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First Time Home Buyer Arkansas
Here you will discover important information and resources if you are a first time home buyer Arkansas
If you’re a first time homebuyer in Arkansas, you should pay close attention to what I’m going to say.
Because one of the major advantages of living in Arkansas (apart from the incredible hot springs), is that first-time homebuyers may save A LOT of money through their programs and down payment help.
Move Up loan program
The ADFA Move-Up Loan Program provides an inexpensive 30-year fixed-rate mortgage to first-time home buyers in Arkansas.
There is no prepayment penalty associated with this program, which means that if you return the loan early (by refinancing or selling the property), you will not be charged an additional fee.
This program is unique in that it can be paired with other ADFA initiatives, such as down payment help.
The following are a few noteworthy points to consider:
There is An Upper Limit on the Buying Price. Your new home’s purchasing price cannot exceed $424,100.
Ratios of Debt-to-Income Are Applicable – This program normally requires a debt-to-income ratio of 45 percent.
The debt-to-income ratio is calculated by dividing total debt payments (credit card payments, vehicle loan payments, future mortgage payments, and so on) by gross family income.
For instance, suppose each member of your household earns $2,800, for a total of $5,600, and your monthly debt totals $2,400.
Divide the $2,400 debt by the $5,600 income, and the DTI equals 42%.
A Minimum Credit Score is Needed – A credit score of 660 or higher is normally required for approval of this lending program.
Class on Home Buyer Education is Required – Prior to completing the loan, first-time home purchasers must complete a homebuyer education class.
Consider taking this class early in the process to ensure that it does not cause your closing date to be delayed.
This program is advantageous for first-time homebuyers since it can be combined with down payment assistance programs and has affordable interest rates and terms.
Bear in mind that the state of Arkansas does not make the loans; rather, it links you with qualified lenders. The ADFA website contains a list of lenders.
Arkansas Down Payment Assistance Help
There are two programs available to assist first-time homebuyers with their down payments:
the Arkansas Dream Down Payment Initiative and the ADFA Down Payment Assistance program (ADDI). The ADDI program has a few advantages and disadvantages.
On the plus side, ADDI provides a more significant down payment assistance award. As a result, those that qualify will have more money in their pockets.
However, in order to qualify for this scholarship, you must comply to a few restrictions. For example, income ceilings and property purchase price ceilings.
Borrowers who qualify may receive up to 10%, or up to $10,000, in down payment help.
The scheme is structured as a second mortgage with no monthly mortgage payment — and it is completely forgiven after five years.
Arkansas Dream Down Payment Initiative
The ADDI program is only available in conjunction with the ADFA Move Up loan program.
First-time home buyers who take advantage of this program may also qualify for a special mortgage tax credit, which can help you save even more program (more on this shortly).
To meet the eligibility requirements for the ADDI program, you must meet the following criteria.
➣ Incomes of households shall not exceed the maximum permissible levels.
➣ Prior to closing, a homebuyer education class must be completed. On the HUD Approved Homebuyer Counseling Agencies website, you can locate a qualifying class (believe me, this is a lifesaver).
➣You must work with a lender who is approved.
➣ The maximum price for a property is $250,000.
Assistance with Down Payments under the ADFA
If you are not eligible for the ADDI program because your income is too high or you are purchasing a property that exceeds the purchase price cap, there is another option.
The ADFA Down Payment Assistance program assists buyers with down payments and closing fees of up to $10,000.
This is a second mortgage with a 10-year term that, unlike the ADDI program, is not forgiving.
ADFA MCC Mortgage Credit Certificate
The ADFA MCC assists first-time home buyers in defraying the annual costs of homeownership.
This program is offered to first-time homebuyers with a low-to-moderate income.
The MCC program provides first-time home buyers with a dollar-for-dollar tax credit.
The ADFA issues the certificate, which entitles homeowners to a tax credit equal to 50% of annual mortgage interest paid up to a maximum of $2,000 per year.
If the home stays your primary residence for the duration of the loan, the credit may be claimed. Several other factors to consider include the following:
The purchase price of the residence must be less than $270,000.
Your primary abode must be your home. For instance, you cannot choose to rent the home in the future and get the tax credit.
Must meet income requirements that vary by household size. The current limitations are available here.
The program is accessible only in conjunction with certain first mortgage options (ADFA Move Up or ADFA Move Up Choice).
Understanding Private Mortgage Insurance
The majority of first-time homebuyer programs need a down payment of less than 20%.
While this may be appealing to borrowers, it is critical to understand private mortgage insurance.
PMI is often necessary when a down payment of less than 20% is made on the home.
The insurance covers the lender in the event of a default. (The lender is protected if you default on your payments.)
PMI might cost between.5% and 1% of the loan amount. This equates to approximately $83 per month for each $100,000 borrowed.
As an example, suppose you acquire a house for $200,000. You could be required to pay approximately $166 per month in PMI.
Once you have at least 20% equity in your house, you may ask the lender to cancel the PMI.
For instance, suppose you purchased a home for $200,000 and it has now been evaluated at $300,000.
20% of the original buying price was $40,000. Because you have more than $100,000 in equity, you can request that the lender waive the PMI.
What If You Don’t Qualify for ADFA?
Although the ADFA offers a variety of appealing programs for first-time homeowners, it is critical to understand your federal choices.
If you do not qualify for ADFA programs, for example, there are other options available to you, including low down payment requirements and flexible qualification standards. Consider the following.
Programs administered by the FHA. Due of the program’s versatility, FHA loans are a preferred program for first-time homebuyers.
If you’re concerned about your credit score, FHA loans allow for credit scores as low as 580.
If you do not have a sizable down payment saved and do not qualify for down payment assistance, FHA loans require as little as a 3.5 percent down payment.
While FHA loans do not require private mortgage insurance, they do require an upfront premium payment and an annual premium payment.
The upfront payment is around 1.75 percent of the mortgage balance, and the monthly premium is between.45 and 1.05 percent of the loan balance.
Loans guaranteed by the VA. If you are an active military member, a retired veteran, or the spouse of a qualifying veteran, you may be eligible for a VA loan.
VA loans appeal to first-time homebuyers because they demand no down payment, have minimal credit score criteria, and do not require private mortgage insurance. To qualify for a VA home loan, you must get a Certificate of Eligibility.
USDA-backed loans. USDA loans are popular with first-time home purchasers because they offer 100% financing, competitive mortgage interest rates, and a lower mortgage insurance premium than traditional loan programs.
USDA loans have income criteria and geographical restrictions on where they can be used to acquire property.
Many first-time homeowners are startled to discover that rural areas can be located near huge urban centers.
USDA loans demand a one-time guarantee equal to 1% of the total mortgage loan amount.
Annually, 0.35 percent is guaranteed. All fees are deductible from your monthly mortgage payment.
First Time Home Buyer Arkansas Summary
If you’ve never purchased a home before, the process can be intimidating.
Fortunately, by determining what is most important to you as a homeowner, you can reduce your selections.
Do you require a low down payment? Are you looking for a program that will allow you to have a lower credit score? Do you wish to reduce your PMI premiums? Determine what is critical and discuss it with your lender.
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