Last Updated on: 27th August 2024, 01:54 am
Buying a house in Missouri is both exciting and daunting. Whether you’re a Missourian changing cities or you’re entirely new to The Show-Me State, understanding the process of buying a house in Missouri is the first step in your relocation journey. You may be a first-time homebuyer or a fifth; regardless, purchasing a home is a big step.
While you likely have a better idea of what to expect if you’ve done it already, all states are different and have varying requirements and incentives to consider. Mortgage loans can be expensive; your home will likely be your biggest purchase ever, so you want to ensure you’re considering all your monthly expenses and costs before purchasing property.
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How to Buy a House in Missouri – Steps to Purchasing a Home
The home buying process is long and requires patience and ample knowledge. Here is how to buy a house in Missouri and what to expect during your journey to home ownership.
1. Save for a Down Payment
Before you can buy a house in Missouri, you’ll have to get your finances in order. You want to boast a good credit score; a “good” credit score to buy a house in Missouri is between 690 and 719, but experts say 760 will get you the best mortgage rate.
You will use your down payment savings when you close on your new Missouri home; your chosen lender pays the remaining balance. The more money you put down, the lower your monthly payment will be. Some conventional home loans require a high percentage down (around 20%), but that’s not the case for first-time homebuyers. However, putting 20% down will lower your monthly payment and remove the need for Private mortgage insurance (PMI).
All loans and mortgage lenders have different requirements, which is why doing your research beforehand is key to getting a good rate.
- Pro tip: If you can’t afford 20% or 3% at closing, or you would like to keep that extra cash for other upcoming expenses, certain government-backed loans (FHA loans) have lower down payment mortgage options, which we discuss below.
Missouri Minimum Down Payment – Avoiding Private Mortgage Insurance (PMI)
| Type of mortgage | Minimum down payment (%) | Down payment ($) |
| Conventional loan | 20% or less than 20% + PMI | $56,460 |
| Federal Housing Administration (FHA) loan | 3% | $8,469 |
Based on the median home price in Missouri, $282,300
Down Payment Assistance in Missouri
The Missouri Housing Development Commission (MHDC) provides financial support to first-time homebuyers through its First Place Loan program. This assistance is given as a second mortgage, which can cover up to 4% of the amount of the primary mortgage. If you stay in the home, do not refinance, and keep up with your first mortgage for ten years, this loan is forgiven.
To qualify, buyers need to adhere to the income and home purchase limits specific to their county.
MHDC’s Next Step Program provides financial assistance to both first-time and repeat homebuyers. This aid is given as a second mortgage loan, covering up to 4% of the primary mortgage. If you do not resell, refinance, or pay off the primary mortgage within ten years, the loan will be forgiven.
Eligibility is subject to purchase and income limits, which vary by county.
HUD offers Assistance Programs that are designed to help you purchase and maintain your home. HUD homes for sale are cost-effective properties the U.S. Department of Housing and Urban Development provides; with the help of certain public housing agencies, you can purchase a home through homeownership vouchers.
How Much are Closing Costs in Missouri?
Whether you can put down 3% or have to put down 20%, closing costs encompass more than your down payment. Closing costs encompass a slew of fees, including (but not limited to) appraisal fees, surveying fees, homeowners insurance, HOA fees, pest inspection fees, application fees, and title-related costs. The average closing cost in Missouri is around 3% to 6% of the loan amount.
2. Get Pre Approved
Getting pre-approved is a crucial step when buying a house in Missouri. When you’re pre-approved, the seller knows you’re seriously considering purchasing their property, and it gives you an accurate idea of what you can afford.
It’s important to shop for your mortgage lender; although you may have a long-term relationship with your bank, they may not offer you the best rate.
Once you’ve found a lender or mortgage broker you can trust, call them. They’ll run a credit check and ask for your proof of funds. You won’t start your actual mortgage application until you make an offer on your dream Missouri home.
Don’t be shy; you can apply to several lenders at once, and this will ensure you get the best rate possible.
- Did you know?: Since many loans are sold on the secondary market, the financial institute that gives you a loan may only own and service it for part of the loan agreement (typically 30 years.)
3. Find the Right Mortgage Lender For You
Your next step is choosing your mortgage lender. Since you’re pre-approved, you know which financial institutions have agreed to work with you. The type of loan you choose will greatly impact your rate. For example, we’ve discussed conventional loans and FHA loans, but there are also VA loans (government-backed mortgages for veterans and their families) and USDA Loans (mortgages provided by the United States Department of Agriculture for low- to moderate-income families in designated rural communities.)
You can apply for your chosen loan once you have the necessary financial documents:
- Bank statements from the last three months
- Pay stubs from your employer
- Driver’s license or passport
- Most recent W-2 forms or tax reports
- Investment account statements
- Documents representing your monthly debt payment
- A gift letter (only applicable if a friend or family member is assisting with the mortgage or down payment.)
3. Determine Your Budget
When you get pre approved, you’ll know the maximum amount you can spend, but that doesn’t necessarily mean you should buy a house in Missouri for that much.
The more expensive your home, the higher your monthly payments will be. Keep in mind that you don’t just pay your mortgage monthly; other expenses like your property taxes are usually included in your mortgage payment.
To ensure home buyers will make their mortgage payments, mortgage companies refer to the 28 and 36 ratios; this means that 28% of your gross income (before taxes) must be allocated to your monthly expenses, which include the principal and interest on the mortgage, along with real estate taxes and insurance.
4. Start House Shopping
Before you buy a house in Missouri, you should get a real estate agent. You want someone you can trust to get you the best deal on your dream home. They will ensure you look for homes within your budget and in the right area.
The Missouri real estate market isn’t considered competitive, and the median home price (282,300) is below the US median of $412,300. Homes for sale in Missouri are affordable, making MO a perfect place to purchase property. If you’re looking for something even more affordable, consider checking out USDA homes for sale in Missouri.
Homes in more desirable areas, like Brentwood and Chesterfield (ranked among the best places to live in the US.), will have a more expensive and competitive real estate market. On the other hand, more affordable MO cities like St. Joseph, Joplin, and Florissant will give you home prices under $200,000.
Whether you’re seeking a larger Missouri city like St. Louis, Kansas City, or Springfield, or a small suburb, you’re still buying a house in Missouri, which is exciting and affordable!
5. Make an Offer
Before buying property in Missouri, you’ll have to make an offer. Your real estate agent is the expert, and they will help you write a compelling letter offer that will help convince the seller to choose you.
The offer will include various points and contingencies as well as an earnest money deposit, which is typically 1–2% of the purchase price. This deposit acts as an incentive for the sellers to remove the home from the market until the closing date. If the sale is completed, that money is applied to your down payment, so you won’t incur any extra costs.
Consider First Time Home Buyer Programs (if applicable)| & Which Mortgage Loan Is Most Beneficial to You
If you’re a Missouri first time home buyer, you’ll want to consider which first-time buyer programs you qualify for. The first time home buyer Missouri requirements are:
- Someone who has never owned a home.
- Someone who has not owned one in the last three years.
The requirements for first time buyers can differ based on the type of loan they are applying for.
Conventional 97
If you’re buying a house in Missouri for the first time, consider Conventional 97, a Freddie Mac and Frannie Mae home loan that allows you to borrow 97% of the home’s purchase price. You will have to pay 3% for the down payment and have a credit score above 620.
FHA Loan Missouri
A great option for looking to buy a house in Missouri for the first time is an FHA loan. FHA loans allow a down payment as low as 3.5% and provide fixed rates for 15, 20, or 30 years. To qualify for this loan, you need a FICO score of 620 or higher and must not have filed for bankruptcy in the past four years; otherwise, you’ll need to wait before applying.
Veteran Home Loan
Veteran home loan programs aim to assist Veterans and Service members in purchasing a home. With this loan, no down payment is required, and it can be used multiple times throughout your life, not just for one home. Additionally, you benefit from lower interest rates and are not required to pay private mortgage insurance (PMI).
Moving Tip From Federal Companies
- Missouri change of address guide: Visit the DMV or go online to change your address after buying a house in Missouri.
- Missouri resident requirements: If you’re not a Missourian already, you’ll have to become a resident of the state.
- If you’re breaking a lease to buy a house in Missouri: If you’re buying a house in Missouri but have to break a lease to do so, we know how to help!
Let Federal Companies Help You Move
The home buying process is stressful no matter where you purchase property. Hopefully, you buy a house in Missouri you love soon so we can start planning your relocation process. Federal Companies has over 100 years of moving experience and the best movers in St. Louis who are ready to get you into your new MO home. Contact us at (800) 747-4100 for a free moving estimate.
