The average house value in Missouri is $236K, which has increased by 13% in the past year. Rates in Missouri are relatively more affordable than the national average of $357K.
According to the Missouri Economic Research and Information Center, the state has the 7th most affordable cost of living in the U.S. If you’re buying your first home in Missouri, you will pay less than in most other housing markets in the country.
However, the cost of living is one of many factors you need to weigh when buying a home. You also need to consider the lender terms, repayment period, interest rate and other requisites. In this guide, MoneyGeek helps you understand the nitty-gritty about buying a house in Missouri.
The average cost of homes in Missouri is $236K, a 13% increase from last year.
To obtain a mortgage, you’ll need to meet the minimum credit score requirement, debt-to-income (DTI) ratio, salary requirements and down payment.
To buy a home in Missouri, identify your preferred location, check mortgage rates, prepare documents, and close the loan.
Choose an Ideal Location
The best place to buy a house in Missouri will depend on your preferences. Prices vary between towns, cities and counties. You’ll also need to consider how the location will affect your monthly expenses. For instance, a rural property may cost less to purchase but might increase your transportation costs.
Finding the best place to buy a home must be cohesive with your lifestyle and needs. If you have an active lifestyle, it’s best to find a property near a gym or recreational areas. Research the neighborhood culture and accessible amenities.
Exploring the housing marketplace can initially feel overwhelming. You’ll see different kinds of properties with different price tags. A realtor can help you find the cheapest places to buy a house in Missouri or the best place to buy a house in Missouri. They’ll factor in your preferences and budget to help you find the right property.
Ask your friends, colleagues and family members for realtor recommendations. MoneyGeek recommends looking for a real estate agent who:
- Is aware of the current housing market
- Has a clean record
- Is open and honest communication with their clients
Once you’ve compiled a list, always check references from recent clients. Ultimately, the best real estate agent for you will depend on your preferences.
The cost of living is another critical factor to consider when buying a home. Expenses that may affect your cost of living in Missouri include:
- Basic needs (food and clothing)
- Utilities (electricity, internet, water)
- Transportation (vehicles, gas or public transportation passes)
- Insurance (medical, home, car)
- Taxes (income, real estate, property)
MoneyGeek’s cost of living calculator can help determine how much a family needs to live in different Missouri locations.
Missouri ranks as the 7th most affordable state to live in the U.S. Buying a home in a more affordable area has pros and cons.
Homeownership costs less than in the suburbs. However, suburban living may not have the best access to malls, gyms, hospitals and other recreational places. Living in the city costs more but provides easy access to many social amenities.
Calculate Mortgage Rates
Your credit score, income, loan type and repayment terms will impact your mortgage rates. Finding a balance among these factors will help you identify the most suitable mortgage for you.
You can choose from different mortgage types in Missouri, each with different rates, requirements, repayment periods and limitations.
Before shopping for lenders, review your credit score, employment history, debt-to-income ratio and monthly income. You can then match these factors against lender requirements to see what size mortgage you qualify for. Comparing lenders is also key in helping you find the best mortgage rates for your profile.
Here are the average interest rates in Missouri for every loan type:
- Conventional home loans: 6.1–7.1%
- VA home loans: 5.5–6.8%
- USDA home loans: 1.0–3.0%
- FHA home loans: 5.0–7.6%
Note that VA loans are only available to eligible military personnel.
Before looking at homes, it’s best to know how much of a mortgage you can afford. Some buyers qualify for both conventional home loans and government-backed mortgages, so comparing rates will help you choose the best option.
If it’s your first time buying a home or you need housing assistance, check the advantages and disadvantages of the various lending options in the area. You can also compare rates between conventional and FHA home loans to find the best choice for your profile.
Mortgage calculators can help you understand the factors that affect your mortgage cost, such as the principal, interest and property taxes. You can use MoneyGeek’s mortgage calculator to estimate your mortgage payments.
Every mortgage lender has specific borrower requirements, and your financial profile will largely determine the mortgage rates and terms available to you. For example, the better your credit, the lower your APR rates. Some of the factors mortgage lenders consider include:
- Credit score: Buyers with good credit receive higher loan amounts and lower APRs.
- Debt-to-income (DTI) limits: Your DTI ratio shows how much of your income goes to your debts or other payables.
- Down payment: Down payments are usually a percentage of the total mortgage amount and are paid upfront—the larger the down payment, the lower the APRs.
- Gross income is the amount you earn from your employment. It affects your repayment ability.
Prepare Down Payment Requirements
Mortgage down payments vary depending on your loan type. The typical down payment is 20% of the purchase price, although some can be as low as 3.5% or even zero.
The down payment depends on your mortgage type. Conventional loans generally require a 20% down payment. USDA and VA loans have a zero down payment for eligible borrowers. FHA loans need a down payment of at least 3.5% of the total mortgage amount.
Knowing how much of a down payment you can afford will help you identify which loan type you qualify for. Higher down payments generally mean lower monthly mortgage payments.
Mortgage insurance protects lenders in case borrowers default on their payments. Borrowers with a down payment of less than 20% must purchase mortgage insurance. USDA and FHA loans also require mortgage insurance, while VA loans do not.
Home buyers can find saving up for a 20% down payment challenging. However, Missouri offers several down payment assistance programs that can help.
- First-Time Homebuyer Program: The City of Blue Springs offers down payment and closing cost assistance for eligible borrowers.
- First Place Loan Program: Qualified borrowers can receive up to 4% of the first mortgage amount in assistance funds that can be used for down payment or closing costs.
- Next Step Program: The Missouri Housing Development Commission introduced this program to help borrowers settle their down payment.
In addition, Missouri offers other housing assistance loans and programs for first-time homebuyers.
Get Pre-Approved for a Mortgage
Once you select a mortgage lender, you can get pre-approved for a mortgage. Pre-approval is important, as most sellers require it before showing you their property.
However, pre-approval doesn’t mean pre-qualification. Pre-qualification is when the lender provides you with a loan amount estimate. Pre-approval means the lender is committing to letting you borrow a certain amount and includes a hard credit check.
When applying for a mortgage in Missouri, you’ll need to have several documents on hand. These include:
- W-2 forms
- Income statement
- Income tax returns
- Credit history
- Identification cards
- Rental history and records
- Bank statements
- Other documents (e.g., divorce papers, alimony, child support documents, etc.)
Some lenders may ask for additional documentation.
Pre-approval is a crucial stage in the homebuying process. Ensure that your timing is right.
Your lender’s pre-approval is valid from 30 to 90 days. If you don’t find a home within this timeframe, you’ll need to reapply.
The lender’s pre-approval letter outlines the amount it will let you borrow. Generally, there are no limitations on how many pre-approval letters you can request. But, lenders conduct hard credit checks that may impact your credit score negatively.
A pre-approval letter usually contains the following details:
- Loan type
- Maximum loan amount
- Mortgage repayment period
- Monthly mortgage payment
- Interest rate
Note that a pre-approval letter is valid from 30 to 90 days.
Conduct a Home Inspection
Before buying a home, buyers should conduct a home inspection, and some lenders won’t finance a home without one. During a home inspection, third-party professionals survey the property and identify any issues. The homebuyer pays for the home inspection.
If you want to save money in the long run, it’s best to hire a licensed home inspector to examine the property. The best way to find one is to contact your real estate agent or ask your friends and family for referrals.
A home inspection report generally covers the following:
- Interior and exterior of the property
- Heating and cooling systems
- Basement, foundation and crawlspace
- Plumbing system
- Insulation and ventilation
- Doors, windows and fences
Some niche home inspections conduct thorough checks of the foundation, pests, molds, fungi and sewers.
Although Missouri does not mandate home inspections, some cities and counties may require one. Regardless of the requirement, home inspections are important. An inspection can uncover issues that need repairs and help you negotiate the home’s price. Not only will an inspection help you prepare your budget, but it will also give you an insight into the property.
Lenders typically conduct a home appraisal before financing your property. During an appraisal, the appraiser inspects the property and assigns it a dollar value according to the current market. This value can differ from the selling price and is a way for the lender to ensure the home buyer is not overborrowing.
Close Your Mortgage Loan
After thoroughly reading the loan terms, it’s time to close the mortgage. When you buy a home, closing costs cover the expenses the lender incurs when generating your credit report, appraisal fees and documentation fees.
In addition, you’ll shoulder the cost of the home appraisal, legal work, pest inspection and more.
You will need several specific documents to close your loan. MoneyGeek recommends preparing these ahead of time:
- Homeowners insurance policy: Protects you from physical damage to your property or belongings.
- Title insurance policy and survey: Assures that the property can be legally owned, freely occupied and is not claimed by another person or entity.
Before signing any documents, ensure you understand the fine print. Always ask your real estate agent for clarification when you encounter confusing terms.
Closing costs usually range from 2–5% of the home’s purchase price. They include:
- Appraisal fee: The cost of hiring an appraiser to assign a dollar value to your preferred property.
- Credit report: A credit reporting agency provides lenders with the borrower’s financial background, which informs them about the level of risk.
- Escrow: Lenders set up an account for the borrower’s homeowners insurance, property insurance and/or private mortgage insurance.
- Home and pest inspection fees: The cost of hiring a licensed home inspector to evaluate the property's current condition.
- Homeowners insurance: It protects the homeowners from any damage to the property, liability or accidents that may occur within the property.
- Prepaid interest: It is the interest that borrowers pay before the loan period begins.
- Recording fee: Some government agencies charge a recording fee to document the ownership interest and potential liens on a property.
- Title insurance premium: It protects the lender if the property is lost due to legal defects in the property title.
To complete a home purchase in Missouri, you’ll choose your preferred location, compute mortgage rates and prepare all necessary documents. You’ll have a pre-approval letter, complete a home inspection and close on the loan.
Once you’re a homeowner, manage your funds and allocate your budget, so you don’t miss your monthly payments.
Missouri Homebuying Details
This MoneyGeek guide outlines key steps to follow during your homebuying journey. You should also contact your lender or real estate agent to identify whether Missouri requires any additional steps.
Those struggling to afford a down payment can take advantage of several homeowner assistance programs in Missouri.
First Place Loan Program: Qualified borrowers can receive up to 4% of the first mortgage amount in assistance funds that can be used for down payment or closing costs. The funds come in the form of a forgivable second mortgage and don’t need to be repaid as long as the borrower stays in the home for 10 years.
Next Step Program: The Missouri Housing Development Commission introduced this program to help borrowers settle their down payment. Borrowers can receive up to 4% of the first mortgage amount in assistance funds.
Frequently Asked Questions About Buying a Home in Missouri
MoneyGeek answers questions about buying a home in Missouri.
- Zillow. "Missouri Home Prices." Accessed October 21, 2022.
- Value Penguin. "Average Household Expenses in the U.S.." Accessed October 21, 2022.
- Missouri Economic Research and Information Center. "Cost of Living Data Series | Missouri Economic Research and Information Center." Accessed October 21, 2022.
- FHA. "FHA Down Payment Assistance Grants for 2022 in Missouri." Accessed October 21, 2022.
- FHA. "First Time Homebuyer Program." Accessed October 21, 2022.
- FHA. "First Place Loan Program." Accessed October 21, 2022.
- FHA. "Next Step Program." Accessed October 21, 2022.
- Missouri Department of Revenue. "Property Tax Credit." Accessed October 21, 2022.