Arkansas First-Time Homebuyer Programs
Arkansas offers several first-time homebuyer’s programs to help cover a portion of the down payment and closing costs. Arkansans can find programs through the Arkansas Development Finance Authority (ADFA), the Department of Housing and Urban Development (HUD) and Habitat for Humanity, but to qualify for the programs you’ll need a minimum credit score of 640, a debt-to-income (DTI) ratio of 45% or less and complete a homebuyer’s education course.
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First-time homebuyer programs in Arkansas
Many first-time homebuyer programs in Arkansas are available to low- to moderate-income homebuyers. Depending on the program, you can get fixed-rate loans or financial assistance to help lower the cost of the home.
ADFA Move-Up Loan Program
The Arkansas Development Finance Authority’s (ADFA) Move-Up Loan Program helps low- to moderate-income homebuyers obtain 30-year, fixed-rate mortgages. The program allows borrowers to use FHA, VA, conventional, or USDA mortgages, but interest rates and down payment are based on the loan type, lender and borrower’s income level. If eligible, borrowers could also receive assistance with their down payment and closing costs through one of two programs, which we will discuss later.
Requirements
- Minimum credit score: 640
- Debt-to-income ratio (DTI): 45%
- Annual income: $137,000 or less
- Successful completion of homebuyer education course
- Home must be the owner’s primary residence
Pros and cons
| Pros | Cons |
|---|---|
Low- to moderate income homebuyers are eligible Available for FHA, VA, conventional and USDA loans Low-income homebuyers are guaranteed a lower interest rate Down payment assistance may be available for eligible ADFA homebuyers | Not ideal for homebuyers with poor credit Cannot be used to purchase a home that isn't the owner's primary residence |
ADFA Mortgage Credit Certificate
The ADFA Mortgage Credit Certificate (MCC) helps low- to moderate-income, first-time homebuyers who purchased a home through an ADFA program. Borrowers can earn a tax credit up to $2,000 maximum and available for the life of loan; however, if you sell your home within the first nine years, you’ll be subject to a recapture tax.
Requirements
- Apply for an ADFA Move-Up Loan through an approved lender
- Complete ADFA MCC application prior to loan closing
- Home must be located in a targeted county
- Household income of less than $117,180, depending on household size
- Home price must be less than $300,000
Pros and cons
| Pros | Cons |
|---|---|
Available to borrowers with ADFA Move-Up loans Decreases overall cost of home loan | Credit is capped at $2,000 Subject to recapture tax if borrower moves within the first nine years Borrowers can lose the credit if they refinance Borrowers pay 0.5% issuance fee Home must be located in a specific county |
ADFA Down Payment Assistance Program
The Arkansas Down Payment Assistance (DPA) Program provides second mortgages that help cover the down payment and closing costs. The DPA program offers 10-year term second mortgages that cover up to between $1,000 and $15,000 in assistance. Homebuyers must purchase a home through the ADFA Move-Up Loan Program and complete a Pre-Purchase Homebuyer Education Class.
Requirements
- Apply for an ADFA Move-Up Loan through an approved lender
- Complete Pre-Purchase Homebuyer Education Class
- Home price cannot exceed $251,000, depending on property type
- Household income cannot exceed $88,400, depending on household size
- Must remain in home for five or 10 years
Pros and cons
| Pros | Cons |
|---|---|
ADDI second mortgage is forgivable Lowers closing costs and down payment | DPA second mortgage is not forgivable Must be repaid if borrower moves before mortgage term lapses |
Habitat for Humanity
Habitat for Humanity is a nonprofit that allows low- to moderate-income homebuyers purchase the homes they help build. Through its program, homebuyers can qualify for 20- or 30-year mortgages with 0% interest. Monthly payments, which include principal, property taxes and home insurance, comprise 33% of the homeowner’s monthly income. The mortgage payments made by Habitat for Humanity homeowners are used to fund the building of future homes.
Requirements
- Low- to moderate-income homebuyers whose income doesn’t exceed 80% of the area median income
- Demonstrate ability to pay mortgage
- Demonstrate need for better or improved housing
- U.S. citizen or permanent resident
- Must complete 300 sweat equity hours per adult (working on their own home, other homes or Habitat for Humanity of Central Arkansas projects or working at the Habitat ReStore
- Must attend prospective homeowner orientation
Pros and cons
| Pros | Cons |
|---|---|
Mortgage payments equal one-third of homeowner's monthly income Zero-interest mortgages Available to low- to moderate-income homebuyers with demonstrated need for better or improved housing | Must complete 300 sweat equity hours Homebuyer must wait until their house is built to move in, which can take up to a year |
Good Neighbor Next Door Sales Program
Good Neighbor Next Door sales program is a nationwide homebuyer assistance program offered by the Department of Housing and Urban Development (HUD). While this program isn’t a loan, it is still a chance for first-time homebuyers in all states to achieve their dream of homeownership. Open to teachers, law enforcement officers, firefighters, and EMTs of all income levels, Good Neighbor Next Door reduces the cost of homes in revitalized areas by 50%. HUD requires homebuyers to sign a second mortgage and note equal to the discounted amount and they must remain in the home for at least three years.
Requirements
- Employed as a teacher, law enforcement officer, firefighter, or EMT
- Must occupy residence for minimum of three years
Pros and cons
| Pros | Cons |
|---|---|
No credit score or income requirement, unless applying for FHA loan Low down payment Home price is discounted by 50% | Second mortgage is required to cover the discounted amount Homebuyer must remain in home for at least three years Limited home options List of available homes changes every weeks |
Arkansas first-time homebuyer qualifications
Most first-time homebuyer’s program in Arkansas consider the following information when determining a homebuyer’s eligibility:
- 640 minimum credit score
- Maximum annual income of $137,000
- Debt-to-income (DTI) ratio of 45% or less
- Location of home
- Maximum home price of $300,000
- Complete a homebuyer’s education course
If you are interested in a first-time homebuyer’s program, here’s how to apply:
→ 1. Review program requirements. Determine if you qualify by reviewing the requirements, including income, credit score, DTI ratio, and property type and location. And if you’re applying for down payment assistance, be sure to check out the requirements to confirm how long you have to remain in the home, especially if it is a forgivable second mortgage or grant.
→ 2. Select a lender and get prequalified and preapproved. You’ll have to work with an approved lender, and once you choose a lender, review rates by getting prequalified. If you like what you see, you can then move forward with getting preapproved to get an even more accurate idea of your potential rates.
→ 3. Complete your homebuyer education course. Most first-time homebuyer programs require the completion of a homebuyer education course that must be completed before you purchase a home.
→ 4. Find a home and complete the loan application. With loan preapproval in hand, you can comfortably shop for a home. And when you find the perfect one, you can complete the loan application and provide the necessary documentation to your lender before it is sent to underwriting.
→ 5. Close the loan. If the lender approves you for the home loan, you’ll close and get the keys to your new home.
Understanding Arkansas first-time homebuyer down payment assistance
Low- to moderate-income homebuyers purchasing their first home may also qualify for down payment assistance. If you qualify, a portion of your down payment and closing costs may be covered by a second mortgage or grant.
Deferred second mortgage
A second mortgage is an additional loan taken out alongside the initial mortgage to help homebuyers cover closing the down payment and/or closing costs. A deferred second mortgage doesn’t require payment until the home is sold or refinanced.
Forgivable second mortgage
A forgivable second mortgage operates similarly to a second mortgage, but borrowers don’t have to repay the loan if they remain in the home for a specified period.
Grant
Similar to a second mortgage, a grant is a form of financial assistance used to cover up to a certain percentage of the down payment and closing costs. Typically, the money is repaid, but, depending on the grant, homebuyers must remain in their home for a specified period or the grant must be repaid. In Arkansas, there are grants specifically for homebuyers purchasing homes in Jacksonville, Jonesboro, Little Rock and Pine Bluff; however, other statewide grants may be available.
Mortgage credit certificate
Paying mortgage interest can earn first-time homebuyers an annual tax credit through the mortgage credit certificate. If you qualify, you can claim a credit of up to $2,000 on your federal tax return.
How much of a down payment do I need to buy a house in Arkansas?
The size of your down payment on a house in Arkansas depends on the loan. For example, if you purchase your home using an FHA loan, your down payment will be 3% or 10%. However, if you go with a conventional loan, the down payment amount is determined by the lender, who may charge from 0% to 20%. Keep in mind that even if a down payment isn’t required, borrowers still have the option to put something down.
Can I qualify for down payment assistance in Arkansas?
To qualify for down payment assistance in Arkansas, homebuyers must:
→ Be low- to moderate income with an annual income of $137,000 or less
→ Be purchasing their first home
→ Complete a homebuyer’s education course
→ Use the home as their primary residence
→ Purchase a home in a specific city/town
→ Purchase their home through the ADFA Move-Up Loan Program
How do I apply for Arkansas first-time homebuyer down payment assistance?
Applications for down payment assistance through the ADFA Down Payment Assistance Program and the Arkansas Dream Down Payment Initiative are available online.
If you plan to purchase a home in Jacksonville, Jonesboro, Little Rock and Pine Bluff, grant applications for these local assistance programs are also available online through each city’s website.
Other first-time homebuyer loan programs
Conventional loans
These types of mortgages are not backed or guaranteed by the government and aren’t as flexible as other loans. If you are a first-time, low- or moderate-income homebuyer interested in a conventional loan, your odds of approval are better when applying for Fannie Mae’s HomeReady® or Freddie Mac’s Home Possible® programs. Each program only requires a minimum down payment of 3%, but fair credit is required.
FHA loans
Backed by the Federal Housing Administration (FHA), FHA loans are popular among first-time homebuyers and seasoned buyers because they offer mortgages with low down payments. Borrowers can expect to pay a minimum down payment requirement of 3.5% if their credit score is 580 or above. However, borrowers with credit scores that fall between 500 and 579 can expect to pay a 10% down payment.
VA loans
VA loans, which are guaranteed by the U.S. Department of Veterans Affairs (VA), are available to active-duty service members, veterans and their spouses. No down payment or minimum credit score required, but depending on the lender, you might need at least a 620 to qualify.
USDA loans
The Arkansas Rural Development’s Section 502 Direct Loan Program offers two USDA loans: the Single Family Housing Direct Loan and Single Family Housing Guaranteed Loan. Each program is available to low- and moderate-income borrowers interested in purchasing or building a single-family home in rural areas, but you’ll want to confirm the eligibility requirements.
What are the best first-time homebuyer loans?
Conventional, FHA, VA and USDA loans are all popular with first-time homebuyers, but determining which is the best for you depends on your credit score, down payment amount and location of the home.
| First-time homebuyer loan | Best for: |
|---|---|
| Conventional | First-time homebuyers with good to excellent credit who can afford a down payment of up to 20% |
| FHA | Homebuyers with poor to fair credit who can afford a down payment of up to 10% for a home with one to four units |
| VA | Military borrowers who want no down payment and limited closing costs |
| USDA | Homebuyers with low- to moderate incomes who want to purchase homes in rural areas |
Home price trends in Arkansas’ major areas
According to the National Association of Realtors (NAR), mortgage payments in Arkansas have increased significantly compared to the previous year, especially in its major counties.
Taking a look at Pulaski County, the largest county in Arkansas, the previous year’s monthly mortgage average payment of $665, there was a $404 increase, bringing the average to $1,068. And in the state’s second largest county, Benton County, the mortgage average payment of $1,581 is even higher, having jumped $658 from $924 the previous year.
Is there a first-time homebuyer tax credit in Arkansas?
Yes, there is a first-time homebuyer tax credit in Arkansas. The ADFA mortgage credit certificate can be issued to low- to moderate-income, first-time homebuyers who purchased a home through an ADFA program. The dollar-for-dollar tax credit is capped at $2,000.
What are the current mortgage rate trends in Arkansas?
Our current mortgage rates forecast predicts that rates will probably remain high compared to recent years but could start trending downward as we enter 2024. According to Freddie Mac’s Primary Mortgage Market Survey, as of December 28, 2023, the average rate for a 30-year fixed-rate mortgage is 6.61%. This average is 5.93% for 15-year fixed-rate mortgages.
You can compare rates in Arkansas using Lendingtree’s mortgage rate page.
