2024 Arkansas First-Time Homebuyer Programs and Loans

First-time homebuyer programs in Arkansas are designed to make homeownership more accessible. These programs, many of which are available through the Arkansas Development Finance Authority (ADFA), ease the financial burden of purchasing a home by offering low interest rates and assistance with the down payment and closing costs.

We’ll take a look at first-time homebuyer programs in Arkansas and how qualifying individuals and families can use them to achieve their dream of owning a home.

First-time homebuyer programs in Arkansas

Explore first-time homebuyer programs in Arkansas to get the support and resources you need for purchasing your dream home. First-time homebuyer programs in Arkansas include:

• ADFA Move-Up Loan Program
• ADFA StartSmart
• ADFA Down Payment Assistance
• Little Rock Down Payment Assistance

ADFA Move-Up Loan Program

The ADHA Move-Up Loan Program offers first mortgages, including FHA, VA, conventional and Rural Development (RD) loans, featuring a 30-year, fixed rate. Interest rates and down payment requirements vary, and there is no prepayment penalty.

Requirements

• Maximum purchase price: $424,100
• Minimum credit score: 640
• Property must be the owner’s primary residence

Pros and cons

ADFA StartSmart

The StartSmart Mortgage Loan Program utilizes IRS regulations to issue tax-exempt mortgage revenue bonds, passing on savings to homebuyers through below-market interest rates and lower monthly payments. These are 30-year, fixed-rate FHA, VA or RD loans with no prepayment penalty created for first-time homebuyers.

Requirements

• Purchase price limit: $425,000, varies by property type
• Minimum credit score requirement: 640
• Income limit: $124,040, varies by county and household size
• Property must serve as the primary residence
• Use of an approved lender is mandatory
• Applicants must qualify as first-time homebuyers, having not owned their principal residence for the past three years before closing

Pros and cons

ADFA Down Payment Assistance

ADFA Down Payment Assistance (DPA) provides eligible homebuyers with $1,000 to $15,000 for down payment and closing costs for their new home. This is a 10-year second mortgage with an interest rate matching their ADFA StartSmart or ADFA Move-Up first mortgage.

Requirements

• Must have ADFA StartSmart or ADFA Move-Up first mortgage
• First-time homebuyers must complete a homebuyer education course if combining DPA with an HFA Preferred conventional mortgage

Pros and cons

Little Rock Down Payment Assistance

The Little Rock Down Payment Assistance Program supports low- and moderate-income individuals purchasing their first homes in the city. Offered by the City of Little Rock, this loan is capped at 6% of the property’s purchase price, with a maximum amount of $10,000, and is forgiven in monthly installments.

Requirements

• Income at or below 80% area median income
• Be a first-time homebuyer
• Property must be located in Little Rock and be no more than four units
• Property must undergo inspection by city staff to ensure compliance with the City of Little Rock Minimum Housing Code Standards
• Reside in the property for a minimum of five years
• Complete a City of Little Rock-approved homebuyer counseling course

Pros and cons

Arkansas first-time homebuyer qualifications

To qualify for Arkansas first-time homebuyer’s programs, applicants must meet the following criteria:

• Be a first-time homebuyer
• Have a 640 credit score or higher
• Purchase a home at or below the price limit of $424,100 or $425,000, varies by program and property type
• Have an annual income at or below: $124,040, varies by county and household size
• Utilize the property as a primary residence
• Work with an approved lender

Steps to apply for a first-time homebuyer program

Here are the steps to apply for a first-time homebuyer’s program in Arkansas:

1. Select a program: Review each program’s requirements to determine your eligibility. This involves assessing things like income, credit score, property type and location. If you’re seeking down payment assistance, ensure you understand the requirements, particularly regarding how long you must remain in the home, especially if it involves a forgivable second mortgage.

2. Get preapproved: Select a lender and undergo the preapproval process. You can first review rates by getting prequalified, and if satisfied, proceed with getting preapproved for a more accurate idea of your potential rates. Since your credit score is considered, note that even though most programs only require a 640, having a high score can ensure lower rates. As of 2023, the average credit score in Arkansas was 696.

3. Complete a homebuyer education course: Your program may require you to complete a homebuyer education course before purchasing a home. Confirm with your lender if this is required.

4. Begin the search for your home: With preapproval in hand, you can confidently shop for a home. When you find the ideal property, complete the loan application and provide the necessary documentation to your lender before it’s sent to underwriting. You’ll also schedule the appraisal and any inspections your lender may require.

5. Close: Following approval, you can get the keys to your new home, but only after you’ve signed the loan documents and made any required payments.

Understanding Arkansas first-time homebuyer down payment assistance

Arkansas homebuyer down payment assistance presents homebuyers with an affordable pathway toward achieving their homeownership dreams. Each has its requirements, but approved homebuyers can ease the financial burden of purchasing a home.

Deferred second mortgage

The deferred second mortgage allows buyers to defer payment on a portion of the down payment until a later date. With the payment often due when the home is sold or the first mortgage is refinanced, this provides the homebuyer with additional flexibility and lowers the upfront costs.

Forgivable second mortgage

The forgivable second mortgage is another avenue for homebuyers who want to save on their home purchase. With this option, the money the homebuyers receive for the down payment is forgiven after a certain period.

Grant

Down payment assistance may come in the form of a grant. Eligible buyers may receive up to a certain amount without the requirement of repayment.

Mortgage credit certificate

Through the mortgage credit certificate program, homebuyers may be eligible to receive money back based on their mortgage interest. The total credit will equal a percentage of the mortgage interest, but it is capped at $2,000.

Keep these things in mind about DPA programs

Down payment assistance programs offer financial aid to homebuyers to help cover the upfront costs of purchasing a home, often in the form of loans and grants. When seeking this type of financial support, it is important to thoroughly review the program requirements. Pay close attention to the income thresholds to qualify for assistance and stipulations regarding repayment if the property is sold, refinanced or vacated, especially since you may have to repay a portion of the balance if you don’t remain in the home for the specified period.

How much of a down payment do I need to buy a house in Arkansas?

The down payment amount can vary depending on factors such as loan type, creditworthiness and lender requirements. For example, someone with a VA loan may put down nothing, while someone with an FHA loan may be required to put down 3.5%. In Arkansas, the average down payment for first-time homebuyers is $22,577, according to a 2023 LendingTree’s study.

Can I qualify for down payment assistance in Arkansas?

Yes, you can qualify for down payment assistance in Arkansas depending on the program. Requirements vary, but organizations and agencies offering down payment assistance generally require applicants to be of low-to-moderate income, be first-time homebuyers and reside in the home for a certain period.

How do I apply for Arkansas first-time homebuyer down payment assistance?

To apply for Arkansas down payment assistance, visit the website of the agency or organization offering the program. You can also confirm with your lender how to apply and confirm program requirements.

  Here’s what you need to know about the process of applying for a home loan.

Other first-time homebuyer loan programs

Conventional loans

Conventional loans typically require a down payment ranging from 3% to 20% of the home’s price. They lack government backing, but offer flexible terms and lower interest rates for those with higher credit scores.

FHA loans

FHA loans, insured by the Federal Housing Administration, feature some lenient requirements, including down payment options as low as 3.5%. Additionally, FHA loan interest rates are competitive, making them appealing to first-time homebuyers and individuals with lower credit scores who may not qualify for a conventional mortgage.

VA loans

VA loans are reserved for eligible military service members, veterans and their families. There’s no down payment, no mortgage insurance and closing costs are capped at 1% of the loan amount. Another perk is VA loan interest rates are often lower than what you’d see with conventional loans.

USDA loans

USDA loans are available to rural and suburban homebuyers. They come with income restrictions and require properties to be located in designated rural areas, but no down payment or minimum credit score is required.

What are the best first-time homebuyer loans?

Homebuyers are advised to consider multiple factors when selecting a home loan. Evaluating creditworthiness, income and down payment capability can help homebuyers choose a loan that aligns with their financial situation and homeownership goals. Furthermore, comparing interest rates, loan terms and eligibility criteria among different loan programs is also key to making the right decision.

Home price trends in Arkansas metro areas

Over the past year, home prices rose year-over-year between Q4 2022 and Q4 2023, in 96 of the top-100 metro areas in the U.S., according to Federal Housing Finance Agency data. Arkansas experienced more modest price changes, with the Little Rock-North Little Rock-Conway metro area witnessing a year-over-year jump of 5.5%, and a 0.4% increase between the third and fourth quarter of 2023.

Is there a first-time homebuyer tax credit in Arkansas?

Yes, Arkansas provides first-time homebuyers with mortgage credit certificates (MCC). Capped at $2,000, these tax credits can reduce federal income tax liability.

What are the current mortgage rate trends in Arkansas?

In Arkansas, the current mortgage rate trends align with the national forecast, indicating the possibility of sustained higher rates compared to previous years.