If you’re a first-time home buyer in Missouri, the state has programs to help you achieve your dream of homeownership. The Missouri Housing Development Commission, or MHDC, offers mortgage programs for first-time home buyers, with and without down payment assistance. You can qualify as a first-time buyer if you haven’t owned a primary residence for three years.
The first-time home buyer requirements are waived for veterans, active-duty military and people buying homes in economically disadvantaged areas.
MHDC highlights and eligibility requirements
- Some programs offer down payment assistance
- Loans can be used to buy most kinds of residences, except for mobile homes
- Federal Housing Administration (FHA), Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA) and conventional loans are available, all with 30-year terms and fixed rates
- Interest rates for some loan programs are below market
- Income limits vary by loan program, location of the home and household size
- Minimum credit score of 620
- Maximum total debt-to-income ratio of 45%
- Home has to be a primary residence in Missouri
Missouri home buyer assistance programs
FIRST PLACE LOAN PROGRAM
The First Place loan program comes in two varieties: with down payment assistance and without. The program without down payment assistance offers below-market interest rates on mortgages for first-time home buyers. Interest rates are usually a quarter to half a percentage point lower than rates of First Place loans with cash assistance. In one recent check-in, the rate was three-quarters of a percentage point lower.
FIRST PLACE LOAN PROGRAM WITH CASH ASSISTANCE
The First Place cash assistance loan is for first-time home buyers who meet income limits. It provides down payment assistance of 4% of the loan amount, which can be used to pay down payment and closing costs.
The assistance is a forgivable second mortgage without monthly payments. This second mortgage is forgiven after 10 years if the borrower keeps the loan and the home is still the borrower’s primary residence. After the first five years have passed, 1/60th of the loan is forgiven every month for the next five years.
The Next Step Program is primarily for home buyers who earn too much to qualify for First Place loans, or who buy homes at prices above the cutoff for the First Place loan program.
Next Step has limits on income and purchase price, but those limits are higher than First Place. In addition, Next Step is available to repeat home buyers as well as first-timers.
There’s one other wrinkle: Next Step borrowers get a lower interest rate if they buy homes in “Opportunity Areas” with low poverty and high income and educational levels. This policy helps the state achieve its goal of encouraging affordable housing in these neighborhoods.
NEXT STEP CASH ASSISTANCE LOAN
Home buyers getting Next Step loans don’t have to get down payment assistance if they don’t need it. But borrowers do have the option of accepting assistance of 4% of the loan amount, which can be used to offset down payment and closing costs.
As with the First Place program with cash assistance, the down payment help is a second mortgage without monthly payments. It is forgiven after 10 years if the borrower keeps the loan and continues to use the home as a primary residence. After the first five years, 1/60th of the loan is forgiven each month for the next five years.
MORTGAGE CREDIT CERTIFICATE
First-time home buyers who meet income limits can obtain mortgage credit certificates from the MHDC. Borrowers can get an annual credit of up to $2,000 against federal income taxes. Income and purchase price limits apply.
» MORE: Best Missouri mortgage lenders
Your next step
Visit the MHDC’s homeownership programs page for a list of loan programs, with links to details about each. Find a list of mortgage rates for each program, updated daily. MHDC maintains a list of certified lenders, which is available on the lender locator page.
National first-time home buyer programs to consider
If you don’t qualify for MHDC programs, or if you want to explore other options, there are nationwide programs worth considering:
Conventional mortgages that conform to the standards of Fannie Mae or Freddie Mac, which are government-sponsored enterprises, can be obtained with down payments of as low as 3%. Mortgage insurance is required for down payments less than 20%.
FHA-insured loans allow down payments as small as 3.5%. These loans are available to borrowers with low credit scores. Borrowers pay monthly mortgage insurance for the life of the loan.
VA loans are available to qualified active-duty service members, military veterans and certain spouses. They don’t require a down payment.
USDA loans, guaranteed by the U.S. Department of Agriculture, don’t require a down payment. They may be used to buy homes in designated rural areas.
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