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2022 Arkansas First-Time Homebuyer Programs
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Arkansas has multiple first-time homebuyer programs available statewide and locally. Buyers interested in these programs must meet residency, credit and income requirements, and additional guidelines. This article provides an overview of first-time homebuyer programs in Arkansas.
Arkansas statewide and local first-time homebuyer programs
The Arkansas Development Finance Authority (ADFA) offers numerous homebuyer programs statewide. Available assistance includes fixed-rate mortgages, down payment help and tax credits. In some cases, eligible borrowers may combine two or three programs to make their home purchase even more affordable.
In addition to state initiatives, local government and community organizations offer programs on the county or city level.
| Program name | Assistance amount | Assistance type | Where it’s available |
|---|---|---|---|
| ADFA Move-Up Loan Program | Up to $424,100 purchase price | 30-year fixed-rate mortgage | Statewide |
| ADFA Down Payment Assistance (DPA) Program | $1,000 to $10,000 down payment and closing cost assistance | 10-year second mortgage | Statewide |
| Arkansas Dream Down Payment Initiative (ADDI) | Up to 10% of the purchase price or $10,000 for down payment and closing cost assistance (purchase price may not exceed $189,000 for an existing single-family home or $243,000 for a new-construction single-family home) | Forgivable second mortgage | Statewide |
| Mortgage Credit Certificate (MCC) Program | Up to 50% of annual mortgage interest, not to exceed $2,000 | Tax credit | Statewide |
What to know about different types of down payment assistance
Closing cost and down payment assistance (DPA) programs come in many forms; borrowers should know how they work before applying.
- Second mortgage. Some borrowers agree to a second loan in addition to their first mortgage. Depending on the program, the loan may be deferred, have interest and traditional payments or be forgivable. Forgivable second mortgages usually require buyers to live in the home for a specific amount of time to receive the forgiveness.
- Grant. Programs that provide grants typically offer them to low- and moderate-income borrowers. Grant recipients do not need to repay the money.
How Arkansas first-time homebuyer programs work
If you’re interested in applying to one of Arkansas’ first-time homebuyer programs, plan to take the following steps.
→ 1. Review program options. Familiarize yourself with the available programs, including the income limits and eligibility requirements for each.
→ 2. Gather documents. Your lender will tell you exactly what paperwork is needed, but it’s a good idea to start gathering recent tax returns, W-2s, pay stubs and information on your debts and assets.
→ 3. Select a lender. To apply to one of ADFA’s programs, you’ll work directly with a participating lender in your area. Once you select a lender, it can prequalify you for a loan.
→ 4. Register for a Pre-Purchase Homebuyer Education Class. Arkansas Dream Down Payment Initiative (ADDI) applicants and some first-time homebuyers may be required to take a homebuyer education course either online or through an approved counselor.
→ 5. Reserve your loan. After your lender accepts and approves your application, it will reserve the loan for you and lock in your interest rate for up to 70 days.
→ 6. Apply for the Mortgage Credit Certificate (MCC). Eligible borrowers who plan to apply for the MCC must submit their application before closing on the home loan.
→ 7. Be aware of program guidelines. Before finalizing your purchase, make sure you understand any program requirements you must meet after closing, such as remaining in the home for a set amount of time.
Arkansas first-time homebuyer program requirements
To qualify for ADFA’s programs, applicants must meet established borrower requirements. Buyers may also need to satisfy additional guidelines, such as a minimum credit score, depending on the loan and lender.
| Program name | Credit score minimum | DTI ratio maximum | Maximum income limit | How long you have to live in home |
|---|---|---|---|---|
| ADFA Move-Up Loan Program | 640 | 45% | $137,000 (higher income limits may be permitted if outside of borrower’s base pay) | N/A |
| ADFA Down Payment Assistance (DPA) Program | 640 (borrowers must meet Move-Up loan requirements) | 45% (borrowers must meet Move-Up loan requirements) | $137,000 (borrowers must meet Move-Up loan requirements) | N/A |
| Arkansas Dream Down Payment Initiative (ADDI) | 640 (borrowers must meet Move-Up loan requirements) | 45% (borrowers must meet Move-Up loan requirements) | $30,350 to $79,100, depending on county and family size | 5 years to receive full forgiveness |
| Mortgage Credit Certificate (MCC) Program | 640 (borrowers must meet Move-Up loan requirements) | 45% (borrowers must meet Move-Up loan requirements) | $64,920 to $104,860, depending on county and family size | 9 years to avoid potential recapture tax |
THINGS YOU SHOULD KNOW
Closing cost and down payment assistance programs are typically available to borrowers who fall within specific income limits. The U.S. Department of Housing and Urban Development (HUD) sets these limits and bases them on a county’s median income. As you review homebuyer programs, it can be helpful to learn the income limits in Arkansas so you get an idea of what you qualify for.
National first-time homebuyer programs
Many national loan programs provide affordable financing with low minimum down payments and flexible eligibility requirements. Borrowers who finance a home through one of ADFA’s programs or who want to apply for one of the state’s down payment assistance programs will need to qualify for one of these loans.
→ Conventional loans. Mortgages that are not guaranteed or backed by the government are considered conventional loans. Typically these loans have stricter borrower requirements and higher down payments, but a few conventional loan programs have lenient guidelines. Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs are for low- and moderate-income borrowers, including those who aren’t first-time homebuyers. Both programs have a minimum down payment of 3%. First-time buyers, and borrowers who haven’t owned a home in the past three years, can qualify for HomeOne, guaranteed by Freddie Mac. This program has no income restrictions and has a minimum down payment of 3%.
→ FHA loans. The Federal Housing Administration (FHA), a division of HUD, insures FHA loans. These mortgages have a minimum down payment of 3.5% and a credit score requirement of 580 or above. Borrowers with credit scores between 500 and 579 can qualify for an FHA loan with a 10% down payment.
→ VA loans. Active-duty service members, veterans and eligible spouses can access loans guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans have no down payment and flexible credit requirements.
→ USDA loans. Low- and moderate-income borrowers who live in rural areas may qualify for a loan guaranteed by the U.S. Department of Agriculture (USDA). USDA loans have no down payment requirement.
FAQs about Arkansas’ first-time homebuyer programs
Who qualifies as a first-time homebuyer in Arkansas?
The majority of Arkansas’ homebuyer programs don’t require first-time buyer status. One exception is the Mortgage Credit Certificate (MCC). For that program, borrowers typically need to be first-time buyers; however, as per HUD guidelines, this includes any buyer who has not owned a principal residence in the past three years. Some homebuyers, such as veterans or those purchasing a home in a targeted area, do not need to be first-time buyers to qualify for the MCC.
Can I qualify for down payment assistance in Arkansas?
Arkansas has two statewide programs that provide down payment assistance: the ADFA Down Payment Assistance (DPA) Program and the Arkansas Dream Down Payment Initiative (ADDI). To qualify, borrowers must be within the income restrictions of each program and must also secure an ADFA Move-Up loan.
Regional housing authorities and local community organizations also offer additional DPA programs. Borrowers must meet the specific requirements of the program to which they apply. Keep in mind down payment assistance programs are subject to the availability of funds.
How much of a down payment do I need to buy a house in Arkansas?
Your down payment will depend on the mortgage for which you qualify. The minimum down payment for a conventional loan through the Move-Up program is either 3% or 5%, depending on your income. And FHA loans have a minimum down payment of only 3.5%. However, buyers can combine those loans with down payment assistance to get 100% financing.
Home price trends in Arkansas’ major areas
Home prices in Arkansas followed national trends in 2021 and increased throughout the state — by double digits in some places. In the Fayetteville area, median home prices rose 12.5% from the prior year. The median home price in the second quarter of 2021 was $223,564 in Washington County, and in Benton County, it was $240,591, per the National Association of Realtors. The typical mortgage payment in those counties was over $70 higher year over year.
Home price increases in the Little Rock area were more modest at 6.8%. In Pulaski County, the median home price as of the second quarter of 2021 was $173,825, and in Faulkner County, it was $187,145. The typical mortgage payment rose by around $25 year over year in both counties.