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  • Writer's pictureNathan Zarcaro

6 Misnomers About Becoming a First-Time Home Buyer in Mississippi


Becoming a homeowner for the first time is really hard to do, particularly for those with student loan debt. Between elevated home prices, high interest rates, and low inventory, there are multiple factors working against buyers.


This is true for prospective home buyers across the country, but definitely in Mississippi. What makes things even harder, though, is the amount of incorrect information about the process in The Magnolia State.


Here are six misnomers about first-time homeownership in Mississippi.



Mississippi first-time home buyer misnomers


There are a lot of inaccuracies and half-truths out there about all elements of the homebuying process for Mississippians. The six that I want to tackle include:


  1. There are no affordable homes on the market.

  2. Your mortgage lender and loan type does not matter.

  3. You need to save your down payment by yourself.

  4. You can't control your closing costs.

  5. Property taxes are high everywhere.

  6. Location is everything.



Mississippi mortgage calculator


1. There are no affordable homes on the market.


Many buyers across Mississippi have given up on searching for a home in this real estate market, due to national headlines regarding home unaffordability. And while homes are more expensive than they have been in decades (when compared to income levels), the average home in Mississippi is now worth nearly $177,000.


This price is actually a 1.4% decline in the past 12 months, according to Zillow.


Sure, this is still higher than the average home price of just $140,000 in 2020, but you can still find homes in this price range.


Counties in areas like Sallis and Kosciusko have average home values of just $124,000 and $115,000, respectively.



2. Your mortgage lender and loan type doesn't matter.


Another misnomer that many first-time home buyers believe is that your mortgage lender doesn't matter. This couldn't be further from the truth. In states as large as Mississippi, buyers have a seemingly endless list of lenders to consider.


And not only do different lenders have different underwriting/acceptance criteria, but these criteria could drastically impact the interest rate your lender quotes you.



Best mortgage lenders in Mississippi


Mississippians may finance homes by working with either a national or local lender. Some of the highest rated lenders as of late include:


  1. Homefinity: Complete with a no loan origination fee option

  2. Better.com: Another no origination fee lender

  3. Wells Fargo

  4. SoFi

  5. Ally Bank



Home loan types for Mississippi buyers


Mississippi's first-time buyers have multiple different mortgage programs to consider, including:


  • Conventional: The most common type of home loan, Conventional loans require a down payment, commonly between 10-20% of the home price. Down payments less than 20% typically require private mortgage insurance.

  • Federal Housing Administration (FHA): Many first-time buyers opt for a FHA loan, which comes with down payments as low as 3.5%. The downside to FHA loans is costly mortgage insurance premiums, which cost more than Conventional PMI.


  • Conventional 97: Conventional 97 loans are a popular alternative to FHA mortgages, since they offer 97% home financing with lower cost PMI than their FHA counterparts.


  • United States Department of Agriculture (USDA): Low to moderate income Mississippians buying homes in rural areas may opt to use a USDA loan. USDA loans are trademarked by 100% financing (zero down payment)!


  • Veterans' Affairs (VA): Veterans, active-duty military, and surviving spouses may use a VA home loan, which comes complete with zero down payment requirement, limited closing costs, and PMI waivers.


Remember - all of these loan types have their own eligibility requirements, including DTI ratios and credit scores.



3. You need to save your down payment by yourself.


If you plan on using a Conventional mortgage loan to buy your home, you're most likely thinking about saving a down payment between 10-20% of your home's purchase price.


On a $200,000 home, this means that you'll need to save between $20,000 and $40,000 in liquid savings. Many Mississippi buyers, though, inadvertently assume that they'll need to save all of this money by themselves.


In reality, Mississippi residents have access to a number of down payment assistance and first-time home buyer programs, offered by the Mississippi Home Corporation (MHC).



Mississippi home buyer and down payment assistance


Mississippi buyers should consider:


  • MHC Smart6: MHC Smart6 offers 30-year mortgages with below market rate insurance premiums. Program participants may use a Freddie Mac, FHA, VA, or USDA loan under the terms of the program, and down payment assistance may be combined. Eligible program participants will have a household income of $110,000 or under, and buy a single-family home, condo, townhouse, or duplex in Mississippi.


  • MHC Mortgage Revenue Bond 7: The MRB7 program is specifically geared towards first-time home buyers and veterans looking to buy a home within a program-designated target area. You'll need to meet credit requirements and use a Fannie Mae, Freddie Mac, FHA, USDA, or VA loan. If in a program-designated target area, the home purchase price is limit is $309,000. In all other areas, the limit is $258,000.


  • MHC Smart Solution Second: This second mortgage program is open to participants of the Smart6 program, and it provides up to $6,000 in down payment assistance to Mississippi home buyers as a second mortgage, complete with no interest.




4. You can't control your closing costs.


Buyers in every state have to pay closing costs to complete their home purchase. Buyers in Mississippi are lucky that their closing costs are among the lowest in the nation at just $2,756, versus a national average of $6,905.


But for whatever reason, many buyers assume that controlling their closing costs is entirely out of their control, which just is not true.


In reality, you may lower your Mississippi closing costs by:


  • Closing late in the month

  • Shopping around for homeowners' insurance



Closing late in the month


Your home's closing will be the only time when you'll need to prepay mortgage interest, for the remainder of the month in which you close.


By closing on the last day of the month, you'll be able to avoid prepaying this interest, which will help you to keep your expenses as low as possible. Depending on the size of your home loan, this could save you up to or even more than $1,000.



Shopping around for homeowners' insurance


One of your largest closing costs is your homeowners insurance.


Homeowners' insurance policy premiums in MS tend to vary more across the state in many other states due to the risk of environmental risks such as tornadoes and hurricanes.


Still, shopping around for premiums could save you hundreds of dollars come your closing, since you'll likely be required to prepay a year's worth of premiums.



5. All property taxes are high.


Property taxes in Mississippi rank 18th in the country by affordability, with the average homeowner paying $1,751 per year. This is far lower than the most expensive states in the country, like New Jersey.


And even if you think that $1,750 is a lot of money for you to swing each year, you'll be happy to learn that many counties across the state have lower average annual property taxes.


For example, according to smartasset, homes in Franklin, Covington, and Attala Counties only have median annual property tax payments of $503, $425, and $690, respectively.



6. Location is everything.


Okay, I know this one is going to be a little controversial.


They say that location is everything in real estate. This means that desirable areas, like along the Gulf Coast and the suburbs of cities like Jackson, typically carry higher real estate prices as a result of where the homes in these communities are located.


But in my opinion, location is not quite as important as it used to be. Here's why.


For one, the increase of remote work means living within a commutable distance to the office may no longer matter. And when you consider that living further from cities can save you money, it could be the right move for you.

Fmis


Conclusion


Many prospective Mississippi home buyers are currently on the sideline, waiting for real estate market conditions to improve.


Unfortunately, there are many misnomers about the home buying process that impact first-time and repeat buyers alike. But as buyers understand the details and nuances of the home buying process, they'll realize that their home ownership goals are still in reach!


Which of these inaccuracies most surprised you?


Tell me in the comments below.



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About Nathan Zarcaro

Nathan Zarcaro is the founder of The Student Debt Destroyer and is passionate about personal finance related causes.  A 2018 graduate of Providence College's Liberal Arts Honors Program, Nathan studied Finance, and has worked for industry leaders in both finance and healthcare.  In his free time, Nathan enjoys playing golf and traveling with his wife Brigid.

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