If you’re hoping to buy a home in Arkansas, get ready to do some more searching than you have in the past. January 2023 data from Redfin shows that prices have increased by 5.6 percent since last year. There is also a serious shortage of supply: The number of homes for sale declined by more than 32 percent year-over-year.
With that intense competition in mind, first-time homebuyers in Arkansas need all the help they can get. The best place to start is the Arkansas Development Finance Authority, which offers programs including affordable mortgages, an ongoing mortgage tax credit and loans to help cover the upfront costs of buying a home.
Arkansas first-time homebuyer loan programs
ADFA Move-Up Program
The Arkansas Development Finance Authority’s (ADFA) Move-Up Program provides affordable 30-year fixed-rate mortgages to low- to moderate-income homebuyers. This program can be used with a conventional, FHA, VA or USDA 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
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 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 the DPA loan will need 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). This assistance is given as a second loan and 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.
Other Arkansas homebuyer assistance programs
Mortgage credit certificate
Home Equity
Bankrate insights
As of this writing, the ADFA website is saying this program’s funds are currently unavailable.
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 50 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 prior to 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.
Local homebuyer assistance programs
The City of Little Rock has a down payment assistance program that offers up to 6 percent of the purchase price, up to $5,000, 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.
Other first-time homebuyer loan programs
As you shop for an affordable mortgage, be sure to check out other national programs and grants that might be a good fit for your finances. You can learn more about low- or zero-down payment mortgages in Bankrate’s guide to first-time homebuyer loans and programs. Some of these programs offer down payment assistance, loans for energy-efficient upgrades, rehab loans and more. 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.
Get started
To learn more about Arkansas homeownership and down payment assistance programs, consider starting with the Arkansas Development Finance Authority (ADFA). As you compare options, take time to research the latest mortgage rates and loan offers from a variety of mortgage lenders. 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 a rate for 70 days at no cost.
