First-Time Home Buyer Advice for Buying a Home in Missouri

Most people dream of owning their own house, but saving the money you need for your dream home can feel daunting. The rising cost of housing nationwide is hampering the market, and buying a home requires careful financial planning. However, first-time home buyers in Missouri have multiple resources available to help guide them through this dynamic process.

Below, we outline four primary points to keep in mind as you begin your Missouri house hunt and get you one step closer to becoming a first-time homeowner.


1. The Important Decisions

What are the requirements to buy a house in Missouri? If you’re exploring the real estate market for the first time, a well-crafted financial plan and a decent down payment are vital. Below are some strategies to help you secure your first home without breaking the bank.


How to Create a Comprehensive Household Budget

To create a proper budget, calculate your monthly household income after taxes, then match it to your monthly expenses. Aim to have a surplus every month (although 64 percent of Americans live paycheck to paycheck, according to one report). If you don’t have quite enough to set aside savings each month, work through your budget to find any items you can cut back on to supplement your savings. 

As part of your home-buying budgeting process, determine what your target amount is for a down payment. Start by looking online to see what housing prices look like in your area.


Track your spending habits and take control of your finances with our free  Budget Worksheet.


How to Determine the Down Payment Amount

A down payment is proportionate to the cost of a home. In a perfect world, homeowners can pay 20 percent as a down payment. Lenders typically use this amount as a threshold because it gives them enough leverage if you can’t pay your mortgage

If you’re committed to putting down 20 percent, your down payment funds will determine the maximum amount you’re able to spend on the house. A 20 percent down payment also saves you from having to purchase an insurance policy that protects the bank in the event of a foreclosure (more on that shortly). If you have the financial means, aim for this amount while building your savings.


2. The Alternatives

Certain types of mortgages cater to specific consumers in unique circumstances. Only some borrowers qualify for these types of loans, but it may be worth considering the following alternatives:


Federal Housing Administration (FHA) Loan

A Federal Housing Administration (FHA) loan is a loan product that tends to be popular with first-time home buyers due to its lower income limits and other requirements. These loans, which are insured by the FHA, provide low- to moderate-income borrowers with loans that make home ownership more accessible—even if you have less-than-perfect credit. These loans also offer a minimum down payment as low as 3.5 percent of the home’s value. Missouri FHA loan limits vary by county, but all single-family homes in Missouri qualify for mortgage amounts up to $472,030 in loans backed by the FHA.


Military Veteran Loans

If you’re a military veteran, you may qualify for special Veterans Affairs loans or grants that offer exclusive rates and terms on mortgages. These loan programs even include mortgage products that don’t require any down payment whatsoever.


Assistance Programs for First-Time Home Buyers in Missouri

The Missouri First-Time Homebuyer Savings Account was created for first-time home buyers in Missouri to help them save for a new home. The initiative allows you to deposit up to $1,600 per person (or $3,200 for couples) of after-tax dollars annually and receive 50 percent off your state taxes on the amount deposited. All accrued interest on the account is tax-free to help save for a down payment. Parents and grandparents also can set up an account for their children and grandchildren. Missouri first-time home buyers can also explore a handful of other state-specific loan options offered by the Missouri Housing Development Commission.


3. The Other Considerations

The closer you’re able to come to that 20 percent down payment threshold, the better your mortgage repayment options will be. But if you can’t quite hit that mark, try not to worry. Many mortgage lenders offer flexibility to help you finance your home purchase.


Paying for Private Mortgage Insurance (PMI)

Although it’s possible to purchase a home through a conventional loan with less than 20 percent down, consider the necessary added cost of private mortgage insurance (PMI). PMI is a safeguard used to protect lenders in the event the purchaser can’t pay their mortgage. Instead of using the down payment as leverage, homeowners purchase an insurance policy that will compensate the bank in the event of foreclosure.

PMI is added to the mortgage until the equity in the home surpasses 20 percent, at which point the insurance is removed. Homeowners achieve this by making regular monthly payments, performing home improvements, or experiencing an increase in the home’s assessed value.


Making the Most of Your Money

As you continue to save for a down payment, you’ll need a safe place to store your savings and maximize that money. We recommend you play it safe by avoiding risky investments. Opt for a reliable, interest-bearing savings account or money market account. Investments might be attractive, especially now. However, they seldom pay off in the short term and may result in a serious loss that can be difficult to recover from. They also aren’t insured, unlike a bank account. 

Once you have the right savings account set up, start setting aside cash for the down payment. One of the easiest ways to save is by cutting down on any unnecessary or excessive expenses. Use the household budget you developed to identify needless expenses you can possibly reduce. 

Even if it seems impossible, seriously consider buying a home rather than paying rent. Especially as a first-time home buyer, the advantages are worth the up-front cost. A few benefits of buying over renting include:

  • Gaining tax advantages, such as tax credits
  • Having home improvement customization potential
  • Acquiring an asset with appreciating value
  • Possessing the pride of home ownership


4. The Reliable Partner for First-Time Home Buyers in Missouri

If you’re getting ready to buy a house in the Show-Me State, be sure to partner with local mortgage lenders you can trust and discuss viable loan options. The most important step is choosing a home that fits your family’s needs and your personal preferences. You can learn more about the ins and outs of Missouri home buying by downloading our free guide, Everything You Need to Know About Home Loans in Missouri.


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