2023 Guide To First-Time Home Buyer Programs In Arkansas

Buying your first home can sometimes feel like a complicated and expensive process due to fear of the unknown and the fact that everything you’re experiencing – including upfront costs – is brand new to you.

But the good news is there is a long list of resources and programs available across the country to help you eliminate uncertainty and save on the upfront costs of home buying.

If you’re a first-time home buyer in Arkansas, this article has everything you need to know about state and local programs that can help you pay less while getting more on your home purchase.

Arkansas First-Time Home Buyers Loan Program

From loan programs to closing cost and down payment assistance, the Arkansas Development Finance Authority (ADFA) offers several options for first-time home buyers to make homeownership more affordable and attainable. So, if you’re in the market, consider the following before buying a home in Arkansas.

ADFA Move-Up Program

The ADFA’s Move-Up Program is 30-year fixed rate mortgage that can be used in conjunction with a conventional loan, FHA loan, VA loan or USDA loan. The program offers a lower interest rate to borrowers with an annual income that is 80% or less than the area median income (AMI). It can be used alongside the ADFA’s down payment assistance offerings, which will be discussed in more detail later.

To qualify for the Move-Up Program, borrowers will need to work with an ADFA-approved lender and may need to attend a home buyer education course. There are also certain credit score requirements and income, DTI, property and loan limits. Here is an overview of the eligibility conditions:  

• Minimum credit score: 640
• Maximum annual income: $137,000
• Maximum debt-to-income (DTI) ratio: 45%
• Loan limit: $766,550
• Property type: Primary residence

Arkansas First-Time Buyer Grants And Down Payment Assistance Programs

Alongside its loan program – which may make it easier for low- to moderate-income borrowers to afford their monthly mortgage payments – the ADFA also offers other forms of assistance to help with the upfront costs of home buying, so let’s explore their first-time home buyer assistance options.

ADFA Down Payment Assistance

The ADFA’s down payment assistance (DPA) program, which was designed to help with down payment and closing costs, can be used alongside the previously discussed Move-Up Loan Program for additional financial assistance.

The program offers up to $15,000 in closing cost assistance in the form of a 10-year second mortgage. To qualify, borrowers must meet Move-Up Loan Program eligibility requirements, which are detailed above.

Arkansas Dream Down Payment Initiative

The Arkansas Dream Down Payment Initiative (ADDI) is another option to be used with the Move-Up Loan Program. This program is targeted at low-income borrowers and offers up to $25,000 in closing cost and down payment assistance.

Unlike the DPA program, this second mortgage functions similarly to a grant because it has no monthly payment requirement and is forgivable after a certain period of time. If you receive $15,000 or less in assistance, the loan is forgivable over 5 years, while assistance amounts above $15,000 are forgivable over 10 years. To qualify, your income cannot exceed 80% of the AMI.

Additional Arkansas First-Time Home Buyer Programs

Looking for more ways to save in Arkansas? In addition to the statewide programs offered by the ADFA, you may qualify for local programs and tax credits that can provide further financial relief.

First-Time Home Buyer Tax Credit

The ADFA’s Move-Up Loan Program has been discussed at length in this article, but there’s one last thing to note: borrowers who participate in the program may also qualify for a mortgage credit certificate (MCC) that can lower their tax bill.

This option allows home buyers to claim a tax credit of up to 35% of their mortgage interest per year, capped at $2,000 annually. To qualify for an MCC, you must be a first-time home buyer, veteran or veteran’s spouse or be purchasing a home in a qualifying county.

Local First-Time Home Buyer Programs

Spread across the Natural State, there are several cities that offer their own options to make housing more affordable – so if you haven’t chosen a specific Arkansas city to call home, consider the following to maximize on closing cost assistance.

Jacksonville

Funded by the Department of Housing and Urban Development (HUD), the Jacksonville Community Development Block Grant offers closing cost assistance to home buyers who are disabled, over the age of 62 or living with a low to moderate income. The grant pays half of the borrower’s out-of-pocket closing costs, capped at $3,000.

Jonesboro

Jonesboro’s Homeownership Assistance Program is available for first-time home buyers within city limits, offering grant assistance to cover out-of-pocket down payment and closing costs.

To qualify, borrowers must meet federal income guidelines and the property must meet HUD Minimum Housing Quality standards. Completion of a home buyer education course is also required, and you’ll need to fill out an in-depth application detailing your monthly expenses and income to be considered.

Little Rock

The state capital offers multiple options to lighten the financial load of home buying, including:

• Little Rock DPA: For low and moderate-income first-time home buyers, this program offers down payment assistance of up to 6% of the home’s purchase price, capped at $5,000. This second loan is forgivable over 60 months. To qualify, the household income cannot exceed 80% of the AMI.
• Save-A-Home: With this program, the city of Little Rock acquires and rehabilitates a house, then resells it at a lower cost to a low-income home buyer. This can save the buyer up to $10,000 on their home purchase.

Pine Bluff

Pine Bluff, Arkansas offers the Home Buyer’s Assistance Program, which provides up to $2,000 in down payment and up to $3,000 in closing cost assistance on a home purchase. This assistance comes in the form of a 5-year, deferred and interest-free loan, which isn’t required to be repaid unless the home is sold or refinanced within the 5-year time frame. To be eligible, borrowers must meet local income limits.

How To Use A First-Time Home Buyers Program In Arkansas

Using what you now know about Arkansas first-time home buyer programs, homeownership may not be such a distant dream. If you’re ready to buy a house in Arkansas, follow these steps:

1. Collect information and documentation. To start the process, your mortgage lender will need information about your personal finances including documents like W-2s, pay stubs and tax returns. We recommend getting these documents ready ahead of time so that when the time comes, you can share them with your lender without any process delays.
2. Choose a lender. Before buying your first house, it’s important to compare lenders. Be sure to consider interest rates, loan terms and consumer reviews to get the full picture of what you can expect.
3. Take the Pre-Purchase Home Buyer Education Class. Most of the first-time home buyer programs discussed in this article require the completion of a home buying education course to qualify. Courses are available in an online or in-person format.
4. Find a property to purchase. Once you receive your mortgage lender’s initial approval, it’s time to go house shopping! The next step of the process is to submit an offer on a house, though it may take you a little time to find your dream home.
5. Submit a mortgage credit certificate (MCC) application. Before you close on your new home, consider applying for an MCC, which can save you money on your taxes.
6. Finalize primary and secondary mortgages. When it’s time to go to the closing table, keep in mind that using a DPA program means closing on two mortgages at once, so try to be patient through the underwriting process.

The Bottom Line

The state of Arkansas may be known for outdoor activities like hiking, fishing and camping – but for those looking for more permanent forms of cover in the Natural State, home buying may be within reach with these programs offered by the Arkansas Development Finance Authority.

If you’re ready to buy a house, start the approval process with Rocket Mortgage® to progress to the next step in the home buying process.