What to know about Missouri mortgage rates

Smiling mother holding her young son in the front yard of their new Missouri homeImage: Smiling mother holding her young son in the front yard of their new Missouri home
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With exciting sports, museums, food and entertainment, Missouri offers no shortage of cultural activities — and it has four distinct seasons, making it an exciting place to live. The Show-Me State is also home to more than 6,000 caves and countless restaurants with delicious food. If you’re searching for a home in Missouri, remember to shop around and compare mortgage rates. What may seem like a small difference could add up to thousands of dollars over the course of a 15-year or 30-year mortgage.

Mortgage debt in Missouri

Credit Karma members with mortgages in Missouri had average mortgage debt of $143,536 in 2020, with an average monthly mortgage payment of $1,062.

That puts Missouri below average for both mortgage debt and average monthly mortgage payments compared to Credit Karma members across the U.S. in 2020.

Types of home loans

If you choose to finance your dream home, you might be overwhelmed with the number of mortgage loan options out there. Here are some of the more common mortgage types Missouri homeowners may consider.

Conventional loans in Missouri

Conventional loans are mortgages that aren’t part of government programs. These loans tend to be good for people with solid credit and a down payment of at least 3% to 5%.

Missouri FHA loans

FHA loans are a good option for first-time homebuyers to explore — particularly if your credit is less than perfect. That’s because you may be able to qualify with credit scores as low as 580 with a 3.5% down payment or 500 with a down payment of 10%. This FICO® score requirement is the FHA minimum standard. In general, additional lender credit score requirements may apply.

The FHA loan limit in 2021 is generally $356,352 for a one-unit property, but it can reach as high as $822,375 depending on where you live.

Every area in Missouri conforms to the FHA loan limit of $356,362 in 2021 — except the Kansas City area, which has a higher limit.

You can find the exact limit by county on the U.S. Department of Housing and Urban Development website.

VA loans in Missouri

If you’re an eligible veteran or service member comparing mortgage rates in Missouri, a VA loan can be attractive since down payments and mortgage insurance aren’t typically required, and you may be able to qualify even if you don’t have great credit.

Similar to FHA loans, VA loans are insured by the government but issued by private lenders.

Conforming loan limits in Missouri

Conforming loans are a type of home loan that meets certain loan limits set by the Federal Housing Finance Agency. This means they can be bought by Fannie Mae and Freddie Mac, government-sponsored enterprises that guarantee mortgages.

Loans that exceed conforming loan limits are known as jumbo loans. Lenders often consider these loans riskier than conforming loans.

All of Missouri’s counties have a conforming loan limit of $548,250 in 2021.

First-time homebuyer programs in Missouri

If you’re hoping to buy your first home, there may be some assistance programs available to you in Missouri.

  • MHDC First Place Loan Program The Missouri Housing Development Commission offers the First Place Loan program to first-time homebuyers and veterans. It offers below-market interest rates on 30-year conventional, FHA, VA and USDA loans. To be eligible, you must meet certain income and purchase price limits.
  • MHDC Next Step Program This program is designed for first-time homebuyers who don’t qualify for the First Place Loan program. If you qualify, you can get approved for a 30-year fixed mortgage on a conventional, FHA, VA, or USDA loan.
  • Mortgage Credit Certificate The Mortgage Credit Certificate can allow first-time homebuyers to save on their federal tax bills. As long as you meet certain income and purchase price limits, you may cash in on an annual tax credit of up to 25% of the total amount you pay in mortgage interest.

Mortgage refinance rates in Missouri

If you’re thinking about refinancing your mortgage in Missouri, keep a few things in mind.

  • Break-even cost — Once you know the closing costs for your refinance, you can use any savings on your monthly mortgage payment to calculate how long it will take you to recoup that investment and “break even.”
  • Cash-out refinance — Have you accumulated equity in your home that you’d like to convert to cash? A cash-out refinance lets you refinance your home for more than what you owe and get cash in return. But you’ll owe the full amount plus interest and you’ll end up owning less equity in your home, which means less cash in your pocket if you sell in the future.
  • Loan term — You also may want to either shorten or extend your loan term. For instance, if you have a 30-year mortgage, you may want to convert it to a 15-year loan. Keep in mind that reducing your term likely means you’re paying more each month — but less in interest over time. Lengthening your loan term may mean you pay less each month, but more interest over the course of the mortgage.

About the author: Anna Baluch is a freelance personal finance writer from Cleveland, Ohio. You can find her work on sites like The Balance, Freedom Debt Relief, LendingTree and RateGenius. Anna has an MBA in marketing from Roosevelt Un… Read more.