What is an Arkansas FHA Loan?
An Arkansas FHA loan is a home loan from the state of Arkansas that is guaranteed by the government. These loans are not given out directly by the government but are given by independent lenders. However, the guarantee of the government means that if the borrower fails to pay the lender will get partially reimbursed by either the US Department of Housing and Development (HUD) or the Federal Housing Administration (FHA). The government insurance lowers the risk of the loan for the lender, which makes the lender willing to make these sorts of loans on better terms. The key way in which the borrower benefits from this is in the relatively low down payments. Down payments are often as low as 3.5%, which compares quite favorably to conventional loans, which can ask for down payments of 20%. Also, in contrast with conventional loans, these down payments can be made as gifts from a family member or by government grants. Additionally, the lower risk of FHA loans means that lenders have lower credit requirements and somewhat lower rates than conventional loans. The small down payment and lower credit requirements make FHA loans ideal for borrowers looking to buy their first home. Below, we at Online Loans have broken down the assorted information available across the web into a convenient need-to-know to make getting you FHA loan as simple as possible.
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You do not need to be a US citizen to get an FHA loan, but you do need to be a legal resident. The loan must be used for the purchase, repair, renovation or refinancing of your primary residence. The maximum size of FHA loans typically vary between the types of home it’s being used for and the county the home is in. However, in Arkansas, every county has the same maximum. The largest maximum in Arkansas is $566,425 for a four-unit home. The smallest maximum is $294,515 for a one unit home. The minimum credit requirements for an FHA loan is a score of 580 or better for loans intending to adhere to a down payment of 3.5%. For loans with a 10% down payment the minimum credit score is 500. Exceptions are sometimes made for borrowers with worse credit if they have good credit history for the past two years. While these are the minimums set by the FHA, independent lenders may have their own minimum. Many lenders in Arkansas ask for a credit score of at least 620. In addition to the credit requirements, the borrower must have stable employment (at least two years) and needs to have a good debt to income ratio. The borrower’s mortgage payment expense to income ratio, or the percentage of their monthly pay that needs to go towards paying the mortgage, needs to be less than 31%. The borrower’s total fixed payment to income ratio, which is the percentage of the borrower’s monthly pay that goes towards all of the different types of debt payments, needs to be less than 43%.
Since the government does not issue FHA loans, the rates vary between lenders and circumstances. Smaller loans usually have higher interest rates, because the cost of underwriting a loan is the same whether it is small or large. Loans with a longer term are typically considered higher risk because it relies on the borrower to be financially stable further into the future. Due to this added risk, long-term FHA loans usually have higher rates. FHA loans tend to have lower APRs than conventional home loans. However, this is offset a bit by the fact that with FHA loans you need to pay for additional insurance, which has an annual fee between 0.45% and 0.85% of the loan. FHA loans always have fixed rates, meaning that once the loan is established the interest rate remains constant independent of the fluctuations in the prime interest rate. In Arkansas, you would typically see APRs between 3.75% and 4.75%.
Maximum ($) Limits – By County
The table below displays the maximum FHA loan limits available for each county in Arkansas, feel free to use and download this information as part of your due dilligence in applying for an FHA loan.Download Formats: Excel (.xslx) & CSV