How to Buy a House in Mississippi: 6 Steps

Purchasing a house is a major financial decision that requires careful consideration. In Mississippi, the average home value stands at $183,340, which is significantly lower than the national average of $362,481. This difference makes Mississippi an attractive option for potential homebuyers looking for more affordable housing opportunities.

Understanding down payment assistance programs, mortgage types and state-specific regulations and requirements can ensure a smooth journey toward homeownership in the Magnolia State. MoneyGeek has compiled the essential pointers to help you navigate the homebuying process in Mississippi, from saving the down payment and choosing the ideal location to finding the best financing option for your particular needs and credit history.

According to the U.S. Census Bureau, the homeowner vacancy rate in Mississippi for the second quarter of 2024 was 0.6%. The homeowner vacancy rate measures the percentage of homes that are vacant and available for sale. This rate provides insights into the housing market's balance between supply and demand.

The stable vacancy rate for homeowners, where buyers have choice and flexibility, is 2%. Mississippi's rate of 0.6% suggests there is not enough inventory on the market to satisfy homebuyer demand. This scenario indicates a competitive housing market, where buyers may face challenges in finding available homes. Homebuyers in Mississippi should be prepared for potentially higher prices and limited options.

Before buying a house in Mississippi, evaluate your financial and credit history. A strong financial profile increases your chances of getting approved when applying for a mortgage. Lenders assess your creditworthiness and financial stability, so ensuring your credit score is in good shape and your finances are well-managed is beneficial.

Your credit score plays a pivotal role in determining the mortgage loans and interest rates you qualify for. A higher score increases your chances of securing a reasonable rate. As of the third quarter of 2023, the average credit score in Mississippi is 680, according to Experian.

If you have a poor credit score, defined by FICO as below 580, buying a house is still possible, although getting approved for a mortgage may prove challenging. Check the table below to see which mortgage type is ideal for you based on the minimum credit score requirements.

Source: Experian

Your debt-to-income ratio is a key metric that lenders use to assess how much of your monthly income is dedicated to debt payments. This helps them evaluate how much mortgage debt you can responsibly take on. In Mississippi, the average mortgage debt in the third quarter of 2023 was $146,515, according to Experian. This figure highlights the additional financial responsibility that comes with homeownership, emphasizing the need to understand your financial limits.

Monthly debt payments included in your debt-to-income ratio calculation typically encompass mortgage payments, credit card bills and other loan obligations. Use our debt-to-income ratio calculator below to see your front-end DTI, which is the percentage of your income that goes toward housing costs and your back-end DTI, which includes all debt payments. Knowing these figures can help you manage your financial commitments effectively.

Buying a house you can't afford can lead to financial strain and stress, making it vital to understand your budget before making such a commitment. One effective guideline to follow is the 28% rule, which suggests that your monthly mortgage payment should not exceed 28% of your monthly income. This rule helps ensure that you maintain a healthy balance between housing costs and other financial obligations, preventing the common mistake of overextending yourself financially.

The median annual income in Mississippi, as reported by the U.S. Bureau of Labor Statistics in April 2024, is $37,500. This translates to a gross monthly income of $3,125 before taxes. Applying the 28% rule, a homebuyer in Mississippi should aim to spend no more than $875 on their monthly mortgage payment. This calculation provides a practical framework for determining how much house you can afford based on your income.

To get a personalized estimate of your potential monthly mortgage payment in Mississippi, use our mortgage calculator below.

A down payment is the initial upfront payment made when purchasing a house. Its role is to reduce the loan amount and demonstrate the buyer's commitment. Typically, homebuyers aim to put down 20%, which is often regarded as the standard. This can be a significant obstacle for many. In Mississippi, the average home value is $183,340, requiring a 20% down payment of $36,668. For homes valued above average at $240,000, the down payment would be $48,000.

Fortunately, saving up for a 20% down payment is not a requirement. Many mortgage types allow for smaller down payments. For example, government-backed loans like VA loans require 0% down, while FHA loans need only 3.5%.

When putting down less than 20%, your lender may require you to take out private mortgage insurance. You can use our PMI calculator to estimate your monthly premium based on your credit score and down payment.

Mississippi offers several down payment assistance programs that make homeownership more accessible. These programs are designed to help prospective buyers overcome one of the biggest hurdles in purchasing a home: the initial down payment. By reducing this financial barrier, more individuals and families can achieve their dream of owning a home.

For those interested in exploring these options, the Mississippi Home Corporation (MHC) provides a range of programs tailored to meet different needs. Prospective homeowners should review these resources to understand the benefits and qualifications associated with each program.

Choosing the right location in Mississippi involves considering several key factors. Begin by evaluating the average house price in the area and how close it is to family, friends and your workplace or school. Access to public transportation, parks, restaurants and shopping centers can greatly influence your lifestyle and should be factored into your decision.

The cost of living also plays a significant role in selecting your new home. According to the Missouri Economic Research and Information Center (MERIC), Mississippi's cost of living index for the first quarter of 2024 is 88.3, which is below the national average of 100. Consider the following expenses when determining the right location:

• Food
• Healthcare
• Clothing
• Utilities
• Education
• Transportation
• Entertainment

Check out the table below to see some cities in Mississippi and their average home values based on recent data. You can also use our cost of living calculator to help you estimate how much you'll need to pay for all the essentials in different locations.

Source: Zillow

Working with a real estate agent can significantly expedite your house hunt in Mississippi. Agents provide the advice you need, manage the paperwork and offer an expanded list of property options you might not find on your own. They can also recommend other service providers, such as title companies and inspectors, to assist you in purchasing your home in Mississippi.

When finding a real estate agent, it's crucial to do your due diligence and interview agents with experience in the neighborhoods you're interested in. Consider the following tips:

• Find someone compatible with your needs and personality
• Verify the agent's credentials, training and licensure
• Ensure they have in-depth knowledge of the area
• Shop around for agents and compare their rates

You can also use the license holder search tool from the Mississippi Real Estate Commission to find or verify real estate agents in Mississippi.

Navigating the homebuying process involves finding a mortgage that fits your budget. In Mississippi, you can choose from conventional, jumbo, FHA, VA and USDA loans. You also have the option of 10-year, 15-year, 20-year, or 30-year terms. Deciding between a fixed-rate mortgage or an adjustable-rate mortgage (ARM) is another crucial step. Selecting the best financing option not only increases your chances of approval but also saves money over time.

Interest rates on a mortgage can change daily due to factors like the type of mortgage, the lender and the economy. The interest rate is the cost of borrowing the principal loan amount, while the APR includes the interest rate plus other fees or costs associated with the loan. This makes the APR a more comprehensive measure of the true cost of borrowing, allowing you to compare different loan offers more effectively.

As of October 2024, the APR for a 30-year fixed conforming loan in Mississippi is 6.01% and for a 30-year fixed rate FHA loan, it is 7.91%. Check the table below to see the current mortgage rates in Mississippi by mortgage type.

Securing a mortgage pre-approval in Mississippi is a strategic move for prospective homebuyers. It helps you understand your borrowing capacity and strengthens your position when making an offer on a home. Lenders issue a mortgage pre-approval letter, which shows sellers that you are a serious buyer with the financial backing to purchase a property. This letter typically remains valid for 60 to 90 days, giving you ample time to find the right home.

To obtain a mortgage pre-approval, you will need to submit several documents, including:

• Proof of income (e.g., pay stubs, tax returns)
• Credit history
• Identification (e.g., driver's license, Social Security number)
• Employment verification
• Bank statements

Home inspections in Mississippi are highly recommended during the homebuying process. Inspectors typically examine various parts of the house, including the roof, foundation, plumbing, electrical systems and HVAC systems. An inspection report will detail any defects or necessary repairs, providing you with a comprehensive view of the property's condition. This information helps you make an informed decision about your purchase.

For example, an inspection might reveal significant issues like a faulty foundation or outdated electrical systems. Such findings can affect the appraisal value of the home, potentially lowering it. As a buyer, you might decide to rescind your offer if the inspection results indicate costly repairs or safety concerns. This scenario underscores the importance of understanding the property's condition before finalizing your purchase.

In Mississippi, the regulation of home inspections falls under the oversight of the Mississippi Home Inspector Regulatory Board, which operates as part of the Mississippi Real Estate Commission. Home inspectors in the state are required to follow the Mississippi Standards of Practice and Code of Ethics, which are adopted from the American Society of Home Inspector’s (ASHI) standards. This ensures a consistent level of professionalism and quality in home inspections.

If you're looking for a home inspector in Mississippi, make sure they are licensed. This is a crucial step in ensuring you receive a thorough and professional inspection. Additionally, consider checking online reviews and asking past clients for references to gauge the inspector's reputation. The Mississippi Real Estate Commission's home inspector search tool can also be a valuable resource for finding or verifying licensed home inspectors. By taking these steps, you can make a more informed decision and feel confident in the inspection process.

In Mississippi, home appraisals are a necessary part of the homebuying process. They provide an unbiased estimate of a property's market value, which helps ensure that buyers are paying a fair price. According to the 2023 Appraisal Survey from the National Association of Realtors (NAR), the median cost of a home appraisal in 2023 was $500.

While both inspections and appraisals are crucial in the homebuying process, they serve different purposes. A home appraisal determines the property's value, while a home inspection assesses its condition. Lenders require appraisals to confirm that the property's value supports the mortgage amount, protecting their investment.

Closing is the final step in buying a house in Mississippi, marking the moment you receive the keys and ownership transfers. Your lender must provide a closing disclosure document three days before the official closing. This document outlines loan terms, projected monthly payments and closing costs. Plan a final walk-through with your real estate agent near closing day to ensure the property remains in the expected condition.

On closing day, you will encounter a variety of paperwork that needs to be reviewed and completed. Each document plays a role in finalizing your home purchase. Here are some of the documents you will need to sign:

• Final loan application: This document confirms the terms of your mortgage and verifies your financial information. It's crucial to ensure all details are accurate to avoid complications.
• Deed transfer: This document legally transfers ownership of the property from the seller to you. It must be signed to officially make you the property owner.
• Promissory mortgage note: This is a legal promise that you will repay your mortgage loan according to the agreed terms. It includes details like interest rate, loan amount and repayment schedule.
• Homeowners insurance: Homeowners insurance in Mississippi protects your new home from potential damages and is often required by lenders. It covers risks such as fire, theft and natural disasters, providing peace of mind for your investment.

When purchasing a home, one of the expenses you'll encounter is closing costs. These are fees paid at the closing of a real estate transaction. In Mississippi, the average closing costs are $2,622, according to NAR. Several fees typically make up these costs:

• Appraisal fee: This fee covers the cost of having a professional appraiser evaluate the property's value.
• Title search and insurance fee: This fee ensures that the title to the property is clear of any liens or disputes.
• Escrow deposit: An escrow deposit is required to cover property taxes and insurance premiums.
• Prepaid costs: These include expenses like homeowner's insurance and property taxes paid in advance.
• Other closing costs: These can include various administrative fees, such as notary fees and recording fees.

If you are a first-time homebuyer, learning the different first-time homebuyer programs in Mississippi can also help you achieve homeownership faster.

Buying a house in Mississippi was a significant financial commitment lasting for many years. We answered some frequently asked questions about buying a house in Mississippi to kickstart your homebuyer journey.