First-time homebuyers in Missouri can take advantage of several programs to secure a mortgage at favorable terms, get down payment assistance and educate themselves on the real estate market in the Show Me State. This guide explores the factors affecting mortgage rates, the places to find financial assistance and the meaning of home affordability.

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Check Mortgage Rates in Missouri

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Mortgage rates in Missouri are tied to several economic factors, including the demand for residential real estate, which local experts say is tight right now, the strength of the job market and the buyer’s credit history. There’s no cost to get a rate quote or apply for a mortgage, but smart Missouri shoppers should first check their credit scores and make sure their credit history is accurate to ensure they get quoted the best rate the first time around.

Missouri residents can get a free credit report annually from the three major credit reporting companies: Experian, TransUnion and Equifax. Review the report carefully and check for errors that pull down a credit score. The lower the score, the higher the interest rate a mortgage company is likely going to charge. In Missouri, scores of 620 and up are needed to qualify for government-backed loan programs.

Learn more about factors that drive mortgage rates.

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First-Timer? Get Homebuying Help in Missouri

Local HUD and FHA fixed-rate mortgage lending programs are available to state residents, and the Missouri Housing Development Commission awards grants to help cover down payments and closing costs. Grants of up to 4.5 percent of the loan amount are available through the commission.

Buyers hoping to apply for government-backed loans through HUD or the FHA must typically meet income requirements for eligibility. The income threshold varies by location and number of people in the household.

Additionally, many banks and mortgage companies offer incentives to attract first-time buyers.

For an in-depth look at the homebuying process, check out this MoneyGeek guide.

Financial Assistance in Missouri for First-Time Buyers

Many first-time homebuyers in Missouri struggle to come up with a down payment sufficient to satisfy the lending company. Fortunately, Missouri offers several financial assistance programs to help these buyers with low-interest, fixed-rate loans and grants based on income. The Missouri Housing Development Commission is the place to start by checking your income against their lending requirements.

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Home Affordability in Missouri: What to Know

How big a mortgage the first-time Missouri home buyer can secure will determine what type of available home to choose. The median price of a detached single-family house in Missouri is $134,500.

Beyond credit scores, the lending company will also consider the buyer’s income to calculate a mortgage amount. For instance, if the home buyer makes $3,000 a month and the mortgage company uses a housing ratio of 33 percent, then the lenders estimates the buyer can afford a monthly mortgage payment of $990.

The FHA recommends first-time homebuyers try to reduce as much existing debt as possible before applying for a mortgage, especially loans that are almost paid off. Some types of anticipated future debt can be deferred from lending calculations. Student loans are one example of future debt.

How Missouri Mortgage Rates and Home Prices Affect Monthly Payments

Metro Area Estimated Monthly Mortgage Payment* Q1 2016 (Change from Previous Year) 2015 Median Home Price 2014 2013
Cape Girardeau $641 $136,300 (+3.00%) $136,100 $137,200 N/A
Columbia $767 $163,200 (+1.20%) $169,500 $161,200 $155,200
Kansas City $767 $163,300 (+6.70%) $170,400 $158,800 $154,800
Saint Louis $661 $140,700 (+4.40%) $150,600 $141,700 $134,300
Springfield $563 $119,900 (+2.90%) $124,400 $121,200 $117,100

Source: National Association of Realtors Q1 2016 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q1 2016 and a 30-year fixed mortgage with today’s rates.

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How Much Can You Borrow in Missouri?

FHA lending limits in Missouri vary by county, although loans are generally capped just above $200,000. The online application process takes only a couple of minutes, and the FHA promises a response within one business day. Other incentives from the Missouri FHA:

  • Borrowers can finance 96.5 percent of the purchase price, with a down payment of 3.5 percent. Sometimes if combined with other types of loans, the down payment can be completely covered.
  • Refinance up to 115 percent of the home’s value.
  • Roll closing costs into the loan package.

Use the tool below to search for both FHA and conventional loan limits by county in Missouri.

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Buying a Home in Missouri: Experts Dish on the Market

Don

Don Brinkeris a homeownership manager with the Missouri Housing Development Commission.

Ava

Ava Smith is a homeownership steward with Beyond Housing Missouri.

What’s the biggest concern first-timers overlook when they’re ready to buy a house?

Brinker

“The down payment is generally what keeps people from purchasing a home. We offer a grant up to 4.5 percent of the amount of the loan they borrow. You need at least a 3.5 percent down payment for an FHA loan.

Smith

It’s all surrounding education. In my experience over the last 10 years it’s the financial aspect of things. Financial literacy. Credit, of course. Getting stuck in payday lending. Inadequate savings and budgeting problems.

If the buyers’ lender requires a minimum credit score, then our counselors will provide that financial coaching to help them get to where they need to be. We concentrate more on credit history, things like liens and judgments.

We also encourage people to take our Catch the Dream course in homebuyer education. You can enroll for a classroom or take it online. There’s a private session with a homeownership counselor to outline your financial goals and go through your credit report line by line. We also do referrals to mortgage lenders, realtors, home inspectors and property insurers.

What’s the best way to repair damaged credit so a new homebuyer can qualify for a mortgage?

Brinker

Our minimum credit score is 620. Lower than that, and we send people to a HUD-approved credit counselor. Sometimes a lender can help you, but it’s usually a credit counselor you’ll need to work with to get your scores up there to the point you can qualify for a mortgage. Another thing is to get a secured credit card, one that’s backed by your own funds. Make purchases below your limit and pay them off on time every month. That can help.

Smith

Once they’re coached on what needs to be done and we’ve gone over the line items on their credit scores, improving them means working on that debt-to-income ratio. People, when they’re trying to clean up their credit rating, often concentrate on certain creditors. They’re looking at the oldest debt or the highest balance, but we look at monthly payments. If they’re only paying the minimum, they’re not reducing the actual debt, maybe just covering the interest charges. I also tell people to be wary of companies that charge you and promise to improve your scores in 30 days. That’s nonsense.

What’s the single greatest obstacle to homeownership in Missouri?

Brinker

The housing inventory is on the low side for the market we serve. A lot of bidding wars going on. Our customers are typically going to be looking at a house in the $130,000 range and the number on the market is tight right now. It has been for a while throughout Missouri and we’re seeing it in surrounding states, too.

Smith

You can find property for sale. It’s meeting the buyer with the right property that can be challenging. And there’s certainly room for more affordable housing development.

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Bracing for Missouri Closing Costs

Closing costs cover all the various fees Missouri lenders charge to originate a loan, as well as incidentals such as the appraiser’s fee, attorney fees, title clearance, housing inspections and any other service necessary to complete the house sale. While Missouri’s average closing costs are in line with national averages, they can still add a couple thousand dollars to the price of home. The graphic below shows average closing costs in Missouri.

More information on how lenders set closing costs and what you can expect can be found here.

Average Closing Costs in Missouri

Average Origination
Fees
$1,040
Average Third-Party
Fees
$792
Average Total Closing
Costs
$1,832

Source: Bankrate’s 2015 survey of closing costs.

Mortgage Refinancing in Missouri

Refinancing a home mortgage in Missouri can save thousands of dollars over the life of the loan. The time to consider refinancing is when interest rates are creeping downward, then lock-in the lowest rate possible. As with buying a home, refinancing rates in Missouri are based on credit scores, although a solid payment history on the existing mortgage, with no late payments, will help.

The FHA Missouri office offers a streamlined refinancing service with a decision in as little as 48 hours.

For a general explanation of the mortgage refinancing process, review MoneyGeek’s guide.

Other Missouri Mortgage Resources

Missouri Housing Development Commission

The primary state-backed agency offers the First Place Homebuyer Program to assist first-time buyers and veterans in Missouri.

First Time Home Buyer Missouri: Incentives, Programs and Grants

Resources curated by the Movoto Foundation

Home Ownership Assistance – Missouri HUD

Lists assistance statewide and regional programs available to Missouri residents.

Homebuyer Assistance Programs in Missouri

Listing of programs compiled by MissouriFamilies.org.

Homebuyer’s Resource Guide: Home Ownership Made Easier

Published by the University of Missouri.

Down Payment and Closing Cost Assistance Program

Information from Beyond Housing, a homeownership advocacy organization.

Missouri First Time Home Buyer Grants

List of grant programs available to first time buyers throughout the state.

Missouri’s Guide to Housing Assistance Programs

Hefty collection of resources to help first-time homebuyers navigate the lending process and secure financial help.

Steps You Can Take to Avoid Foreclosure

A guide published by the Missouri State Bar to help homeowners stay in their houses.