any down payment.

Conventional loans. It can be challenging for first-time homebuyers with low- to-moderate incomes to afford conventional mortgage loans. These loans have strict requirements and higher loan limits than those backed by a government agency, like an FHA-backed loan. Fannie Mae HomeReady and Freddie Mac Home Possible programs are options if you want a conventional mortgage, and these are two popular loans because they have cancelable mortgage insurance.

FHA loans. These loans are backed by Federal Housing Administration (FHA), and many first-time homebuyers take advantage of them. FHA loans requirements allow for higher debt ratios and lower credit scores (some even as low as 500 with 10% down) from their borrowers. The loan threshold for a down payment is only 3.5% of the purchase price. Two aspects of the loan can make them unappealing for some buyers: FHA loan limits are lower than conventional mortgages, and you have to take out two forms of mortgage insurance

VA loans. The U.S. Department of Veterans Affairs (VA) guarantees VA loans to those who have served in the military or are eligible spouses. These loans provide a lot of perks for first-time homebuyers. VA loans require no down payment and do not require you to take out mortgage insurance. Unlike FHA loans, if you find a pricey home you love, there are no limits on the amount you can borrow.

USDA loans. The U.S. Department of Agriculture (USDA) loan is designed for those who want to settle down in rural areas. No down payment is required, but you may have to pay guarantee fees.

FAQs about Missouri first-time homebuyer programs

Who qualifies as a first-time homebuyer in Missouri?

First-time homebuyers are defined as individuals who have not ever owned a home or had an ownership industry in a primary residence for the past three consecutive years.

Can I qualify for down payment assistance in Missouri?

If you meet the income eligibility requirements and your home meets the purchase price limits, you should be able to obtain assistance. Of course, you also must qualify for a mortgage.

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

It depends on the loan application. For example, a VA loan calls for no down payment, an FHA loan calls for 3.5%. The MHDC’s First Place loan, for example, does not have a minimum down payment or a minimum loan amount requirement, according to its website.

Home price trends in Missouri’s major areas

Like most of the U.S., home prices in Missouri, especially in urban areas, experienced increases in the past year. In Jackson County (Kansas City), the median home price was up 15.8% from the fourth quarter of 2021 to the same quarter in 2021, to $203,098, according to data from the National Association of Realtors. This translates to an average monthly mortgage payment of $779, up from $650 a year earlier. In St. Louis County, prices rose 12.7% year-over-year to $252,240. The monthly mortgage payment was $967, up from $829 the year before.

 

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