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Mortgage

Arkansas First-Time Homebuyer Programs of 2019

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One of the biggest challenges potential homebuyers face when preparing to buy a home is saving up for the down payment. Their credit scores might be high and their incomes stable, but any number of factors — high rent, student loans, medical bills — might prevent them from getting together the 3.5% minimum needed for FHA loans, let alone the 20% required for several types of conventional mortgages.

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The good news for Arkansans is that there are down payment and homebuying assistance programs for prospective homeowners of all income levels. From forgivable loans to low-interest second mortgages to tax credits, programs throughout the state make the dream of homeownership achievable.

Arkansas first-time homebuyer programs

There are several types of homebuyer assistance programs available in Arkansas, including down payment and closing cost assistance, forgivable loans, grants and a mortgage-based tax credit. There are statewide programs administered by the Arkansas Development Finance Authority (ADFA), as well as city-level initiatives.

Eligibility for Arkansas assistance

The basic requirements for Arkansas housing assistance programs are that you reside in the state and that you take out one of these types of qualifying mortgage: Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), U.S. Department of Agriculture’s (USDA) Rural Development or Fannie Mae HFA Preferred™ 97% or 95% mortgages (referring to the maximum loan-to-value [LTV] ratios accepted). Eligibility also depends on the type of home you’re buying. Single-family detached homes and duplexes, condominiums and modular homes qualify; manufactured houses do not.

ADFA Move-Up Loan Program

Features

  • Available for first mortgages.
  • Applies to conventional, FHA, USDA Rural Development and VA loans.
  • 30-year fixed-rate terms.
  • May be used in combination with ADFA down payment and mortgage credit programs.

Eligibility

  • Property type must be one of the following, and manufactured homes are ineligible:
    • A single-family detached home
    • Modular home
    • Condominium
    • Qualified duplex
  • Home value cannot exceed the Arkansas conforming loan limit of $424,100.
  • No income limits are in place for this loan.
  • Credit score requirements vary according to loan type:
    • HFA conventional loans, USDA and VA loans require a 640 credit score.
    • FHA loans require a 660 score.
  • Debt-to-income (DTI) ratio:
    • FHA, USDA and VA loans: 45% or less
    • Conventional loans: 45-50%
  • You do not have to be a first-time homebuyer to qualify.
  • If you (and your co-borrower, if applicable) are a first-time homebuyer, you must complete a Pre-Purchase Homebuyer Education Class.

How it works

Derrick Rose, ADFA’s director of public information and outreach, suggested that homebuyers begin the borrowing process by getting prequalified for a mortgage with a lender that participates in the organization’s programs. You can search for participating lenders on ADFA’s website. Rose said any of those listed will have issued loans with ADFA’s programs within the past two years, so you can trust that they’re familiar with the products and have helped borrowers navigate them recently.

ADFA Down Payment Assistance (DPA)

Features

  • Structured as a second mortgage with the same interest rate as the Move-Up Loan Program.
  • Ten-year loan.
  • Up to $10,000 available for closing-cost assistance.
  • No prepayment penalty.

Eligibility

  • Must be used in conjunction with a Move-Up Loan.
  • Lending requirements are the same as the Move-Up Loan Program.
  • You do not have to be a first-time homebuyer.
  • Loan must be used for down payment costs, not debt pay-off or home repairs.

How it works

The DPA option is used in combination with a Move-Up Loan to decrease your out-of-pocket expenses when buying the home, so ask your lender about it early on. They’ll help determine your eligibility and ensure you don’t miss out on the benefit, if you qualify. Learn more about the program at ADFA’s website.

Arkansas Dream Down Payment Initiative (ADDI)

Features

  • Designed for low-income borrowers.
  • Provides up to 10% of the down payment (capped at $10,000).
  • Forgivable loan if you stay in the home for five years.

Eligibility

  • Income cannot exceed 80% of the median in the county in which you plan to buy.
  • The home’s value must not exceed $250,000.
  • A home inspection is required.
  • You must complete an eight-hour Pre-Purchase Homebuyer Education Class before closing.

How it works

As long as you remain in the home as your primary residence for five years, you will not have to repay the loan. However, if you decide to move before the five-year mark, you’ll need to repay a prorated amount. So, if you sell the house after three years, you’ll owe the remaining two years’ worth of payments. To find out if you qualify for the ADDI program and to locate a participating lender, visit ADFA’s website.

ADFA Mortgage Credit Certificate (MCC)

Features

  • Up to $2,000 annual tax credit you can claim each year that you’re paying interest on the loan.
  • Receive the certificate for free if you have an ADFA loan.
  • May be combined with other ADFA programs.

Eligibility

  • The MCC is only available to the following borrowers:
    • First-time homebuyers
    • Veterans and veterans’ spouses
    • Those buying homes in counties that the Internal Revenue Service (IRS) has designated as areas of chronic economic distress. These include: Bradley, Calhoun, Chicot, Clark, Cleburne, Columbia, Conway, Crawford, Crittenden, Cross, Dallas, Desha, Drew, Jefferson, Lafayette, Lee, Lincoln, Madison, Mississippi, Monroe, Nevada, Ouachita, Perry, Phillips, Prairie, St. Francis, Scott, Searcy, White, Woodruff and Yell
  • You must apply for the MCC before closing on the mortgage. Borrowers may not apply for the certificate retroactively.
  • Income must not exceed 80% of the median in your county.
  • Eligible home purchase prices are capped at $270,000.
  • Certificates are only available through approved lenders.
  • You must live in the home as your primary residence.

How it works

The MCC does not provide assistance with your initial homebuying costs. Rather, it reduces your annual tax burden by allowing you to deduct up to 50% of the interest you paid on your mortgage in a given year. If you pay $4,000 in interest, you’re eligible to deduct the full $2,000 allowance. But if you pay less — say, $2,500 — you may deduct $1,250.

You will need to submit Forms 1040 and 8396 to claim your mortgage interest. Be sure to secure your certificate before closing so that you do not miss out on this benefit. Learn more about the MCC and where to find participating lenders at the ADFA website.

University District Partnership First-Time Homebuyer Program (Little Rock)

Features

  • Receive up to $20,000 toward closing and down payment assistance when buying a new or rehabilitated home in Little Rock’s University District.
  • Receive a purchase price reduction subsidy in the form of a grant from the University District Development Corp. (UDDC).

Eligibility

  • Program is for first-time homebuyers.
  • Amount of assistance received varies based on the homebuyer’s financial need. Income cannot be more than 80% of the median area income, based on family size.
  • Property must be “a new or recently rehabilitated home by the UDDC,” and it must be located in Little Rock’s University District.

How it works

The UDDC receives federal funds from the Department of Housing and Urban Development (HUD), via the Little Rock city government. The University District assistance programs are available to first-time homebuyers, whom HUD defines as someone who has never owned a home or who has not owned their principal residence within the past three years. Single parents who only previously owned with their spouses qualify as first-time homebuyers as well.

All participants must receive mortgage pre-approval from a participating lender and complete a Homebuyer Education class before they can apply for the cost-assistance and price-reduction benefits. To learn more about the program and where to find participating lenders, contact the UDDC.

Jacksonville Home Buyers Assistance Program

Features

  • Provides assistance for up to half of your out-of-pocket homebuying expenses, capped at $3,000.

Eligibility

  • Property must be within the Jacksonville city limits.

How it works

Contact the Jacksonville city government to learn more about the program.

Jonesboro Homeownership Assistance

Features

  • Grant to help cover down payment or closing expenses.

Eligibility

  • The property must be located in the Jonesboro city limits.
  • Home must not be within a flood zone.
  • Eligible borrowers are required to complete a Homebuyer Education Course.
  • Borrowers’ income must not exceed HUD-defined area income limits. You can find the income requirements on page 5 of the homeownership assistance application.

How it works

To apply for Jonesboro homeownership assistance, you must first be approved for a mortgage. At that point, you can download an application from the Jonesboro city government website. If you’re approved, the city will pay the grant proceeds directly to the title holding company.

Pine Bluff Homebuyer Assistance Program

Features

  • Up to $2,000 toward down payment.
  • Up to $3,000 toward closing costs.
  • Down payment and closing assistance can be combined, up to $5,000.
  • Up to $10,000 if you buy in the Turtle Creek subdivision of Pine Bluffs.
  • Deferred loan that does not have to be repaid if you remain in the home for at least five years.

Eligibility

  • Borrower must pay $500 toward the down payment.
  • Income must not exceed established limits based on the area and your family size. You can find the income requirements here.

How it works

The city assistance program must be used in combination with a loan from an approved lender. You can find a list of those lenders on page 4 of the program guide. The Department of Economic and Community Development recommends that you start the process by scheduling an in-person appointment to complete your application before applying for pre-approval or looking at homes.

National first-time homebuyer programs

If you plan to buy a home in Arkansas, make sure you understand the homebuyer assistance programs available based on your area, income and the type of property you wish to purchase. Speak with different lenders to find out whether they participate in the programs relevant to you so that you can maximize your cost-saving opportunities.

Beyond Arkansas’ state- and city-level programs, there are also national programs in place to help first-time homebuyers. Be sure to review LendingTree’s guide to these programs to see which might apply to you and may be used in conjunction with state incentives.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Mortgage

How to Recover From Missed Mortgage Payments

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understanding good faith estimate vs loan estimate
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Can you bounce back from a missed mortgage payment or two? The answer is yes, but there’s work involved. After all, your payment history has the greatest impact in determining your credit score.

Falling behind on your mortgage payments can affect your credit and finances, and you could lose your home to foreclosure. It’s critical to be proactive and not wait until it’s too late to get help.

How missed mortgage payments affect your credit

In most cases, mortgage lenders give you a 15-day grace period before charging a fee — often around 5% of the principal and interest portion of your monthly payment — for late payments. But your credit history typically isn’t impacted until you’re at least 30 days behind on a mortgage payment. At this point, your mortgage servicer may report your late mortgage payment to the three major credit reporting bureaus: Equifax, Experian and TransUnion.

Your credit score could drop by 60 to 110 points after a late mortgage payment, depending on where your score started, according to FICO research. Being 90 days late on your loan could lower your score by another 20 points or more.

It can take up to three years to fully recover from a credit score drop after being a month behind on your mortgage, FICO’s research found. Once you’re three months behind on your mortgage, that time can increase to seven years.

Recovering from missed mortgage payments

Falling behind on your mortgage can be a frustrating and scary experience, particularly if you’re facing the threat of foreclosure. Here are some options to help you get back on track after missed mortgage payments:

  • Repayment plan. Your loan servicer agrees to let you spread out your late mortgage payments over the next several months to bring your loan current. When your upcoming payments are due, you’d also pay a portion of the past-due amount until you catch up.
  • Forbearance. Your servicer temporarily reduces or suspends your monthly mortgage payments for a set amount of time. Once the mortgage forbearance period ends, you’ll repay what’s owed by one of three ways: in a lump sum, a repayment plan or by modifying your loan.
  • Modification. A loan modification changes your loan’s original terms by extending your repayment term, lowering your mortgage interest rate or switching you from an adjustable-rate to a fixed-rate mortgage. The goal is to reduce your monthly payment to a more affordable amount.

Be proactive about getting back on track and reaching out to your lender for help instead of waiting until you get late payment notices. If you think you’ll be behind soon or are already a few days behind, make contact now and review your options.

Extra help for homeowners affected by COVID-19

If you’re behind on mortgage payments because of a financial hardship due to the coronavirus pandemic, you may qualify for a mortgage relief program through the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Homeowners who have federally backed mortgages, and conventional loans owned by Fannie Mae or Freddie Mac, can request mortgage forbearance for up to 180 days. They can also request an extension for up to an additional 180 days.

Federally backed mortgages include loans insured by the:

  • Federal Housing Administration (FHA)
  • U.S. Department of Agriculture (USDA)
  • U.S. Department of Veterans Affairs (VA)

Reach out to your mortgage servicer to request forbearance. Even if your loan isn’t backed by a federal government entity, Fannie Mae or Freddie Mac, your servicer may offer payment relief options. You can find your servicer’s contact information on your most recent mortgage statement.

How many mortgage payments can you miss before foreclosure?

Your lender can begin the foreclosure process as soon as you’re two months behind on your mortgage, though it typically won’t start until you’re at least 120 days late, according to the Consumer Financial Protection Bureau. Still, it’s best to check your local foreclosure laws since they vary by state.

Here’s a timeline of how missed mortgage payments can lead to foreclosure.

30 days late

Your lender or servicer reports a late mortgage payment to the credit bureaus once you’re 30 days behind. Your servicer will also directly contact you no later than 36 days after you’re behind to discuss getting current.

45 days late

You’ll receive a notice of default that gives you a deadline — which must be at least 30 days after the notice date — to pay the past-due amount. If you miss that deadline, your servicer can demand that you repay your outstanding mortgage balance, plus interest, in full.

Your mortgage servicer will also assign a team member to work with you on foreclosure prevention options. This information will be communicated to you in writing.

60 days late

Once you’re 60 days late, expect more mortgage late fees, as you’ve missed two payments. Your servicer will send you another notice by the 36th day after the second missed payment. This same process applies for every month you’re behind.

90 days late

At 90 days late, your servicer may send you a letter telling you to bring your mortgage current within 30 days, or face foreclosure. You’ll likely be charged a third late fee.

120 days late

The foreclosure process typically begins after the 120th day you’re behind. If you live in a state with judicial foreclosures, your loan servicer’s attorney will file a foreclosure lawsuit with your county court to resell the home and recoup the money you owe. The process may speed up in nonjudicial foreclosure states, because your lender doesn’t have to sue to repossess your home.

You’re notified in writing about the sale and given a move-out deadline. There’s still a chance you can keep your home if you pay the amount owed, along with any applicable legal fees, before the foreclosure sale date.

Can you get late mortgage payment forgiveness?

If you’ve otherwise had a good payment history but now have one missed mortgage payment, you could try writing a goodwill adjustment letter to request that your servicer erase the late payment information from your credit reports.

Your letter should include:

  • Your name
  • Your account number
  • Your contact information
  • A callout of your good payment history prior to missing a payment
  • An explanation of what led to the late mortgage payment
  • The steps you’re taking to prevent late payments in the future

End the letter by requesting that your servicer remove the late payment from your credit reports, and thank your servicer for their consideration. Print, sign and mail your letter to your servicer’s address.

The letter is simply a request; your servicer isn’t required to grant late mortgage payment forgiveness. If your servicer agrees to remove the late payment info from your credit reports, your credit scores may eventually increase — so long as you continue to make on-time payments.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.

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Mortgage

What Is the Minimum Credit Score for a Home Loan?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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If you’re hoping to become a homeowner, your credit score may hold the keys to realizing that dream. Knowing the minimum credit score needed for a home loan gives you a baseline to help decide if it’s time to apply for a mortgage, or take some steps to boost your credit first.

It’s possible to get a mortgage with a score as low as 500 if you can come up with a 10% down payment. Keep reading to learn the minimum credit score requirements for the most common loan programs.

What are the minimum credit scores for home loans?

Your credit score plays a big role in determining whether you qualify for a mortgage and what your interest rate offers will be. A higher credit score means you’ll likely get a lower rate and a lower monthly mortgage payment.

There are four main types of mortgages: conventional loans, and government-backed loans insured by the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Agriculture (USDA). Conventional loans, which are the most common loan type with guidelines set by Fannie Mae and Freddie Mac, have a credit score minimum of 620. Although some loan programs don’t specify a minimum credit score needed to qualify, the approved lenders who offer them may set their own minimum requirements.

The table below features the minimum credit scores for these home loans, along with minimum down payment amounts and for whom each of the loans is best.

Loan type

Minimum credit score

Minimum down payment

Who it’s best for

Conventional6203%Borrowers with good credit
FHA500-579 with 10% down payment
580 with 3.5% down payment
10% with a score of 500-579
3.5% with a minimum score of 580
Borrowers who have bad credit and are purchasing a home at or below their area FHA loan limits
VANo credit minimum, but 620 recommendedNo down payment requiredActive-duty service members, veterans and eligible spouses with VA entitlement
USDA640No down payment requiredBorrowers in USDA-eligible rural areas with low- to moderate-incomes

What is a good credit score to buy a house?

Meeting the minimum score requirement for a home loan will limit your mortgage options, while higher credit scores will open the doors to more attractive rates and loan terms. A good credit score can also provide you with more choices for home loan financing.

  • 740 credit score. You’ll typically get your best interest rates for a conventional mortgage with a 740 (or higher) credit score. If you make less than a 20% down payment, you’ll pay for private mortgage insurance (PMI). PMI protects the lender in case you default on your home loan.
  • 640 credit score. Rural homebuyers need to pay attention to this benchmark for USDA financing. Exceptions may be possible with proof that the new payment is lower than what you’re paying for rent now.
  • 620 credit score. The bare minimum credit score for conventional financing comes with the largest mark-ups for interest rates and PMI.
  • 580 credit score. This is the bottom line to be considered for an FHA loan with a 3.5% down payment.
  • 500 credit score. This is the lowest credit score you can have to qualify for an FHA loan, but you must put 10% down to qualify.

Annual percentage rates by credit score

Your mortgage rate is a reflection of the risk lenders take when they offer you a loan. Lenders provide lower rates to borrowers who are the most likely to repay a mortgage.

Here’s a glimpse of the annual percentage rates (APRs) and monthly payments lenders may offer to borrowers at different credit score tiers on a $300,000, 30-year fixed loan. APR measures the total cost of borrowing, including the loan’s interest rate and fees.

FICO Score

APR

Monthly Payment

760-8503.011%$1,267
700-7593.233%$1,303
680-6993.410%$1,332
660-6793.624%$1,368
640-6594.054%$1,442
620-6394.6%$1,538
*Based on national average rate data from myFICO.com for a $300,000, 30-year, fixed-rate loan as of May 4, 2020.

As the credit score ranges fall, the interest rates are higher. Borrowers with a score of 760 to 850, the highest range, saw an average monthly payment of $1,267. Borrowers in the lowest credit score tier of 620 to 639 saw their monthly payment jump to $1,538. The extra $271 in monthly payments adds up to an additional $97,560 in interest charges over the life of the loan.

Steps for improving your credit score

Now that you have an idea of the extra cost of getting a minimum credit score mortgage, follow some of these tips that may help boost your score.

  • Make payments on time. It may seem obvious, but recent late payments on credit accounts hit your scores the hardest. Set your bills on autopay if possible to avoid forgetting to pay one.
  • Pay off balances monthly. Try to pay your entire balance off each month to show you can manage debt responsibly.
  • Keep your credit card balances low. If you do carry a credit card balance, charge 30% or less of the available credit limit on each account.
  • Have a mix of different credit types. Mortgage lenders want to see you can handle longer-term debt as well as credit cards. A car loan or personal loan will help demonstrate your ability to budget for installment debt payments over time.
  • Avoid applying for new accounts. A credit inquiry tells your lender you applied for credit. Even if you were applying to get your best deal on a credit card or car loan, multiple inquiries could drop your scores, and give a lender the impression you’re racking up debt.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.