Many Americans dream of owning their own home but might need help knowing where to start. As one of the leading mortgage lenders in the Ouachitas and the River Valley, we’d like to offer these first-time homebuyer tips to help you start your journey to homeownership.
We will discuss the entire home buying process, how to qualify for a loan, and the kind of mortgages available in the Ouachitas and Arkansas River Valley.
What Are Homes Selling for in the Ouachitas and the Arkansas River Valley?
According to the National Association of Realtors, the median home price for the Arkansas Valley in the third quarter, of 2024 was:
- Polk County: $130,930
- Franklin County: $127,860
- Johnson County: $133,280
- Logan County: $135,530
- Pope County: $172,690
Of course, there are many options for homebuyers in the Ouachitas and the River Valley, but this gives you a ballpark idea of what the local housing market is like. Before you look at properties, you’ll need to consider where you stand financially. A good place to start is with your credit score.
Check Your Credit
Your credit score significantly impacts your ability to qualify for a mortgage and the interest rate you’ll have to pay. You can get a free credit report every year through AnnualCreditReport.com. It will include three reports from the nation’s credit reporting bureaus: Equifax, Experian, and TransUnion.
Take a close look at your credit reports in case of inaccurate information or signs of fraud, such as a credit card or loan on your report that you don’t recognize. If this happens, contact the bureau that lists the information.
Try to boost your credit score as much as possible before applying for a loan. You can improve your credit by paying your bills on time and reducing your debt from loans and credit cards. These are two important factors in determining your credit rating.
How Much Can You Afford?
There is a general rule of thumb that says you should not spend more than 28% of your monthly gross income on mortgage payments. Your gross income is how much you make in a month before taxes and other deductions are subtracted from your paycheck.
Our financial calculators make it easy for anyone to estimate their monthly loan payments based on the type of mortgage you have and the terms.
Save up for a Down Payment
The down payment you will need depends on the type of mortgage you can obtain. For a conventional mortgage, financial experts recommend a down payment of at least 20% of the closing price.
You could still qualify for a conventional mortgage with less of a down payment, though you would have to pay private mortgage insurance (PMI) which will add to the cost of your monthly mortgage payments.
Mortgage Options in the Ouachitas or River Valley
At Union Bank, we offer many types of mortgages including conventional home loans and those backed by government programs. Our conventional loans are available at both fixed and variable interest rates.
With a fixed-rate mortgage, your interest rate is set and will not change for the duration of the loan. Some people prefer this option because their monthly mortgage payments are predictable and will not change.
Variable-rate mortgages, also known as adjustable-rate mortgages (ARM) start with an introductory interest rate that’s fixed but will eventually fluctuate based on market conditions.
For example, with a 5/1 ARM, your initial rate will be set for five years and have annual adjustments until you pay off your loan.
We can also help you apply for government-backed loans. These include:
FHA Home Loans
Loans backed by the Federal Housing Administration (FHA) allow a mortgage with a down payment of as little as 3.5% of the purchase price. These are popular with first-time homebuyers because they offer more relaxed credit requirements than conventional loans.
These loans require annual mortgage insurance premiums (MIP) based on your mortgage balance and how much time you have to pay it off. Your first MIP payment would be 1.75% of your entire loan.
The amount you can borrow depends on your location and the kind of property you want to purchase. You can check the FHA’s mortgage limits online for properties in your area.
VA Home Loans
Mortgage loans backed by the Veteran’s Administration are available to active servicemembers, veterans, and some surviving family members.
With a VA loan, homebuyers can borrow up to 100% of a home’s value at a fixed interest rate, at terms more favorable than what they could obtain through a conventional mortgage. These loans do not require personal mortgage insurance (PMI).
The VA charges a funding fee for each mortgage, ranging from 0.5 to 3.3% of the total loan. Borrowers could pay this fee upfront or add it to their loan amount.
Veterans will need to confirm their status and obtain a Certificate of Eligibility (COA) through the VA’s eBenefits portal before they start the loan application process.
USDA Home Loans in Arkansas
Mortgages backed by the U.S. Department of Agriculture (USDA) are called Rural Development loans. Qualified buyers in certain areas can use these loans to buy a home with no down payment and no requirement for private mortgage insurance (PMI).
They offer 30-year terms and interest rates that are similar to conventional loans. There are two types of USDA home loans:
USDA Direct Home Loans:
Funded and approved directly by the USDA, with these requirements:
- Apply through the USDA online or at a local USDA service center.
- Limited to those with low incomes.
- The interest rate is set by the USDA at 33 or 38-year terms.
- A property must be less than 2,000 square feet.
USDA Guaranteed Home Loans:
Issued by local banks and backed by the USDA, with these requirements:
- Apply through your local bank.
- Available to low and moderate-income buyers.
- Interest rates set by your bank for a 30-year term.
- No limit on property size.
To qualify for a USDA loan, a buyer's income must be between 50% and 80% of an area’s median income. The home being purchased must be located in a rural or low-population area. You can check your eligibility status at the USDA’s Single-Family Housing Income Eligibility website.
USDA loans do require a guarantee fee, similar to mortgage insurance, with an upfront fee when you obtain a mortgage and an annual fee each year thereafter. A home must also be “modest, but also decent, safe, and sanitary” as determined by the USDA.
Financial Assistance for First-Time Homebuyers in Arkansas
The state of Arkansas has three homebuying programs that offer below-market interest rates and down payment assistance for qualified buyers.
StartSmart Mortgage Loan Program
This offers 30-year mortgages with a fixed interest rate that is approximately 1% below market rates, with no prepayment penalty. StartSmart mortgages can be used with conventional loans and those backed by the FHA, VA, and USDA.
Applicants must be first-time homebuyers who haven’t owned their principal residence for the previous three years, although veterans and their spouses do not have to be first-time home buyers.
Anyone buying a home in one of 30 counties also doesn’t have to be a first-time homebuyer. In the River Valley area, this includes Scott County.
Applicants cannot exceed the following income levels:
| County | 1–2 Member Households | 3 or More Member Households |
|---|---|---|
| Franklin County | $76,440 | $89,180 |
| Johnson County | $76,080 | $88,760 |
| Logan County | $76,080 | $88,760 |
| Polk County | $76,080 | $88,760 |
| Pope County | $76,800 | $89,600 |
| Scott County | $89,040 | $103,880 |
The home must become the homebuyer’s primary residence, the purchase price cannot exceed $425,000 and applicants must have a credit score of at least 640.
Eligible Property
- Single Family Detached
- 1-Unit Primary Residence
- Planned Unit Developments, Townhomes & Condominiums
- Modular Homes
- Duplexes – when purchasing both sides – FHA Financing Only. Must occupy 1 side and must be at least 5 years old. Targeted County duplexes can be newer
- Manufactured Homes must follow FHA, VA, and USDA guidelines
Homes can be on no more than 5 acres of land, and businesses cannot occupy more than 15% of the residence.
Move-Up Loan Program
This program offers help with mortgages, including conventional mortgages and those backed by the FHA, VA, and USDA.
They offer 30-year fixed interest rates with no prepayment penalty. Homebuyers can pair these mortgages with the state’s Down Payment Assistance (see below).
Borrowers do not have to be first-time homebuyers, but their income cannot exceed $142,000 and they must have a credit score of at least 640. The maximum purchase price is $424,100.
Down Payment Assistance Program
The Arkansas Development Finance Authority (ADFA) offers down payment assistance for those who qualify for a StartSmart or Move-up first mortgage. It covers $1,000 to $15,000 in down payment and closing cost assistance. This assistance acts like a second mortgage and has a 10-year term.
Once you have considered all your mortgage options in the River Valley and figured out where you stand financially, you will probably need to talk to a realtor.
Finding a West Central Arkansas or River Valley Realtor
There are several ways to find a licensed realtor in the Ouachita or Arkansas River Valley areas. Your friends, neighbors, and coworkers might recommend someone. Of course, you can always search online and check out their reviews.
A licensed realtor can tell you what the housing market is like in your area, walk you through the home-buying process, and negotiate for you.
You will need to sign a written agreement with an agent before they can show you a home or even give you a virtual tour. The agreement must stipulate how the agent will be paid and their compensation rate.
If you wanted to check out an open house and speak with an agent who is selling the home, you wouldn’t need to sign an agreement with them.
Searching for a Home in West-Central Arkansas or the River Valley
It never hurts to do a little home shopping on your own, especially if you want to get an idea of the kind of price ranges you’re dealing with.
With Zillow and For Sale by Owner or Redfin, you can search for homes based on price, property type, location, and other factors.
Of course, a professional realtor will have access to many more listings and can let you know of any properties that would be a good fit for you.
Get Your Mortgage Preapproval
You will need a mortgage preapproval before you make an offer on a home. Many sellers and their realtors will want to see a preapproval letter before they show you a home.
Your lender will issue a preapproval letter that spells out how much money you can borrow to buy a home and is typically good for a specific period, such as 60 to 90 days.
Before granting a pre-approval letter, your lender will examine your credit report, credit score, payment history, monthly income, household debt-to-income ratio, and employment history.
A lender will likely ask for proof of income and financial status. This includes bank statements, tax returns, and W-2 forms or pay stubs.
When You Make an Offer
Your offer to buy a home should be made in writing and identify how much you’re willing to pay and the closing terms, plus any contingencies.
A realtor could help you with this process by suggesting what your offer should be and if you need to include any contingencies in your letter.
One frequently used contingency is to require the home to be approved by a certified home inspector. This process is important because an inspector could save you money and headaches by pointing out any potential problems with the home.
When a property relies on well water, homebuyers frequently require the well to be tested and approved as safe and usable.
Your lender will likely require an appraisal by a licensed appraiser, to make sure you’re not overpaying for the home.
When You Close the Deal
If the seller accepts your offer, your lender will give you documents that lists the term of the loan, what your monthly payments will be, and your closing costs. These are usually around 2% to 5% of the closing price.
Before closing on a property, homebuyers will typically do a walk-through with their realtor, to make sure the property is in suitable condition before they take possession.
Contact a Lender to Discuss Your Mortgage Options
At Union Bank we help our customers obtain mortgages throughout West Central Arkansas and the River Valley. If you have any questions about the mortgage lending process, please contact us or visit one of our locations in Mena, Paris, Hatfield, Wickes, Ozark, Waldron, Booneville, Russellville and Clarksville.