According to Affordability Rankings by US News & World Report, Missouri ranks #7 for buying a home in the country overall. It does even better in terms of its cost of living at #4. So if you’re a lover of affordable living, barbecue, and the best southern hospitality outside of the South, Missouri might just be for you.

That being said, we’re not the first ones to point out Missouri is a great place to put down some roots, so the housing market can be a little competitive.

Don’t worry, the

insurance

broker and super-app

Jerry

has got your back. In this guide, we’ll break down the step-by-step process of buying a house in The Show-Me State.

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Figure out your finances

The first step in any home-buying process is to figure out exactly what your budget will be. You’ll need to evaluate your financial situation by calculating your credit score and your debt-to-income (DTI) ratio. You’ll also need to familiarize yourself with all the expenses that accompany purchasing a house in Missouri.

So, you have some homework to do before you can start shopping for your new home. Grab your financial records and a calculator and we’ll jump right in!

Check your credit score

First, you should check your credit score. This number is crucial for calculating what kind of house you’ll be able to afford. To secure a conventional mortgage loan, you’ll typically need to have a credit score of 620 or higher.

If your credit score is below 620, it might be a good idea to consider holding off on buying a house until you’ve raised your credit. However, buying a house with less-than-ideal credit is not impossible.

These organizations will sometimes offer mortgage loans to customers with low credit:

The Federal Housing Administration (FHA) will sometimes offer loans to individuals with credit as low as 523

The Veterans Administration (VA) will sometimes offer mortgages to veterans or active service military members with credit scores as low as 500.

More:

Everything you need to know about Credit Karma

Calculate your debt-to-income (DTI) ratio

Next, you’ll need to calculate your debt-to-income ratio (DTI). Add up your recurring monthly expenses and divide them by your monthly income before taxes. Payments that count towards your DTI include:

Rent or house payments

Car payments

Credit card payments

Student loan payments

Alimony or child support

Ideally, you’ll get a result that is 0.36 (meaning your DTI is 36%) or lower. The higher your DTI is, the more difficult it will be for you to secure a mortgage. If your DTI is above 0.56 (56%), it is unlikely that you’ll be able to purchase a house in Missouri.

Determine your down payment

Whether you can secure a mortgage largely depends on how much of a down payment you are prepared to make. A conventional mortgage will require a down payment of at least 20%.

If you cannot afford a 20% down payment, you might consider purchasing mortgage insurance. Mortgage insurance protects a lender from financial loss if you default on your loan and can lower your required down payment. You can also consider seeking a mortgage loan from alternative lenders. These organizations will sometimes offer mortgages for lower down payments:

FHA loan: A mortgage insured by the Federal Housing Administration for low- and moderate-income homebuyers (especially first-time homeowners)

VA home loan: A mortgage insured by the Veterans Administration for servicemembers, veterans, and eligible surviving spouses

Prepare for closing costs and other fees

Closing costs typically add up to between 2-5% of the house’s total value. In Missouri, however, they can be significantly cheaper (sometimes as little as 0.52%). While the average cost of a house in Missouri is $177,915, homebuyers pay an average of only $1,290 in closing costs.

Closing costs typically include:

Credit report fee

Home inspection fee

Home appraisal fee

Mortgage origination fee

Earnest money paid towards your down payment

Mortgage insurance

Homeowner’s insurance

Property taxes

MORE:

How to change your address when moving

Look for homeowner’s insurance

Homeowners insurance will be a constant expense as long as you own the home. While it is not a legal requirement like car insurance, homeowner’s insurance is required by most mortgage lenders. The terms of your mortgage will probably mandate that you keep a certain level of coverage until the mortgage is paid off. Even after you own your home outright, it is a good idea to keep it insured.

Homeowner’s insurance in Missouri tends to be higher than in most places. The average cost of coverage in Missouri is $1,914 annually (compared to the national average which is only $1,387).

It’s important to compare rates from three or more insurance companies to ensure you get the best available price. But this can be a time-consuming project. It takes time and paperwork to get a quote from even one insurance company.

The good news is that the insurance comparison and brokerage app

Jerry

takes the hassle out of comparing quotes. We’ll get rates from 50+ top insurance companies in seconds at the tap of an app!

MORE: How to choose the best type of home insurance for you

Key Takeaway Evaluating your finances is the first and most important step in home buying. Calculate your DTI, credit score, and what down payment you can afford.

Get preapproved for a mortgage

Before you can begin shopping for a house, you’ll need to know exactly how much you can afford to spend. Once you have evaluated your finances, the next step is to get preapproved for a mortgage. This will give you a hard dollar amount to work with when negotiating. A lot of realtors will not even show you properties until you have proof of preapproval.

Getting preapproval for a mortgage is similar to applying for any loan. Here’s what you’ll need to do:

Choose a mortgage lender

Provide the potential lender with your Social Security Number

Supply all required information including banking information, employment history, property and assets, and any debts or financial obligations

Complete a mortgage application

Once your application is submitted, the only thing to do is wait. Make sure you are ready to buy before you submit your application as repeated applications can damage your credit.

How to pick the right mortgage in Missouri

Make sure you choose a mortgage that works for you. The two main variables you’ll want to consider are the mortgage term and the mortgage rate.

The term refers to how long the mortgage will last and how many payments you’ll make before it is paid off. Most mortgages have terms of either 30 or 15 years.

The rate refers to the size of each payment (how much you’ll be charged each month).

The term and the rate are inversely correlated, meaning if one number goes up, the other will go down. A longer term will mean a lower rate, and a shorter term will mean a higher rate. Longer mortgage terms also have higher interest rates. 30-year mortgages usually have interest rates of about 3.5% while 15-year mortgages tend to be closer to 2.5% or lower.

Remember to compare your mortgage options from several lenders before choosing one.

Look for a house

Ok! So, you’ve evaluated your financials, chosen a mortgage lender, and been preapproved. Now comes the fun part: shopping!

Pick your city or neighborhood

Get to know the area you will be moving into. Check out multiple potential neighborhoods. Evaluate each one for its atmosphere, community, cost of living, weather, and any other factors that are important to you.

It’s a good idea to have prepared a list of traits that you are looking for in a house. Rank the items on your list in order of how important they are to you. This will help you evaluate potential houses.

If you are looking for an affordable place to settle down in Missouri, you might start your search with

Richmond

Trenton

, or

Bonne Terre

. If you don’t mind paying a bit more, and you’d prefer a city with higher property values,

University City

, Sunset Hills, and Weldon Spring might be better choices.

MORE:

Buyer’s market vs. seller’s market

Before you decide on a house, check to see if it is in a buyer’s market or a seller’s market.

In a buyer’s market, there are more homes for sale than people who are looking to buy. This gives the buyer the advantage. In a seller’s market, more people are looking to buy homes than there are houses on the market. This gives the seller the advantage. If you’re not sure which type of market your new house is in, here are some quick tricks for figuring it out:

Do houses in the area sell quickly or do they stay on the market for a while? If they sell quickly, you’re probably in a seller’s market.

Do houses in the area sell for less than their original asking price? If so, you’re probably in a buyer’s market.

Most of Missouri is currently a seller’s market, meaning demand exceeds supply. This is causing property value to rise. Expect the price of Missouri homes to rise significantly in the next few years.

Find a real estate agent

Buying a house is a time-consuming and complicated process. A lot of buyers decide to hire a real estate agent to handle the heavy lifting for them. This can be a really good idea as the right agent can end up saving you a lot of money in negotiations. If you do decide to hire a real estate agent, make sure you choose one that knows the area well and communicates well.

Make an offer

Once you’ve gotten all the preparation out of the way and found the right house, it’s finally time to make an offer! This is what all the planning and paperwork were for! If you hired a real estate agent, check with them about what your offer should be. Most agents will calculate the best offer for you. If all goes well and your offer is accepted, you’ll be moving into your new house soon!

MORE: Home insurance terms you need to know

How to save on homeowners insurance

Buying a home is an expensive process and you’ll probably be looking for ways to save money. One area you can cut down on expenses is by saving on your homeowner’s insurance.

Almost all insurance companies offer a variety of discounts for qualifying customers. One common type of discount is offered for bundling home and auto insurance together. This is a great way to save since it gets you a discount on each of the bundled policies.

The licensed broker app

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FAQs

How much money do I need to buy a house in Missouri?

The exact price varies from house to house, of course. A lot of factors affect the final price including your negotiations with the seller, the house’s location, demand in the area, and more. In general, houses in Missouri cost an average of $177,915. To cover a 20% down payment and closing costs you’ll probably need to have a little over $37,000 in savings.

What credit score is needed to buy a house in Missouri?

To qualify for a conventional mortgage, you’ll need a credit score of at least 620. If your credit score is lower than that, you may still be able to get an FHA loan.

What is the best place to buy a house in Missouri?

If you’re looking for the cheapest price, Webb City, Bowling Green, and Richmond are some of the most affordable cities in Missouri. Richmond was also ranked as the #1 place to live in that state by Niche.

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