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If you’re hoping to buy a home in Arkansas, get ready to dig a little deeper into your pocket. December 2023 housing data from Redfin shows that prices have increased by 4.6 percent year-over-year, to a median $242,000. While that’s a better deal than you’ll find in a lot of other states (and well below the current national median price tag of $382,600), it can still feel like a large chunk of cash, especially if you’re new to homeownership.
For those seeking support, the best place to start is the Arkansas Development Finance Authority (ADFA). It offers several programs to help a first-time homebuyer, including affordable mortgages, an ongoing mortgage tax credit and loans to help cover the upfront costs of buying a home.
Arkansas first-time homebuyer programs
ADFA Move-Up Program
The Arkansas Development Finance Authority’s Move-Up Program provides affordable 30-year fixed-rate mortgages to low- to moderate-income homebuyers. This program can be used with a conventional or a government-guaranteed or -insured loan. Here are the basic requirements:
- Annual income cannot exceed $137,000
- Minimum credit score of 640
- Maximum debt-to-income (DTI) ratio of 45 percent
- Must be your primary residence, and a single-family home
- Must take a homebuyer education course (if you’re a first-time buyer and getting a conventional mortgage)
If you qualify as a low-income buyer — meaning your annual income is at or below 80 percent of the area median income (AMI) — you’ll pay a lower interest rate on the loan. Notably, you can use a Move-Up mortgage in combination with other incentives, like ADFA’s down payment assistance and a mortgage credit certificate (MCC).
Arkansas down payment assistance
ADFA Down Payment Assistance (DPA)
If you qualify for a Move-Up loan, you might also be eligible for the AFDA’s Down Payment Assistance program, which offers between $1,000 and $15,000 to help with closing costs. It’s a second mortgage with the same interest rate as your 30-year loan, but to be repaid over 10 years.
Arkansas Dream Down Payment Initiative (ADDI)
Homebuyers in Arkansas who get a mortgage through ADFA’s Move-Up Program can receive up to 10 percent of their home’s purchase price, up to a maximum of $10,000, through the Arkansas Dream Down Payment Initiative (ADDI), a program funded through the U.S. Department of Housing and Urban Development. This assistance is given as a second loan, has no monthly payment, and is forgivable after five years. If you’re a first-time homebuyer and leveraging this program, you could also be eligible for a free MCC.
This program is for low-income borrowers, so you can’t earn more than a certain amount per year, depending on where you’re buying and how many people are in your household. The purchase price is also subject to limitations based on location.
Additionally, you’ll need to complete an eight-hour homebuyer education course before your loan closes.
Mortgage credit certificate
If you are purchasing a home with an ADFA Move-Up mortgage, you might be eligible to apply for a mortgage credit certificate, which could help lower your tax bill. The MCC in Arkansas is available to first-time homebuyers, veterans and their spouses, or those buying a home in a county that has been designated as an “area of chronic economic distress” by the IRS.
With the MCC, you get an annual tax credit of up to 35 percent of the mortgage interest you pay, up to $2,000 per year, for as long as you live in the home as your primary residence. If you sell the home within the first nine years, there is a small chance you could have to pay a recapture tax, so ask a tax professional whether this is the right move for you.
To qualify, you’ll need to meet household income limits, which vary based on county and the size of your household, and the purchase price of the home can’t exceed $300,000.
Keep in mind you must apply for the MCC before closing on your mortgage to get this benefit. You’ll also pay a one-time issuance fee of 0.50 percent of your mortgage amount.
Other Arkansas homebuyer assistance programs
Many individual municipalities throughout the state offer help to first-timers. Here are some examples.
Little Rock Down Payment Assistance Program
The City of Little Rock has a down payment assistance program that offers up to 6 percent of the purchase price, not to exceed $10,000, to low- and moderate-income first-time homebuyers. The loan is forgiven over five years. You’ll need to get your mortgage through a lender that has a physical presence in the state of Arkansas, however.
Jonesboro Homeownership Assistance Program
The Jonesboro Homeownership Assistance program is designed to help low- to moderate-income first-time homebuyers purchase homes within the city limits of Jonesboro. Through the program, applicants can receive a grant to help with their down payment and closing costs. Once approved, the funds are paid directly to the applicant’s title company.The home purchased must meet HUD Housing Quality Standards, and the household must meet the federal income guidelines. Applicants must complete a HUD-approved homebuyer education course, as well.
Other Arkansas first-time homebuyer loans
As you shop for an affordable mortgage, be sure to check out national loan programs that might be a good fit for your finances. You can use them in conjunction with an AFDA program or on your own.
The Federal Housing Administration (FHA) insures mortgage loans — called FHA loans — that are underwritten and funded by private mortgage lenders (you can find them at most big banks and mortgage companies). These mortgages are popular with first-time homebuyers because of their low minimum credit score and down payment requirements. Homebuyers with credit scores as low as 580 are eligible for a mortgage as long as they can make a 3.5 percent down payment. Homebuyers with credit scores as low as 500 are eligible with a 10 percent down payment.
The U.S. Department of Veterans Affairs guarantees mortgages — called VA loans — for eligible veterans, active-duty service members and surviving spouses. These loans are popular with first-time homebuyers because of their competitive interest rates and because they don’t require a down payment or private mortgage insurance.
USDA loans can help first-time homebuyers finance their home purchase in a bucolic setting. These mortgages don’t require a down payment, but only those living or willing to buy in designated rural areas qualify for USDA loans. Compared to conventional loans, USDA loans may have additional upfront and annual fees.
You can learn more about low- or zero-down payment mortgages in Bankrate’s guide to first-time homebuyer loans and programs. The aid includes down payment assistance, loans for energy-efficient upgrades and rehab loans. If you work in public service — for example, as a law enforcement officer, firefighter or in another eligible profession — you could even qualify for the Good Neighbor Next Door program, which has a very low down payment requirement and offers access to homes at a significant discount.
As you compare options, take time to research the latest mortgage rates and loan offers from a variety of mortgage lenders. You can compare rates in Arkansas If you’d like to apply for an ADFA program, you can search for participating lenders through the agency’s website. If you find a rate that looks especially appealing, lock it in through the AFDA’s Loan Reservation system. You can lock in a rate for 70 days at no cost.
Additional reporting by Kate Peters