Featured Experts
Derrick Rose
Derrick Rose Public information officer, Arkansas Development Finance Authority View bio
Joel Doelger
Joel Doelger Director of community relations and counseling, Consumer Credit Counselors of Arkansas View bio

At last, you’re ready to buy that first house in Arkansas, but the mortgage process soon proves daunting. You’ve come to the right place to get started. This guide covers mortgage rates and shopping for the best, getting up-to-date on your credit scores and looking at ways to get the money you’ll need for a down payment and closing costs. Here are tools for navigating the lending landscape in the Razorback State.

1

Understanding Arkansas Mortgage Rates

Powered by AR Mortgage Rates

Interest rates on home loans in Arkansas can change daily, though usually by mere fractions of a percent. Mortgage companies will advertise their best rate available, though that doesn’t mean everyone buying a house will get that prime loan rate. This will vary on several factors, mainly your credit scores. To a lesser extent, housing demand can affect rates as well as state economic conditions. Any lender in Arkansas will provide a no-obligation rate quote and try to pre-qualify buyers for a mortgage so they can go house shopping. Better to go this route and establish that you probably will qualify for a home loan than to find a house you adore and discover the banks won’t lend to you or lend as much as you need. The borrower’s credit history, net worth and monthly income are always part of the lending equation.

Because credit scores are so important to mortgage lending in Arkansas, it’s a good idea to check them at least annually. You can get free yearly reports from each of the three major credit reporting companies: Experian, TransUnion and Equifax. New homebuyers can quickly estimate the interest rate they can expect in Arkansas once they know their credit scores. Housing experts in the state say it’s best to start fixing errors on your credit report at least six months and in some cases a year before you get serious on buying a house.

Learn more about economic factors that move mortgage rates.

2

First-Timer? Get Homebuying Help in Arkansas

The Arkansas Development Finance Authority provides extensive loan programs and education resources for the first-time homebuyer.

The ADFA recommends that first-time homebuyers talk to a lender to get preapproved for a mortgage. The two programs of greatest interest to first-time homebuyers are the ADFA Advantage Home Loan Program and the ADFA Move Up Program, which is for buyers with higher incomes. Either program offers optional down payment assistance and help with closing costs. Down payment aid is in the form of a 10-year second mortgage at a fixed interest rate.

Financial Assistance in Arkansas for First-Time Buyers

Other Arkansas agencies can help first-time homebuyers finance their homes. Here are resources to get you started:

You can also meet with a counselor to go over key homebuyer concerns:

  • Determine how much home you can afford.
  • Go over your credit reports.
  • Make a plan to solve any problems on the reports.
  • Get detailed information on the ADFA’s mortgage programs.
  • Set a strategy and timeline for homeownership.

Sometimes the first-time home buyer in Arkansas gets everything lined up to apply for a mortgage but ends up just shot of the cash required upfront for a down payment. Other times, a big bill awaits at the end of the sale with unanticipated closing costs, which can run several thousand dollars. For these individuals, there are numerous programs in Arkansas to help cover the shortfall and close the deal.

Financial Assistance for First-Time Buyers in Arkansas

Here’s a list of financial resources for the first-time homebuyer shopping in Arkansas.

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3

Understanding Home Affordability in Arkansas

Arkansas’s economy, employment level and housing demand all impact the real estate market, pushing house prices higher or lower along with interest rates. Home sales are up nearly 20 percent year-over-year, according to the Arkansas Realtors Association. At the same time, the value of all houses sold has spiked almost 14 percent.

Average apartment rentals in Arkansas are lower than national numbers, though as rents inevitably increase, buying a home becomes a more attractive option for many Arkansas residents.

Yet with a modest credit score of at least 640, many Arkansas residents could qualify for loans and grants through the state’s Housing Finance Agency. A complete financing package that includes a fixed-rate mortgage, Arkansas down payment assistance and most or all closing costs could work out to less than a monthly rent payment.


How Mortgage Rates and Home Prices Affect Monthly Payments

Metro Area Estimated Monthly Mortgage Payment* Q1 2016 (Change from Previous Year) 2015 Median Home Price 2014 2013
Little Rock-N. Little Rock $614 $130,800 (-0.80%) $135,900 $131,700 $137,000
Memphis $637 $135,800 (+2.80%) $147,000 $138,600 $129,400

Source: National Association of Realtors Q1 2016 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q1 2016 and a 30-year fixed mortgage with today’s rates.

4

Figure Out How Much You Can Borrow in Arkansas

Different Arkansas counties have different lending limits for FHA mortgage loans, with $271,000 on the lower end of the range. Conventional loan limits are set at $417,000. Here’s a listing by locality of FHA and conventional loan limits in Arkansas:

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5

Buying a Home in Arkansas: Learn from the Experts

expert

Derrick Rose is a public information officer for the Arkansas Development Finance Authority.

expert

Joel Doelger is Consumer Credit Counselors of Arkansas’ director of community relations and housing counseling — a position he has held for 22 years.

What’s the biggest thing first-timers overlook when they’re ready to buy a house?

Rose

Getting prequalified by a bank is a great first step before working with a government housing agency. By working with a lender they’ll knowing how much home they can buy. Any first-time homebuyer should find out what kind of loan they qualify for. And pull your credit scores so you know what they are.

I think the biggest hurdle we see is that down payment and coming up with the closing costs, so that’s one thing to think about early on: start saving. Right now our lowest rate is 2.5 percent and that’s the lowest in our 39-year history, but what I mean is, we recently had a couple buy their first home and they weren’t so excited with the interest rate but the down payment assistance we offer.

Doelger

Not being aware of what their credit standing is. That’s a common problem. We recommend people check their credit on a regular basis, at least once a year, and see what’s going on. If there’s been an identity theft or something, they can address that. Sometimes it’s an old bill. A medical debt for $50 has gone ignored and now it’s come back to haunt you on that credit report.

What can first-time homebuyer do to repair damaged credit so they can qualify for a mortgage?

Rose

If you know you’ve got a bad score work with a counselor to get that credit score up. If you’ve got a good lender they can help you work on that. It might take more than a year to turn it around, depending on the problem, so the best thing to do is not ignore it.

Doelger

Good credit standing involves two things – positive reported information and bad or delinquent debts. Paying cash for everything does not help people in getting a mortgage because their credit worthiness doesn’t exist yet. So at least a year beforehand, pull up your credit, and start building a positive history. That can be simple as getting a gasoline credit card and paying off fuel purchases every month so you’re not being hit with a finance charge. You’ve got to buy gas, anyway, and you’re building positive credit.

Are there obstacles to home ownership right now in Arkansas, such as affordable houses for first-time buyers?

Rose

We’re making loans in the $100,000 to $150,000 range for first time homebuyers’. There seem to be homes out there and lenders willing to work with those folks.

Doelger

The people we encounter generally don’t have a lot of savings. Part of the reason they attend our classes is to qualify down payment assistance. It’s a requirement of Attending our class and using the development finance authority’s down payment assistance program. It’s a requirement of the AFDA.

In the northwest corner of Arkansas there are houses available. The southwest and delta areas of the state are a lot poorer and I can’t speak to those areas of the state, but in our area the housing seems adequate for the demand. We’re also seeing some strength in people moving out of a starter house into something better, which opens up more houses for first-tome buyers.

The specter of student loan debt hangs over a lot of first time homebuyers who’ve said they ran into some bumps along the way and their student loans went into default. There are a lot more options these days, particularly for government student loans. So don’t think of a delinquent student loan debt as a barrier because you can make a plan to get out of default, rather than worrying every year about having your tax returns withheld. A lot of agencies like ours offer student loan counseling now, when some years ago they had to research it alone or deal with shark agencies charging hundreds of dollars to help.

6

Plan Ahead for Arkansas Closing Costs

On the final day of the deal, you’ll sit down with your lender and the house seller to close on the home, at which time various fees that may run to an average of $1,000. The lender tacks on origination fees to the mortgage. An appraiser gets a fee to certify the value of the property. If lawyers are involved, they’ll hand you a bill, too. There’s a separate charge for researching the title to a house — money worth paying to ensure you get a clean title on a home with no liens against it, as well as a transaction between the lawful owner and the buyer. Arkansas ranks about $20 higher than the national average on closing costs. A breakdown on specific fees is below.

More information on how lenders set closing costs and what you can expect can be found here.

Average Closing Costs in the Arkansas State

Average Origination
Fees
$1,057
Average Third-Party
Fees
$760
Average Total Closing
Costs
$1,817

Source: Bankrate’s 2015 survey of closing costs.

Refinancing a Mortgage in Arkansas

By refinancing a home loan in Arkansas you could save many thousands of dollars over the life of the new loan compared to your existing mortgage.

Conventional home loans as well as FHA-backed mortgages can be refinanced, but the time to act is when interest rates are low. To qualify for FHA refinancing, Arkansas homeowners must use the house as their primary residence.

The Better Business Bureau of Arkansas warns homeowners of several online refinancing scams where the fraudulent lender may ask for upfront fees to get the refinancing process rolling. A common thread running through these scams is the claim that the lender is government-affiliated or in partnership with a housing agency. Beware these solicitations and contact the appropriate state agency first before doing business with a refinancing company.

For an in-depth look at refinancing, check out this MoneyGeek Guide.

Other Arkansas Mortgage Resources

Arkansas Development Finance Authority

State resources, including funding to assist first-time homebuyers throughout Arkansas.

American Dream Down Payment Initiative

State-funded financial assistance to help first-time homebuyers come up with the up-front cash needed to buy a house.

HUD Homeownership Assistance in Arkansas

Financial help for residents of the Razorback State through the federal housing department.

Homebuyer Education

In Affordable Housing offers education seminars to bring new homebuyers up to speed on the Arkansas mortgage process, how to read a credit report, coming up with a down payment and more.

First Time Arkansas Homebuyer Federal Tax Credit

Information on qualifying for a new homeowner tax credit of up to $2,000 per year.

Arkansas First Time Homebuyer

Listing of financial assistance resources, including loans and grants, to help novice homebuyers in Arkansas.

Credit Counseling of Arkansas

Non-profit organization helping Arkansas residents get a handle on their debt and make a plan to pay off outstanding loans to improve their financial situation and credit scores.

Arkansas Credit Counseling Workshops and Presentations

Listing of educational events from Consumer Credit Counseling Services in Arkansas.

Arkansas REALTORS® Association

Arkansas homeownership information, including state-funded programs, compiled by the state’s professional realtors association.

Mortgage Relief Project

Get help in stopping foreclosure. Learn how the foreclosure process works in Arkansas and find region-specific help to prevent losing your home.