Arkansas First-Time Home Buyer | 2022 Programs and Grants

What to know about buying a house in Arkansas

Home prices in Arkansas rose quickly between 2021 and 2022. And that can be scary for first-time home buyers.

But there’s good news, too: Arkansas offers real, tangible help to many first-time buyers. That might include special mortgages, mortgage credit certificates that can slash your federal tax bill, and down payment assistance. Here’s what you should know.

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Arkansas home buyer overview

In March 2022, the median list price for homes in Arkansas was $245,000, according to Redfin. That was an increase of 20% year-over-year.

But while home prices in Arkansas were rising more quickly than the national pace, prices themselves were still far lower; in March 2022, the nationwide average clocked in at $412,156. So Arkansas home buyers are still getting a pretty good deal, comparatively.

Arkansas home buyer stats

Average Home Sale Price in AR	$245,000
Minimum Down Payment in AR (3%)	$7,350
20% Down Payment in AR	$49,000
Average Credit Score in AR1	694
Maximum AR Home Buyer Grant2	Up to $10,000 loan, forgivable after five years

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

First-time home buyer loans in Arkansas

If you’re an Arkansas first-time home buyer with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first-time buyers have saved a 20% down payment. But the good news is, you don’t need 20% down. Not by a long shot.

Arkansas home buyers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:

• Conventional 97: With Freddie Mac or Fannie Mae, you may qualify with a 3% down payment and 620 minimum credit score. You can usually stop paying private mortgage insurance after a few years
• FHA loan: Backed by the Federal Housing Administration, you could qualify for an FHA loan with a 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
• VA loan: Only for veterans and service members, the VA mortgage offers a zero-down-payment option. Minimum credit score varies by lender but often 620. There’s no ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
• USDA loan: For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
• ADFA mortgage programs: May include affordable mortgages, mortgage credit certificates that could reduce your annual federal tax bill, and down payment assistance

Note that government loan programs (including FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

In addition, most programs let you use gifted money or down payment assistance (DPA) to cover your down payment and closing costs. Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

If you’re unsure which program to choose for your first mortgage, your lender can help you find the right match based on your finances and home buying goals.

Arkansas first-time home buyer programs

The Arkansas Development Finance Authority (ADFA) has a mortgage program called “Move Up” that offers several types of 30-year, fixed-rate mortgages: FHA, VA, USDA, and conforming loans. When you get one of these mortgages through the ADFA, you may be in line for additional assistance with your home buying costs.

The ADFA’s website is light on details for eligibility, so contact one of its approved mortgage lenders to learn whether you qualify.

When this was written in May 2022, the most you could borrow through the Move Up program was $424,100, according to the webpage. But check when you apply to see if that’s changed. That amount was the conforming loan limit in Arkansas in 2017. But the Federal Housing Finance Agency has upped that each year since, and by 2022 it stood at $.

In addition to an “affordable” loan, you may be in line for a mortgage credit certificate (MCC). ADFA explains: “An MCC is a dollar-for-dollar tax credit for first-time, low-to-moderate income homebuyers. The certificate is issued by ADFA and allows qualifying, taxpaying homebuyers to claim a tax credit of up to 50 percent of the mortgage interest paid per year, capped at $2,000 annually.”

You might also be in line for one of ADFA’s down payment assistance programs (details coming next).

Arkansas first-time home buyer grants

ADFA has two down payment assistance programs:

1. DPA, which stands for down payment assistance
2. Arkansas Dream Down Payment Initiative (ADDI)

In both cases, you’ll need an ADFA Move Up mortgage to benefit from a program.

Arkansas DPA

It’s easier to qualify for DPA than ADDI. But you benefit less.

With Arkansas DPA, you get a 10-year loan in the form of a second mortgage with the same interest rate as your first (main) mortgage. And you have to pay both loans back in parallel.

If you’re eligible, you can borrow between $1,000 and $10,000, which should cover both your down payment and closing costs on a fine home in most of the state. You can even use it for expenses “paid outside of closing.”

Arkansas ADDI

ADDI is open only to those with modest incomes. Check the applicable income limits in each county. And there are also purchase price limits by county that are well below median home prices across the state.

But, if you qualify and are happy with what’s on offer, you get a sweet deal. You get to borrow up to 10% of the home’s purchase price, capped at $10,000. However, unlike with the DPA program, you shouldn’t usually have to repay that loan.

It comes as a “silent” second mortgage, which means you don’t make monthly payments and the interest rate is 0%. Better yet, provided you stay in residence and don’t sell the home or refinance the mortgage, the loan is forgiven in full after five years.

Buying a home in Arkansas’ major cities

Home prices are more affordable than statewide in two of Arkansas’s three biggest cities. Only Fayetteville was more costly. And it also saw the sharpest home price increases between 2021 and 2022: an astronomical 31.6 percent. Little Rock saw a decrease in home prices, while Fort Smith had only a slight increase.

Little Rock first-time home buyers

The median home listing price in Little Rock was $221,000 in March 2022, according to Realtor.com. That was a year-over-year decrease of 4.3 percent.

If you want to buy a home at that median price, your down payment options might fall between:

• $6,630 for 3% down payment
• $40,200 for 20% down payment

The City of Little Rock has a helpful down payment assistance program for first-time home buyers with modest incomes. The program’s flyer lists income caps and provides more details.

Those who are eligible can borrow up to 6% of the home’s purchase price, capped at $5,000. This takes the form of a silent second mortgage that lasts five years. That means you make no monthly payments and pay zero interest. And the loan is forgiven at a rate of one-sixtieth of the total each month. So, after 60 months (five years), you owe nothing. Find more details in this eligibility document.

Fayetteville first-time home buyers

The median home listing price in Fayetteville was $394,900 in March 2022, according to Realtor.com. That was up by an eye-watering 31.6% year-over-year.

If you want to buy a home at that median price, your down payment options might fall between:

• $11,6850 for 3% down payment
• $78,980 for 20% down payment

We could find no trace of a down payment assistance program on the websites of either the City of Fayetteville or Washington County. But you can try applying to the ADFA’s statewide program.

Fort Smith first-time home buyers

The median home listing price in Fort Smith was $164,900 in March 2022, according to Realtor.com. That was up by 3.4% year-over-year.

If you want to buy a home at that median price, your down payment options might fall between:

• $4,950 for 3% down payment
• $32,980 for 20% down payment

The Crawford-Sebastian Community Development Council, Inc. lists three down payment assistance programs open to those buying in Fort Smith. Check out all three to see which suits you best.

All three are available only to those with incomes at or below those shown in this table. And you must undergo an eight-hour course of home buyer education to be eligible.

All the programs offer silent second mortgages with no monthly payments and a 0% interest rate. And those mortgages are forgiven after five years, provided you remain in residence for that period and observe other rules.

Where to find home buying help in Arkansas

All the organizations we’ve listed above should provide advice freely to any first-time home buyer in the state of Arkansas or the local areas they serve.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources:

Statewide and regional Arkansas home buyer programs

Arkansas home buyer programs by city/town

What are today’s mortgage rates in Arkansas?

You can see today’s live mortgage rates in Arkansas here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

¹Source: Experian.com 2022 study of 2021 data

²Based on a review of the state’s available DPA grants at the time this was written