What to know about Arkansas mortgage rates

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Arkansas offers beautiful state parks, delicious regional cuisine and exciting nightlife at casinos, comedy clubs and music venues.

All of this plus its low cost of living make the state a great place to live.

If you’re searching for a home in Arkansas, remember to shop around and compare mortgage rates. What may seem like a small difference could add up to thousands of dollars over the course of a 15-year or 30-year mortgage.

Mortgage debt in Arkansas

Credit Karma members with mortgages in Arkansas had average mortgage debt of $133,746 in 2020, with average monthly mortgage payments of $995. 

That puts Arkansas a good bit below average for both mortgage debt and average monthly mortgage payments compared to Credit Karma members across the U.S. in 2020. 

Types of home loans

If you choose to finance your dream home, you might be overwhelmed with the number of mortgage loan options out there. Here are some of the more common mortgage types Arkansas homeowners may consider.

Conventional loans in Arkansas

Conventional loans are mortgages that aren’t part of government programs. These loans tend to be good for people with solid credit and a down payment of at least 3% to 5%.

Arkansas FHA loans

FHA loans are a good option for first-time homebuyers to explore — particularly if your credit is less than perfect. That’s because you may be able to qualify with credit scores as low as 580 with a 3.5% down payment or 500 with a down payment of 10%. This FICO® score requirement is the FHA minimum standard. In general, additional lender credit score requirements may apply.

The FHA loan limit in 2021 is generally $356,352 for a one-unit property, but it can reach as high as $822,375 depending on where you live.

 Every area in Arkansas conforms to the FHA loan limit of $356,362 in 2021. 

You can find the exact limit by county on the U.S. Department of Housing and Urban Development website.

VA loans in Arkansas

If you’re an eligible veteran or service member comparing mortgage rates in Arkansas, a VA loan can be attractive since down payments and mortgage insurance aren’t typically required and you may be able to qualify even if you don’t have great credit.

Similar to FHA loans, VA loans are insured by the federal government but issued by private lenders.

Conforming loan limits in Arkansas

Conforming loans are a type of home loan that meets certain loan limits set by the Federal Housing Finance Agency. This means they can be bought by Fannie Mae and Freddie Mac, federal-government-sponsored enterprises that guarantee mortgages.

Loans that exceed conforming loan limits are known as jumbo loans. Lenders often consider these loans riskier than conforming loans. 

All of Arkansas’s counties have a conforming loan limit of $548,250 in 2021.

First-time homebuyer programs in Arkansas

If you’re hoping to buy your first home, there may be some assistance programs available to you in Arkansas.

  • ADFA Move-Up — The Arkansas Development Finance Authority’s Move-Up program offers a 30-year fixed rate mortgage with no prepayment penalty. Eligible homebuyers can choose from conventional or government-backed loans offered through a network of participating lenders. Purchase price limits may apply.
  • ADFA Down Payment Assistance — For those who are eligible, this program provides down payment and closing cost assistance of up to $10,000 in the form of a second mortgage with a 10-year term. You may need to complete a homebuyer education course to be eligible.     
  • ADFA Mortgage Credit Certificate — This is a dollar-for-dollar tax credit offered to those buying their first home as low- and moderate-income earners. This certificate lets qualified homebuyers claim a tax credit of up to 50% of the mortgage interest paid per year (up to $2,000 annually). The ADFA Mortgage Credit Certificate is available only for homes in certain counties (other restrictions and fees may apply).       

Mortgage refinancing rates in Arkansas

If you’re thinking about refinancing your mortgage in Arkansas, keep a few things in mind.

  • Break-even cost — Once you know the closing costs for your refinance, you can use any savings on your monthly mortgage payment to calculate how long it will take you to recoup that investment and “break even.”
  • Cash-out refinance — Have you accumulated equity in your home that you’d like to convert to cash? A cash-out refinance lets you refinance your home for more than what you owe and get cash in return. But you’ll owe the full amount plus interest and you’ll end up owning less equity in your home, which means less cash in your pocket if you sell in the future.
  • Loan term — You also may want to either shorten or extend your loan term. For instance, if you have a 30-year mortgage, you may want to convert it to a 15-year loan. Keep in mind that reducing your term likely means you’re paying more each month — but less in interest over time. Lengthening your loan term may mean you pay less each month, but more interest over the course of the mortgage. 

About the author: Anna Baluch is a freelance personal finance writer from Cleveland, Ohio. You can find her work on sites like The Balance, Freedom Debt Relief, LendingTree and RateGenius. Anna has an MBA in marketing from Roosevelt Un… Read more.