How to Buy a House in Missouri: 6 Steps

Purchasing a house is a major financial decision that requires careful consideration of various factors. In Missouri, the average home value is $251,455, which is significantly lower than the national average of $362,481. This difference may present an opportunity for potential homebuyers seeking affordability in the housing market.

Understanding down payment assistance programs, mortgage types and state-specific regulations and requirements can ensure a smooth journey toward homeownership in the Show-Me State. MoneyGeek has compiled the essential pointers to help you navigate the homebuying process in Missouri, 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 Missouri for the second quarter of 2024 was 1.5%. The homeowner vacancy rate measures the percentage of available homes that are vacant and for sale.

A stable vacancy rate for homeowners is 2%, which allows homebuyers some choice and flexibility in where to live. With Missouri's rate at 1.5%, there is a high housing demand for limited inventory. This means homebuyers in Missouri may face competition and potentially higher prices due to the limited availability of homes.

Before buying a house in Missouri, take a close look at your financial and credit history. A strong financial profile increases your chances of getting approved when applying for a mortgage. Ensuring your finances are in order can help you navigate the competitive housing market more effectively.

Your credit score plays a significant role in determining the mortgage loans and interest rates you qualify for. A higher score increases the likelihood of securing a reasonable rate. According to Experian, the average credit score in Missouri in the third quarter of 2023 was 714. This information is based on data from October 2023.

If you have a poor credit score, which FICO defines as below 580, buying a house is still possible, but getting approved for a mortgage may be 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 vital metric for lenders. It shows them how much of your monthly income is dedicated to debt payments, helping them determine your capacity to take on more mortgage debt. In Missouri, the average mortgage debt was $166,056 in the third quarter of 2023, according to Experian. This figure underscores the financial responsibility that comes with homeownership, making it crucial to understand your debt obligations before taking on a mortgage.

Monthly debt payments factored into your debt-to-income ratio include mortgages, credit card payments, car loans and other debts. Use our debt-to-income ratio calculator below to see your front-end DTI, back-end DTI and total monthly debt payments. Front-end DTI focuses on housing-related debt, while back-end DTI encompasses all monthly debt obligations. These insights can help you better understand your financial standing and readiness for a mortgage.

Purchasing a home beyond your financial means can lead to long-term financial strain. To avoid this mistake, consider the 28% rule, which suggests not spending more than 28% of your monthly income on mortgage payments. This guideline helps ensure you can comfortably manage your housing expenses without compromising other financial obligations.

According to the U.S. Bureau of Labor Statistics, the median annual income in Missouri as of April 2024 is $45,080. This translates to a gross monthly income of $3,757 before taxes. Applying the 28% rule, you should aim to keep your monthly mortgage payment at or below $1,052. This approach can help you maintain a balanced budget and avoid overextending your finances.

Use our mortgage calculator below to get a ballpark figure of your monthly mortgage payment in Missouri.

A down payment is the initial portion of a home's purchase price that a buyer pays upfront. It plays a crucial role in the home-buying process, often setting the standard at 20%. This percentage can be a substantial hurdle for many prospective homebuyers. For instance, in Missouri, the average home value is $251,455, making the 20% down payment approximately $50,291. If we consider a home priced above the average at $285,000, the 20% down payment rises to $57,000.

Fortunately, saving up for a 20% down payment isn't a requirement for all mortgage types. Many options allow you to put down less. Government-backed loans like VA loans require no down payment, while FHA loans require only 3.5%. These alternatives can make homeownership more accessible to a wider range of buyers.

It's important to note that if you put down less than 20%, your lender may require you to take out private mortgage insurance. This insurance is designed to protect the lender if you default on your loan. You can use our PMI calculator to estimate your monthly premium based on your credit score and down payment.

Missouri offers several down payment assistance programs that make homeownership possible for many people. These programs help reduce the initial financial burden of buying a home, making it more accessible for a wider range of individuals. For more details on the available down payment assistance programs in Missouri, check out the table below. The programs are offered by the Missouri Housing Development Commission (MHDC).

Finding the right location in Missouri for your new home involves several key considerations. Begin by examining the average house prices in various areas to ensure they align with your budget. Proximity to family, friends, work, or school can significantly impact your daily life, so consider these factors carefully. Additionally, access to public transportation, parks, restaurants and shopping centers can enhance your lifestyle and convenience.

The cost of living is another critical factor in your decision-making process. According to the Missouri Economic Research and Information Center (MERIC), Missouri's cost of living index for the first quarter of 2024 is 88.5, which is below the national average of 100. This suggests that living in Missouri may be more affordable than many other states. When evaluating locations, consider these essential expenses:

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

Check out the table below to see some cities in Missouri 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 speed up your house hunt in Missouri. They provide the advice you need to make informed decisions and offer extra hands to manage the paperwork involved in buying a home. Real estate agents also have access to an expanded list of property options that you might not find on your own. Additionally, they can recommend other service providers, such as title companies and inspectors, to assist you throughout the home-buying process.

When finding a real estate agent, ensure you do your due diligence and interview agents who have 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 Missouri Real Estate Commission to find or verify real estate agents in Missouri.

The homebuying process in Missouri requires careful consideration of the best mortgage options you can afford. Explore various types of loans such as conventional, jumbo, FHA, VA and USDA loans. You can choose from 10-year, 15-year, 20-year, or 30-year terms and decide between a fixed-rate mortgage or an adjustable-rate mortgage (ARM). Selecting the right financing option can enhance your approval chances and save you money over time.

Interest rates on a mortgage can fluctuate daily due to factors such as the type of mortgage, the lender and the state of the economy. While interest rates indicate the cost of borrowing expressed as a percentage of the loan balance, APR provides a more comprehensive picture by including additional costs such as fees and other charges. This makes APR a useful metric for understanding the true cost of borrowing. 

As of December 2024, the APR for a 30-year fixed conforming loan in Missouri is 6.41%, while the APR for a 30-year fixed rate FHA loan is 7.86%. To see the current mortgage rates in Missouri by mortgage type, please refer to the table below.

Getting pre-approved for a mortgage in Missouri is a strategic step in the home buying process. It provides clarity on your budget and strengthens your position as a buyer. Lenders issue a mortgage pre-approval letter, which serves as a conditional commitment to lend you a specific amount. This letter is typically valid for 60 to 90 days, giving you a timeframe to find a suitable property. Having this pre-approval can make your offer more attractive to sellers, as it demonstrates your financial readiness.

To obtain mortgage pre-approval, you need to submit several documents. These include:

• Government-issued identification
• Proof of income (such as pay stubs or tax returns)
• Bank statements
• Credit history
• Employment verification

It's important to understand the difference between mortgage pre-approval and prequalification. Pre-approval involves a detailed examination of your financial history and creditworthiness, resulting in a conditional loan offer. In contrast, prequalification is a preliminary assessment based on self-reported information, providing an estimate of what you might be able to borrow without any commitment from the lender.

Home inspections are highly recommended in the homebuying process in Missouri. They help identify potential issues that may not be visible during a regular viewing. Inspectors typically examine the roof, foundation, plumbing, electrical systems, heating and cooling systems and overall structure of the house. The inspection report generally includes a summary of findings and recommendations for repairs or further evaluation, providing a comprehensive overview of the property's condition.

For example, an inspection might reveal major issues such as a faulty foundation or outdated electrical systems. These findings can affect the home's appraisal value, potentially lowering it due to the cost of necessary repairs. In such cases, buyers may decide to rescind their offer, especially if the cost of repairs exceeds their budget or if they feel the property no longer meets their needs. This scenario underscores the importance of understanding inspection results and their potential impact on the homebuying decision.

Missouri does not regulate home inspections or require home inspectors to obtain a license. This means that while anyone can perform a home inspection, many professionals in Missouri choose to voluntarily obtain certification through reputable organizations such as the American Society of Home Inspectors (ASHI) or the International Association of Certified Home Inspectors (InterNACHI). This voluntary certification can indicate a higher level of expertise and commitment to industry standards.

When searching for a home inspector in Missouri, ensure they are licensed, even though it's not a state requirement. This can provide additional assurance of their qualifications. It's also wise to read online reviews and ask for references from past clients to gain insight into their reliability and quality of service. While Missouri does not offer a search tool for verifying licenses, these steps can help you find a trustworthy inspector.

Home appraisals play a vital role in the homebuying process in Missouri. They provide an unbiased estimate of a property's market value, ensuring that both buyers and lenders have a clear understanding of what a home is worth. This process helps prevent overpaying for a property and protects lenders by confirming that the loan amount aligns with the home's value. According to the 2023 Appraisal Survey from the National Association of Realtors (NAR), the median appraisal cost in 2023 was $500.

While both inspections and appraisals are crucial steps in the homebuying process, they serve different purposes. A home inspection focuses on the condition of the property, identifying potential issues or repairs needed. In contrast, a home appraisal assesses the property's market value. Lenders require appraisals to ensure that the property value justifies the loan amount being requested. This distinction helps buyers and lenders make informed decisions, ensuring financial security for both parties involved.

Closing is the final step in buying a house in Missouri, marking the transfer of ownership and the moment you receive the keys to your new property. Your lender will provide a closing disclosure document three days before the official closing. This document includes details on 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 review and complete numerous documents that finalize your home purchase. These documents are critical to ensuring a smooth transition of homeownership. Below are some of the documents you will need to sign:

• Final loan application: This document confirms the terms of your mortgage loan and verifies your personal and financial information. It ensures that all details are accurate and agreed upon by both you and the lender.
• Deed transfer: This legal document officially transfers ownership of the property from the seller to you. It is a crucial step in establishing your legal rights to the home.
• Promissory mortgage note: This is your written promise to repay the mortgage loan under specified terms. It outlines the loan amount, interest rate and repayment schedule.
• Homeowners insurance: homeowners insurance in Missouri provides protection for your new home against potential damages or losses. In Missouri, it covers risks such as fire, theft and certain natural disasters, ensuring your investment is safeguarded.

When purchasing a home, you'll encounter closing costs, which are fees paid at the end of a real estate transaction. In Missouri, the average closing costs are $2,862, according to NAR. These costs typically include several fees:

• Appraisal fee: This fee covers the cost of evaluating the property's value to determine the appropriate loan amount.
• Title search and insurance fee: This fee ensures that the property's title is clear of any liens or claims, protecting both buyer and lender.
• Escrow deposit: This involves setting aside funds to cover property taxes and insurance, providing a cushion for future payments.
• Prepaid costs: These are upfront payments for items like homeowners insurance and property taxes, required at closing.
• Other closing costs: This category can include various additional fees such as loan origination fees, recording fees and credit report fees.

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

Buying a house in Missouri represents a financial commitment that lasts for years. We answered frequently asked questions about buying a house in Missouri to kickstart your homebuyer journey.