First-Time Homebuyer Programs in Mississippi

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Edited byLilian Mironga
Edited byLilian Mironga

Updated: October 21, 2023

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Buying a house for the first time can be daunting, especially when accumulating funds for a down payment. It is possible to make this process more convenient with an assistance program. For potential homeowners, MoneyGeek features various Mississippi first-time homebuyer programs that suit your circumstances and needs.

What Is a First-Time Homebuyer Program & How Can It Help?

A home down payment refers to the upfront money you pay towards the purchase price of a home. Generally, by making a larger down payment, you will be able to reduce your loan principal, allowing you to save money over time. That is why you need to carefully consider the amount you put down. For those who can afford it, experts recommend putting down 20%.

One of the biggest challenges for first-time homebuyers is accumulating enough cash for a down payment. Fortunately, many loan options exist to assist you with your home purchase. For instance, federal homebuyer programs are available to U.S. citizens and lawful residents. These include zero-down-payment programs like USDA and VA loans and low-down-payment options like conventional and FHA loans.

There are also state-specific homebuyer programs only available to residents of that state. In Mississippi, eligible residents can take advantage of its state-specific loans, such as the Smart Solution loan program and the Housing Assistance for Teachers.

Learning more about Mississippi first-time homebuyer programs is essential, as they can help you buy a home sooner than you otherwise could.

Zero-Down-Payment Loan Programs

Home loan programs with zero down payments offer the simplest way to get a mortgage without putting money down. You can purchase a home with no down payment only through two significant financing programs: the USDA loan and the VA loan.

USDA Loans

The government offers agricultural loans, such as USDA loans, to promote development in rural and suburban areas. Compared to other mortgages, USDA loans require no down payment and have some of the lowest fees.

Under the U.S. Department of Agriculture are three USDA home loan programs.

One example is Section 502 Direct Loans, also called Single Family Housing Direct Home Loans. This program helps applicants with low income to receive hygienic, secure and affordable housing in rural areas.

The Section 502 Guaranteed Loan Program provides a loan note guarantee of 90% to certified lenders to decrease the risk of lending 100% to qualified rural homebuyers. A home may be purchased by those who qualify without a down payment.

Alternatively, the Section 504 Home Repair Program offers grants or loans to very-low-income homeowners to repair, remodel or modernize their homes to remove hazards to health and safety.

VA Loans

Since VA home loans have less stringent requirements, they make refinancing or buying a property more accessible to qualified borrowers. Veterans and military service members are the only ones eligible for this program.

VA home loans offer a borrower the benefit of putting as little as nothing down on their loan, which makes them superior to traditional mortgages. There are several benefits to choosing a VA home loan, such as no down payment, no private mortgage insurance and no minimum credit score. In addition, VA loan sellers can pay closing costs. These types of loans are assumable and have lower rates than conventional loans.

The U.S. Department of Veteran Affairs backs a portion of the loan, shielding lenders from loss, which makes VA home loan rates competitive.

MoneyGeek's detailed guide describes the pros and cons of VA home loans, eligibility requirements and current interest rates.

Low-Down-Payment Loan Programs

The two low-down-payment loan programs are a standard Fannie and Freddie loan and an FHA loan.

Fannie and Freddie (Conventional) Loans

Conventional loans — also referred to as Fannie Mae and Freddie Mac loans — are a viable option for first-time homebuyers who want to own a home. Although the government does not guarantee conventional loans, they are readily available and flexible.

When borrowers cannot meet federal obligations like taxes, they may consider Fannie and Freddie loans. The down payment on a home is typically 20%, but some lenders only require 3%.

For conventional loans, lenders usually require a 620 credit score and a debt-to-income ratio (DTI) of 45%. We recommend shopping around to find a lender that best suits your financial background and needs.

Additionally, conventional mortgages can be conforming (comply with the guidelines of Freddie Mac and Fannie Mae) or non-conforming (go beyond the conventional loan limits).

FHA Loans

People with damaged or incomplete credit histories are ideal candidates for FHA loans. Using the Federal Housing Administration's guidelines, private lenders can offer low-down-payment mortgages that comply with the FHA.

FHA home loans have fewer requirements than other loan types. With a minimum credit score of 500, you'll need to put down 10%. A credit score of 580 and above will require a down payment of 3.5%. Plus, the maximum debt-to-income ratio is 43%. Note that interest rates on FHA loans are fixed, with repayment terms of either 15 or 30 years.

While these are standard requirements, they aren't the only ones. Depending on your location (county and state), you will have different loan limits. You can check your maximum loan amount online at the Department of Housing and Urban Development (HUD). In Mississippi, single-family FHA mortgages are limited to $420K.

FHA 203(k)

It is not uncommon for beautiful homes to be expensive. Many prospective homeowners wind up buying a house that requires a lot of repairs to lower their costs. FHA 203(k) loans provide financing for home purchases and renovations. Because of this, FHA 203(k) mortgages are also called renovation loans, mortgage rehabilitation loans or Section 203(k) loans.

By taking out this loan, homeowners won't have to simultaneously apply for a mortgage and a loan for repairs. FHA 203(k) loans also have lower credit requirements, making them easier to obtain.

For an FHA 203(k) loan to be available to an applicant, their home must be at least one year old. Its purchase price should still fall within the mortgage limit in their county. Additionally, the minimum cost of the renovation should be $5,000.

Key Takeaways

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USDA loans - Ideal for buyers looking to settle in rural areas because of low-interest rates and don't require a down payment.

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VA loans - This mortgage is available to veterans, active-duty military and spouses of military officers.

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Fannie & Freddie loans - You don't need a large down payment on these loans, but you'll have to get private mortgage insurance if your down payment is less than 20%.

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FHA - Ideal for low-credit-score homebuyers, but mortgage insurance is required.

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FHA 203(k) loans - Assist homebuyers who want to renovate an older home.

Mississippi Homebuyer Programs

These are several Mississippi first-time homebuyer programs you can check out to help you purchase your first home.

Smart Solution

Mississippi Home Corporation launched the Smart Solution program to assist individuals in paying a down payment. The program offers competitive interest rates and down payment assistance of up to 3% of a home's purchase price in cash advances.

Housing Assistance for Teachers

As determined by the Mississippi Department of Education, this loan program is reserved for licensed teachers in geographical localities with a significant shortage of teachers. The maximum loan amount for eligible teachers is $6,000 to help them pay their closing costs.

Mortgage Credit Certificate

With this program, Mississippi borrowers typically pay a tax credit equal to 40% of the annual interest on the mortgage loan.

FAQs for First-Time Homebuyer Programs in Mississippi

We answered some commonly asked questions to help you start your journey to homeownership in Mississippi as a first-time homebuyer.

Does Mississippi have any first-time homebuyer programs?
What qualifies me as a first-time homebuyer in Mississippi?
Can you buy a house in Mississippi with no down payment?
Who can help me with my down payment on a house in Mississippi?
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