Arkansas First-Time Home Buying Assistance Programs for 2022

Arkansas First-Time Home Buying Guide

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    By Kim Franke-Folstad

    (Last Updated – 08/2022)

    If you’re a first-time homebuyer hoping to put down roots in the “Natural State,” better pack your patience.

    In mid-2022, first-time homebuyers in Arkansas faced many of the same challenges as buyers across the country: higher prices, lower inventory. Even though rising mortgage rates may cause things to cool in the months to come, the median selling price of an Arkansas home hit $253,300 in May 2022, a 17.2% increase in just 12 months, according to Redfin.

    In some areas, the increases were much larger. In Hot Springs, home prices were up 25.7% year-over-year. In Bella Vista, prices were up 33.2%.

    Fortunately, buyers who are struggling with the costs of purchasing their first home in Arkansas may be able to get some financial help through programs offered by the state and some cities. There also are longstanding federal programs that could improve a buyer’s chances of success.

    Recommended: Step-by-Step First-Time Home Buyer Guide

    Who Is Considered a First-Time Homebuyer in Arkansas?

    For most programs in Arkansas, there is no first-time buyer requirement. For those that do have a requirement (such as the MCC program), applicants are considered first-time homebuyers if they haven’t owned a home for at least the past three years. (Veterans, veterans’ spouses, and those buying in targeted areas also may qualify for this program.)

    Before you start any application process, whether it’s offered by a state or city, it’s a good idea to be clear on the specific eligibility standards.

    Recommended: Understanding Mortgage Basics

    4 Arkansas Housing Programs for First-Time Homebuyers

    Most homebuyer programs in Arkansas are designed for low- to moderate-income buyers who need help finding affordable loan terms or coming up with a down payment and/or closing costs.

    Program participants typically must meet requirements regarding their income, credit scores, and debt-to-income (DTI) ratio. There also may be limits on how much the home that’s being purchased can cost, and the home must be owner occupied. Also, at least one borrower may have to complete a homebuyer education course.

    The Arkansas Development Finance Authority (ADFA) offers several assistance programs first-time homebuyers might want to consider.

    1. ADFA Move-Up Mortgage Program

    The ADFA’s Move-Up program provides an affordable 30-year fixed-rate mortgage to qualifying low- to moderate-income homebuyers. Borrowers can choose from several different mortgage types, including conventional, FHA, VA, or USDA loans.

    Benefits and qualifications include:

    •  Low-income buyers who are at or below 80% of the area median income may qualify for a lower interest rate

    •  Loan can be combined with other ADFA programs (down payment assistance and mortgage credit certificate)

    •  Annual income limit is $137,000

    •  Minimum credit score of 640

    •  Maximum DTI of 45%

    •  Must take homebuyer education course if you’re a first-time buyer with a conventional mortgage

    •  Terms may vary based on type of loan

    •  Maximum purchase price is $424,100

    •  Type of homes allowed may vary based on loan type

    More information: Move Up (arkansas.gov)

    You can get started by working with a participating lender .

    2. ADFA Down Payment Assistance

    If you qualify for the ADFA Move-Up first mortgage, you also may benefit by pairing it with a second mortgage for a down payment or closing costs from the ADFA Down Payment Assistance Program. The assistance ranges from $1,000 to $10,000 and comes in the form of a 10-year second mortgage with a rate that matches your ADFA first mortgage.

    Benefits and qualifications Include:

    •  Borrowers may receive cash back at closing to cover items paid outside of closing

    •  Must be paired with ADFA first mortgage

    •  Must meet ADFA Move-Up program guidelines

    •  Cannot be combined with Arkansas Dream Down Payment Initiative

    More information: DPA (arkansas.gov)

    A participating lender can help you apply for this program.

    3. Arkansas Dream Down Payment Initiative

    The Arkansas Dream Down Payment Initiative offers low-income Arkansans a 0% interest, no-payment, forgivable second mortgage. Qualifying participants can receive up to $25,000 to pay for the down payment and closing costs on an ADFA Move-Up first mortgage.

    Benefits and qualifications include:

    •  Second mortgage is forgiven over five years if less than $15,000 and forgiven over 10 years if over $15,000

    •  Income limits based on household size and 80% of area median income

    •  Purchase price limits based on property type

    •  Homebuyer education course required prior to closing

    •  Must be paired with ADFA first mortgage

    •  Must meet ADFA Move-Up program guidelines

    •  Cannot be combined with ADFA Down Payment Assistance program

    More information: ADDI (arkansas.gov)

    You must work with an ADFA-approved lender to apply for this program.

    4. ADFA Mortgage Credit Certificate

    Eligible first-time homebuyers, veterans, veterans’ spouses, and those who are buying in targeted areas in Arkansas also may benefit from obtaining a mortgage credit certificate (MCC) through an ADFA-approved lender.

    Borrowers can use the MCC to claim up to 50% of their annual mortgage interest (up to $2,000) as a federal tax credit every year for the life of their loan. Homeowners can claim the remaining balance as a regular interest deduction.

    The MCC can be combined with an ADFA Move-Up mortgage as well as the ADFA Down Payment Assistance or the Arkansas Dream Down Payment Initiative.

    More information: ADFA MCC – MORTGAGE CREDIT CERTIFICATE (arkansas.gov)

    You can apply for the credit certificate when you take out a home loan through a participating lender .

    Other Arkansas Homebuyer Programs by Location

    If you’ve already chosen the part of Arkansas you hope to make your home, you also may want to research local buyer assistance programs.

    If you can’t find assistance in your chosen location, check back occasionally for new offers. Some first-time homebuyer programs base their opportunities (and deadlines) on the funds they expect to become available. When their money runs out, they may press pause.

    Some local programs include:

    Crawford-Sebastian Community Development Council Programs

    The Crawford-Sebastian Homeownership and Asset Development Center provides homebuyer counseling and education programs as well as down payment assistance in the form of grants and forgivable loans. For information on the benefits and requirements of various programs, you can check out the Homeownership Program page, email [email protected], or call 479-785-2303.

    City of Jonesboro Homeownership Assistance Program

    Jonesboro’s Homeownership Assistance Program was created to help low- and moderate-income homebuyers who wish to purchase a property in the city. The program offers qualifying first-time homebuyers a grant that can be used for their down payment and closing costs. For information, you can go to the Homeownership Assistance Program page, email [email protected], or call 870-336-7071.

    City of Little Rock Down Payment Assistance Program

    Little Rock’s down payment assistance program offers up to $5,000 to qualifying low- and moderate-income first-time homebuyers through a forgivable second loan. For information, check out the program brochure or ask your Arkansas lender about applying.

    City of Pine Bluff Homebuyer Assistance Program

    Pine Bluff’s Economic and Community Development Department offers this program, which was created to help low- and moderate-income buyers. Qualified applicants may receive assistance of $2,000 for a down payment and up to $3,000 for closing costs. For requirements and approved lenders, check out the program’s brochure .

    How to Apply to Arkansas Programs for First-Time Homebuyers

    Follow the links under each program to find participating lenders or other contacts.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA mortgage limits by area by area.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans , to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.

    First-Time Homebuyer Stats for 2022

    Ever wonder where you fit amid the mix of buyers who are out there shopping for their first home, or their first home in three years? Here are some stats from a recent National Association of Realtors® Profile of Home Buyers and Sellers:

    Percentage of buyers nationwide who are first-time buyers: 34%

    Percentage of buyers in the NAR’s South region who are first-time buyers: 30%

    Median household income of first-time buyers nationwide: $86,500

    Type of home purchased by first-time buyers nationwide:

    •  Detached single-family home: 80%

    •  Townhouse/rowhouse: 9%

    •  Condo/apartment (five or more units): 1%

    •  Duplex/condo/apartment (two to four units: 2%

    •  Other: 8%

    Median home price for first-time buyers nationwide: $252,000

    Median down payment for first-time buyers nationwide: 7%

    Median age of first-time buyers nationwide: 33

    Relationship status of first-time buyers nationwide:

    •  Married: 50%

    •  Single females: 20%

    •  Unmarried couples: 17%

    •  Single males: 11%

    First-time buyers with kids nationwide:

    •  No children: 70%

    •  One child: 15%

    •  Two children: 11%

    •  Three or more children: 5%

    Additional Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    Low- and moderate-income first-time homebuyers in Arkansas may be able to pair a mortgage with down payment assistance. Other first-time buyers can shop for a mortgage on their own that’s a good fit.

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

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    FAQ

    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for many government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And often, interest rates and other loan pricing are competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications.

    What credit score do I need for first-time homebuyer assistance in Arkansas?

    Most homebuyer programs in Arkansas require a minimum credit score of 640.

    Requirements may vary from one program or organization to the next, though, and some programs may use criteria other than credit scores to determine a borrower’s eligibility.

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

    Yes. The Arkansas Development Finance Authority administers a mortgage credit certificate program that allows qualifying borrowers to claim a portion of their annual mortgage interest paid as a federal credit every year for the life of their loan.

    Is there a first-time veteran homebuyer assistance program in Arkansas?

    Veterans may qualify for an ADFA mortgage and mortgage credit certificate.

    What is the average age of first-time homebuyers?

    The median age is 33, according to the National Association of Realtors.


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