First-Time Home Buyer Programs

Bob Wahl
Bob Wahl
Published on October 13, 2017
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Buying your first home is a milestone in life. Mortgage specialist Brian Gater is back to tell us about programs for first-time home buyers. Not only do we go over loans available from the federal government, but we also highlight programs in the state of Missouri that many first-time home buyers don’t know about. Save money on your down payment, insurance, and closing costs. Listen and share this episode with any first-time home buyers you know.

Types of Loans

FHA (Federal Housing Administration) Loan is ideal for people with low credit scores or for those who want a low down payment. The FHA loan is an assumable loan, meaning that the new buyer will be pay the same interest rate as the owner, making it ideal for anyone planning to move soon.

The drawback with this loan is that you will have to pay more mortgage insurance. PMI (Private Mortgage Insurance) will cost 1.75% of loan amount up front. Then you will have a monthly insurance payment as well.

Conventional Loan – This is not a government loan. With a conventional loan you may be able to pay much less insurance. The higher your credit score, the less insurance you’ll have to pay. Eventually, you might not have to pay any at all.

VA Loan ­– This is a loan for active-duty military, veterans, and surviving spouses. You can learn all about VA loans in this post here.

USDA Loan ­– USDA loans are typically available in rural areas. This is a no down payment loan with low closing costs and low interest rates. The trick is to make sure the property you’re buying is in a USDA classified area.

Special Programs Available in the State of Missouri

There are some great programs in the state of Missouri that most people don’t’ know about.

HomeReady – This is a program with a conventional loan. You’re only required to pay 3% down. The insurance is based on your credit score. The best part is that this is not strictly for lower-income or low credit score home buyers. You can earn up to $74, 500 in income a year and still qualify. Some places have no limit at all. Home Possible is a similar option.

MHDC – Missouri Housing Development Commission is a state-backed government program in which they help you with your down payment. They will give up to 4% of in the form of a forgivable loan.

Until October 2017, this was a 5-year plan. If you stayed in your home for 5 years or more, you wouldn’t have to pay this back at all.

The program still exists, but it’s a 10-year program. If you leave after 5 years, or if you refinance, you must pay back all the money. However, from year 6 to year 9, the amount you have to pay back gets prorated down. If you stay for ten years, you basically get 4% of your down payment for free. This program helps free up money so you can spend it on other things, like closing costs, furniture, or a nest egg for home emergencies.

Talk to Your Lender About What’s Best for You

Discuss these options with your mortgage specialist when you’re looking at these loans. Your credit score, down payment, and loan type it will affect how much mortgage insurance you will be paying, which will factor into your overall monthly costs.

Contact Brian Gater

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