How to Buy a House in Mississippi: A Homebuyer’s Guide

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Edited byAliha Strange
Edited byAliha Strange

Updated: May 21, 2023

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In Mississippi, the average price of a house is around $171K. It has increased year-over-year by 12.9%. Mississippi rates are more affordable than a typical home in the U.S., which averages almost $358K.

Moreover, Mississippi residents spend an average of $990 monthly for mortgages. It’s $169 less than the average monthly mortgage for the entire country. The cost and lender terms are some of the most crucial factors in homebuying.

Grasping the homebuying process will help you with your application. Then, you can seal the deal and avoid drowning in debt. In this guide, MoneyGeek outlines the essential information for Mississippi homebuyers.

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Choose an Ideal Location

When you're searching for a house in Mississippi, you need to determine your desired location within the state. The price differs depending on the city and county, affecting an individual’s mortgage. For instance, based on 2022 data, the median home price in Canton is $194,777, compared to an average of $43,314 in Goodman.

The location shows the neighborhood culture, cost of living, recreational areas, amenities and even clubhouses. For this reason, it’s best to consider your lifestyle, needs and wants when evaluating the best place to buy a house in Mississippi.

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WORK WITH A REAL ESTATE AGENT

The housing marketplace can be daunting. If you want to find the best place to buy a house in Mississippi, try contacting a real estate agent. They will help you find a suitable property and expedite the process.

If you’re having difficulty knowing where to start, begin by asking your friends and family for recommendations. When you come up with a list, it’s best to request references from recent clients. The ideal real estate agent:

  • Has a license and considerable industry experience
  • Has an excellent reputation for being trustworthy
  • Understands the local real estate market
  • Communicates concisely

Ultimately, picking the best real estate agent depends on your homebuying needs and preferences.

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CALCULATE THE COST OF LIVING

The cost of living can greatly vary depending on the Mississippi city or county in which you live. It’s best to check the cost of factors such as:

  • Food
  • Utilities
  • Medical insurance rates
  • Car insurance rates
  • Income, real estate and property taxes
  • Gas or public transportation passes

If you need help figuring out your monthly expenses, use MoneyGeek’s cost-of-living calculator to determine how much a family needs to live in Mississippi.

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CONSIDER AFFORDABLE NEIGHBORHOODS

Mississippi is a relatively affordable state to live in. Keep in mind, however, that living in a less-costly area has advantages and disadvantages. Homeownership costs are more affordable for those who live in the suburbs or non-metropolitan locations. But, the downside is potentially living far from schools, malls, hospitals and other recreation.

Consider the top affordable places to live. According to MIT research, the most affordable county in Mississippi is Holmes County. It has the lowest cost of living because it has cheaper childcare and housing costs than the entire state. According to Zillow's listings, the city of Goodman is the least expensive Mississippi housing market, costing around $43,314.

Calculate Mortgage Rates

Your mortgage rates depend on many factors like the lender, credit score, credit history, income, interest rates, loan type, repayment terms, property size and more. Finding the balance among these factors is best for finding the most suitable mortgage rate.

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SEE YOUR MORTGAGE OPTIONS

In Mississippi, you can choose from mortgage types with different rates, requisites, repayment terms and limitations.

Before choosing a lender, it’s best to check your credit score, employment history, DTI, gross/net monthly income, bills and more. It’s best to meet the requirements of your preferred lender to become eligible for the mortgage.

Here are the average interest rates for each loan type:

The average interest rates for each loan type in Mississippi can vary depending on the housing market.

Before starting your application for a specific loan type, ensure you qualify. For instance, VA loans are exclusively available to eligible military personnel.

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USE A MORTGAGE CALCULATOR

To successfully determine how much it costs to buy a home in Mississippi, it’s best to calculate your mortgage payments and stay within your budget. What’s more, a plan is a starting point. You can modify or personalize it depending on your current lifestyle, including your financial situation and any changes.

On the other hand, you can check the best loan type for you. MoneyGeek’s FHA vs. conventional loan calculator is a helpful tool. Here, we’ve conducted a deep dive to help you select the loan suited for you.

When you compute all the necessary details, it’s time to find a mortgage lender. If this is your first time buying a home or you require housing assistance, determine the pros and cons of the different lending options in your area.

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KNOW YOUR QUALIFICATIONS

Each lender provides its set of requirements, repayment terms and certain limitations. Knowing your financial profile before reaching out to a mortgage lender is time-saving and efficient. Factors like APR rates and the loan amount will depend on your creditworthiness.

Here are some factors to be mindful of during the mortgage application process:

  • Credit score: Not all lenders require this, but it’s preferable if you have a fair credit score. Keep in mind that buyers with good credit can get better APR rates.
  • Income: Mortgage lenders will look at your gross income as an indication of your creditworthiness and ability to repay the loan. Some lenders may have a minimum income requirement.
  • Debt-to-income (DTI) limits: Your DTI ratio indicates your ability to repay the loan. It proves how much of your income goes to your outstanding debts.
  • Down payment: The down payment is the upfront amount, which lets the lender determine if you’re a risky borrower. The down payment is a certain percentage of your mortgage amount. Remember that buyers with higher down payments will typically get better APR rates.

Prepare Down Payment Requirements

Before you start homebuying, it’s best to provide a down payment. The rate depends on your loan type, as there are loans as low as 3.5%. However, most lenders require a down payment of at least 20%. Look at all of your options. You may qualify for a home loan that does not require a down payment, such as a VA or USDA home loan.

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DETERMINE DOWN PAYMENT REQUIREMENTS

When buying a home, consider that your down payment could be your greatest upfront expense. The amount will depend on your chosen mortgage. Conventional loans usually require a 20% down payment. FHA loans need at least a 3.5% down payment. On the other hand, USDA and VA loans have a 0% down payment for qualified borrowers.

Zero-down-payment mortgages may be your desired homebuying route. However, they require you to meet certain criteria. For example, USDA home loans are exclusively available to those buying homes in eligible rural areas.

One benefit of a down payment is that it affects your monthly mortgage payments. A higher down payment means lower monthly payments and vice versa. By determining your down payment, you will know how to allocate your expenses.

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CALCULATE MORTGAGE INSURANCE

Generally, homebuyers who put less than 20% down and borrow conventional loans also need to purchase private mortgage insurance (PMI). It protects lenders in case the borrower defaults on their payments.

  • Conventional loans: PMI is required if the down payment is less than 20%. Rates vary depending on credit score and down payment amount.
  • FHA loans: PMI is not required, but you will likely need to pay an upfront mortgage insurance premium (MIP) instead.
  • VA loans: No PMI required.
  • USDA loans: No PMI required (may need to pay a guarantee fee).

In some fortunate cases, borrowers terminate a homebuyer’s PMI after a few years of receiving punctual payments.

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DOWN PAYMENT ASSISTANCE PROGRAMS

A 20% down payment can be a hefty sum of money. Fortunately, there are down payment assistance programs in Mississippi to help. They include:

  • Mortgage Revenue Bond: The Mississippi Home Corporation (MHC) provides competitive interest rates and down payment assistance through sales proceeds from Mortgage Revenue Bonds.
  • Smart6 Mortgage Program: The Smart Solution program, founded by MHC, offers down payment assistance to qualified borrowers.

If these don’t fit your profile, there are other housing assistance loans and programs for first-time homebuyers in Mississippi.

Get Pre-Approved for a Mortgage

When buying a home in Mississippi, getting pre-approved for a mortgage is necessary. Pre-approval lets you converse with the lender about the repayment terms and the budget you need. Some sellers will require a mortgage pre-approval before showing their property.

Remember that pre-approval doesn’t equate with pre-qualification. Pre-qualification means that your lender gives you a loan amount estimate. Consequently, pre-approval encompasses a credit check that’s not conducted in the pre-qualification process.

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GATHER NECESSARY DOCUMENTS

When applying for a mortgage in Mississippi, you can generally expect the lender to request the following documents:

  • Proof of identification (driver’s license and Social Security card)
  • Three years of tax returns with W-2s
  • Current pay stubs
  • Credit history records
  • Rental history
  • Bank statements
  • List of credit cards and debts
  • Statement of your assets and liabilities
  • Other documents (e.g., alimony or child support documents)

Remember, it’s best to consult your lender about their specific requirements. You can also ask them for alternatives if you don’t have the requested documents.

If you are self-employed, you will need to provide year-to-date profit and loss statements and statements of unpaid accounts receivable.

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TIME YOUR PRE-APPROVAL

Pre-approval is a crucial phase in your homebuying process. What’s more important is you need to make the timing right. To expedite the process, prepare all your documents for your mortgage application.

Moreover, your lender’s pre-approval letter generally is valid for 30 to 90 days. It is a great window to evaluate if certain factors could affect your mortgage, like your expenses or interest rate.

If the above-mentioned applies to you, help your creditworthiness by paying off other debts or improving your credit score.

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RECEIVE PRE-APPROVAL LETTER

When your lender sends you a pre-approval letter, it contains vital information about how much they will let you borrow. It also means that you’re a serious and committed homebuyer with the financial capability to take out a mortgage.

Generally, a pre-approval letter contains the following information:

  • Type of loan
  • Maximum loan amount
  • Mortgage repayment term
  • Monthly mortgage payment
  • Interest rate

Keep in mind that although there are no limits to how many pre-approvals you can request, lenders perform hard credit checks during this process that can negatively affect your credit score.

Conduct a Home Inspection

Before buying a home in Mississippi, it’s crucial to have a home inspection by a third-party professional. It’s crucial to uncover any significant problems or safety issues with the property (for a fee). It’s best to find out this information before purchasing a home. It's also an opportune time for the homebuyer to negotiate the price if the home requires repairs.

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CONTACT A LICENSED INSPECTOR

Working with a licensed home inspector will help save you money in the long run. Reaching out to an accredited real estate agent is a good start. Another option to consider would be asking your trusted friends and family members who have experience with homebuying.

According to the International Association of Certified Home Inspectors, a standard home inspector provides a written report about the house's current condition.

The report contains information about the:

  • Basement, foundation and crawlspace
  • Interior and exterior
  • Roof
  • Heating and cooling
  • Plumbing
  • Electrical
  • Fireplace
  • Attic
  • Insulation and ventilation
  • Doors, windows and fences

Moreover, there are specialized types of home inspections that look deeper into a home’s foundation, pests, molds and sewers.

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FOLLOW MISSISSIPPI-SPECIFIC INSPECTIONS

Generally, a home inspection isn’t mandatory, but it is in some Mississippi cities or counties. Plus, there might be some other inspections that your preferred property may need.

Therefore, it’s best to consult your home inspector about what areas or items they will examine beforehand. It will help you prepare and budget. Aside from hiring a licensed home inspector, special inspections can range from $25 to $500.

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GO THROUGH APPRAISAL

Another crucial step in buying a house in Mississippi is a home appraisal. Here, a professional appraiser determines the actual value of the home, which can be different from the listing price. It informs the lender of the property costs and computes your loanable amount.

Current market trends also impact appraisal values. During this phase, the appraiser will also consider current market rates of similar properties. This is valuable information for you as the buyer.

Close Your Mortgage Loan

After scrutinizing the loan terms and completing the home inspection and appraisal processes, you are ready to close the mortgage loan. Remember that when purchasing a home, there are closing costs. It refers to how much you’ll pay the lender for your credit report, appraisal fees and documentation costs.

For those with limited funds, there are Mississippi assistance programs that can help cover some of the closing costs.

Moreover, you’ll need to pay a third party for the home appraisal, legal work, pest inspection and control and more.

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SIGN ALL DOCUMENTS

Collecting and preparing your documents for the closing takes time. Listed below are a few documents that will need your signature. Review all documents carefully before you sign them.

  • Homeowners insurance policy: This insurance protects you from damages that may incur and affect the house's physical structure and your belongings.
  • Title insurance policy and survey: It ensures that the property can be legally owned, freely occupied and not claimed.
  • Closing disclosure: This disclosure details the terms of your loan. The law requires the lender to give you the closing disclosure at least three business days before you close on the mortgage.

Before signing any documents, ensure you fully understand the fine print. There may be small details that might cost you more in the long run. If you feel confused with specific terms or jargon, it’s best to consult an expert or real estate agent.

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PAY CLOSING COSTS

Generally, closing costs range between 2% and 5% of the total purchase price, considering your location, lender and other factors. Aside from your monthly payments, here’s what to expect:

  • Credit report: An authorized credit reporting agency gives the borrower’s financial background to the lender, showing the risk level.
  • Escrow: Lenders set up an account for the borrower’s homeowners and property insurance. It may also include private mortgage insurance, if applicable.
  • Prepaid interest: A type of interest borrowers need to pay before the loan term starts.
  • Appraisal fee: The amount you pay an appraiser to assign a dollar value to your preferred property or home.
  • Home and pest inspection fees: There are instances when borrowers need to hire a licensed home inspector to review the property's current condition.
  • Recording fee: Some government bodies charge a recording fee to document the borrower’s ownership interest and potential liens on a property.

This list will guide you when you move forward with your mortgage.

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COMPLETE YOUR HOME PURCHASE

To complete your Mississippi home purchase, ensure that you’ve checked off each step in your homeownership journey:

  • Chosen your preferred location
  • Calculated mortgage rates
  • Collected all the required documentation
  • Received a pre-approval letter
  • Conducted a home inspection and appraisal
  • Closed the loan

Once done, you’re officially a homeowner.

Your next steps include managing your funds and ensuring you don’t miss monthly payments.

Homeownership is a serious commitment that comes with new responsibilities. It includes setting aside an emergency fund and preparing for any home repairs that may come your way. It’s best to secure an affordable rate and settle a larger down payment.

Mississippi Homebuying Details

Mississippi homebuyers must remember to research their preferred location and compare mortgage types and quotes to find the suitable and best lender.

These are essential steps to follow throughout your homebuying journey, but there may be specific processes in Mississippi. It’s best to contact your lender or a real estate agent so you’re prepared.

Moreover, some homeowner assistance programs in Mississippi will help you find a suitable property.

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Smart6 Mortgage Program: Mississippi Home Corporation (MHC) offers this program, which helps borrowers get the funds they need to buy a home or move to the next one. Their partner lenders provide it at a 30-year fixed rate set by MHC.

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Mortgage Revenue Bond 7: Mississippi Home Corporation (MHC) offers this program, which assists borrowers with home ownership by providing a competitive mortgage rate through the sales of Mortgage Revenue Bonds, which are federally tax-exempt. A down payment of $7,000 can help borrowers with their mortgage upfront costs.

Frequently Asked Questions About Buying a Home in Mississippi

Homebuying in Mississippi is a substantial undertaking and major success. MoneyGeek has answered some of the most commonly asked questions to help your homebuying journey.

What are the most important questions to ask when buying a house in Mississippi?
Is buying a house in Mississippi a good idea?
Is it wise to buy a house in Mississippi in 2023?
How much income do I need to buy a house in Mississippi?
How much is property tax in Mississippi?
Which Mississippi city is the cheapest to buy a home?
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