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Compare mortgage rates in Arkansas.
Key Points
• Mortgage rates in Arkansas trend closely to the national average — sometimes higher or lower.
• Mortgage interest rates are influenced by the economy, Federal Reserve’s monetary policy, and supply and demand for mortgages.
• Higher interest rates mean higher monthly mortgage payments, while lower interest rates result in lower monthly payments.
• Arkansas offers various mortgage types, including fixed-rate mortgages, adjustable-rate mortgages (ARMs), FHA loans, VA loans, and USDA loans.
• The cost of living in Arkansas is significantly lower than the national average.
Introduction to Mortgage Rates
Unlike some interest rates, mortgage rates are not determined by a single benchmark. Rather, they’re the result of a complex interplay of economic conditions and the borrower’s financial profile. Economic factors that influence mortgage rates include the Federal Reserve’s interest rate policy, inflation, and unemployment rates. Borrower-specific factors such as credit score, down payment amount, income, assets, and type of mortgage loan also play a significant role in determining the interest rate offered.
Where Do Mortgage Rates Come From?
The Federal Reserve, often referred to as the Fed, holds the key to shaping mortgage rates. The Fed sets short-term interest rates, which serve as benchmarks for other interest rates, including those for home loans. While mortgage rates are not directly tied to Fed rates, they tend to follow similar economic trends.
When the Fed raises short-term interest rates, it becomes more expensive for banks to borrow money. As a result, banks often pass on this increased cost to consumers in the form of higher mortgage rates. Conversely, when the Fed lowers interest rates, mortgage rates tend to follow suit, making it more affordable for borrowers to obtain a home loan.
How Interest Rates Affect Home Affordability
Mortgage rates have a profound impact on home affordability. Even seemingly small changes in interest rates can significantly affect monthly mortgage payments and, consequently, the overall cost of purchasing a home.
The average home value in Arkansas is $208,000. If you buy a home for that amount and make a 20% down payment, your mortgage will be $166,400. A 30-year loan at 5.50% gives you a monthly payment of $944. The same loan at 6.50% interest results in a monthly payment of $1,051. An additional $107 per month may not be painful for some buyers, but for others it might make the home unaffordable. And those who can afford the larger payment will pay a whopping $38,506 in additional interest over the life of the loan.
Should Homebuyers Wait for Interest Rates to Drop?
First-time homebuyers often face a dilemma: Should they purchase a home now or wait for mortgage rates to drop? While it’s impossible to predict future interest rate movements with certainty, there are other factors to consider. Waiting may mean missing out on the opportunity to build equity and take advantage of favorable market conditions.
Homeowners who aren’t thrilled with their current mortgage rate can always refinance in the future when rates decrease. Refinancing allows you to obtain a lower interest rate on your existing mortgage, potentially saving thousands of dollars in interest payments over time.
Arkansas Mortgage Rate Trends
Examining historical mortgage rate trends in Arkansas can offer valuable insights into potential future rate movements. While rates have experienced fluctuations over the years, they currently hover around the 50-year average, indicating a relatively stable mortgage environment. (The FHFA stopped reporting state interest rates after 2018.)
| Year | Utah Rate | U.S. Rate |
|---|---|---|
| 2000 | 7.98 | 8.14 |
| 2001 | 6.82 | 7.03 |
| 2002 | 6.55 | 6.62 |
| 2003 | 5.84 | 5.83 |
| 2004 | 6.00 | 5.95 |
| 2005 | 5.94 | 6.00 |
| 2006 | 6.52 | 6.60 |
| 2007 | 6.47 | 6.44 |
| 2008 | 6.15 | 6.09 |
| 2009 | 4.93 | 5.06 |
| 2010 | 4.70 | 4.84 |
| 2011 | 4.57 | 4.66 |
| 2012 | 3.68 | 3.74 |
| 2013 | 3.94 | 3.92 |
| 2014 | 4.12 | 4.24 |
| 2015 | 3.88 | 3.91 |
| 2016 | 3.75 | 3.72 |
| 2017 | 4.08 | 4.03 |
| 2018 | 4.61 | 4.57 |
Historical U.S. Mortgage Rates
To provide a broader perspective, let’s explore historical U.S. mortgage rates. Over the past 50 years, mortgage rates have experienced significant fluctuations, reaching peaks of 18.00% during periods of economic uncertainty and declining to under 3.00% during times of economic stability. The current rates in Arkansas align with the long-term average, indicating a relatively balanced mortgage environment.
Factors Affecting Mortgage Rates in Arkansas
Many factors contribute to the determination of mortgage rates in Arkansas and across the nation. These can be broadly categorized into two groups: economic and consumer factors.
Economic Factors
• The Fed: The Federal Reserve, often referred to as the Fed, sets the federal funds rate, which serves as a benchmark for other interest rates, including those for home loans. When the Fed raises the federal funds rate, it becomes more expensive for banks to borrow money, leading to higher mortgage rates.
• Inflation: Inflation, the general increase in prices and fall in the purchasing value of money, also impacts mortgage rates. As inflation rises, the purchasing power of money decreases, making it more expensive for lenders to lend money. To compensate for this, lenders may increase interest rates to maintain their profit margins.
• Unemployment rate: The unemployment rate plays a role in determining mortgage rates. A low unemployment rate generally indicates a strong economy, which often leads to increased demand for housing. This increased demand can put upward pressure on home prices and, consequently, mortgage interest rates.
Consumer Factors
• Credit score: A borrower’s credit score serves as a crucial indicator of their creditworthiness. A higher credit score reflects a history of responsible borrowing and repayment, making borrowers less risky in the eyes of lenders. As a result, individuals with higher credit scores typically qualify for lower mortgage interest rates.
• Down payment: The down payment amount made by a borrower can influence the mortgage interest rate. A larger down payment reduces the loan amount required, making the borrower less risky for the lender. Consequently, borrowers who make a larger down payment often receive lower mortgage interest rates.
• Income and assets: A steady income and sufficient assets contribute to a borrower’s financial stability and ability to repay the loan. Lenders assess a borrower’s income and assets to determine their creditworthiness. Borrowers with a stable income and substantial assets are considered less risky and may qualify for lower mortgage interest rates.
• Type of mortgage loan: The type of mortgage loan selected can also impact the interest rate. Adjustable-rate mortgages (ARMs) often offer lower initial rates compared to fixed-rate mortgages. Government-backed loans, such as VA mortgages, may have lower rates. And shorter loan terms typically come with lower interest rates than longer loan terms.
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Types of Mortgages Available in Arkansas
Arkansas offers a diverse range of mortgage types to cater to the needs of different homebuyers. These include fixed-rate mortgages, adjustable-rate mortgages (ARMs), FHA loans, VA loans, and USDA loans.
Conventional loans, which are not backed by government agencies, offer flexibility in terms of interest rates and loan amounts. They can be fixed-rate or adjustable-rate.
Fixed-Rate Mortgage
Fixed-rate mortgages provide stability and predictability by locking in the interest rate for the entire loan term. This means that the monthly principal and interest payments remain the same throughout the life of the loan, regardless of fluctuations in market interest rates.
Fixed-rate mortgages are commonly available in terms of 10, 15, 20, or 30 years. The choice of loan term depends on the borrower’s financial situation and preferences, with shorter terms typically resulting in higher monthly payments but lower total interest paid over the life of the loan.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgages (ARMs) provide an initial interest rate that is lower than fixed-rate mortgages. This can be an attractive option for borrowers who plan to sell their home or refinance before the fixed-rate period ends.
In most cases, an ARM rate will be fixed for three, five, seven, or 10 years and then periodically adjust. If you see a 7/6 or 10/6 ARM, that means the rate on the home loan can adjust every six months after the introductory period.
It’s important to understand that adjustable-rate mortgages can potentially lead to higher monthly payments in the future.
FHA Loan
FHA loans, backed by the Federal Housing Administration, offer more flexible eligibility requirements compared to conventional loans. They are designed to make homeownership more accessible to first-time buyers and individuals with less-than-perfect credit.
These loans do require an upfront mortgage insurance premium (MIP) and monthly premiums. The upfront cost is usually 1.75% of the base loan amount, and can be rolled into the loan. The monthly MIP for new homebuyers is typically 0.55%. For a $160,000 mortgage, that’s upfront MIP of $2,800 and monthly MIP of $88.
VA Loans
VA loans are exclusively available to veterans, active-duty military members, certain Reserve and National Guard members, and surviving spouses. These loans are backed by the U.S. Department of Veterans Affairs (VA) and offer competitive interest rates and flexible eligibility requirements. A significant advantage of VA loans is that they do not require a down payment. Borrowers obtain these loans from private lenders after first obtaining a certificate of eligibility from the VA.
USDA Loans
USDA loans, provided by the U.S. Department of Agriculture (USDA), are tailored to low-income borrowers seeking to purchase a home in a rural area. These loans offer competitive interest rates and do not require a down payment.
Jumbo Loans
Conventional mortgage loans typically have a maximum loan amount, known as the conforming loan limit, set by the Federal Housing Finance Agency (FHFA). For 2024, the conforming loan limit for a single-family home is $766,550. Any mortgage amount above that limit requires a jumbo loan.
Popular Places to Get a Mortgage in Arkansas
The choice of location can significantly impact the mortgage process. Homebuyers should consider not just home affordability but the overall cost of living when selecting a place to purchase a home.
The Cost of Living Index (COLI) provides a comparison of the cost of living in different cities and states relative to the average cost of living in the U.S. By considering the COLI, homebuyers can assess the affordability of living in a particular location.
Least Expensive Locations
Arkansas as a whole is 22.5% less expensive than the national average, and the average home value is $208,000. Here are a few areas worth exploring:
• Fort Smith:COLI 76.6 $178,000
• Pine Bluff:COLI 67.9 $79,000
• Searcy:COLI 75.1 $206,000
• Texarkana:COLI 72.5 $163,000
Most Expensive Locations
The most expensive places to live in Arkansas, based on the Cost of Living Index and average home value, include:
• Cammack Village: COLI 80.7 $284,000
• Conway: COLI 81.9 $241,000
• Hot Springs: COLI 83.5 $248,000
• Little Rock: COLI 80.7 $210,000
Find more places to consider in our guide to the Best Affordable Places to Live in the U.S.
Tips for Securing a Competitive Mortgage Rate in Arkansas
If you’re buying your first home, you may realize that obtaining a competitive mortgage rate can significantly reduce the overall cost of borrowing and save tens of thousands of dollars in interest payments over the life of the loan. Here are some tips for securing the lowest available rate.
Compare Interest Rates and Fees
Shopping around and comparing interest rates and fees from different lenders can help you secure the best possible mortgage deal. Lenders offer varying rates and terms, so make sure to compare multiple options before making a decision.
In addition to the interest rate, borrowers should also consider any upfront costs or closing fees associated with the loan.
Get Preapproved
Going through the mortgage preapproval process, which involves submitting most of the documentation required for a mortgage application, strengthens a homebuyer’s position in the purchasing process. It demonstrates to sellers that the buyer is a serious and qualified candidate, potentially increasing the chances of a successful purchase.
Depending on the interest rate environment, borrowers may want to consider locking in their rate while they’re getting preapproved. Lenders typically offer a rate lock option for a fee, which allows borrowers to secure the current interest rate for a specified period, usually ranging from 30 to 90 days.
Arkansas Mortgage Resources
The Arkansas Development Finance Authority (ADFA) provides a range of resources and programs to support homebuyers, especially first-time buyers and individuals with limited financial means. These resources can help make the homebuying process more accessible and affordable.
First-Time Homebuyer Programs
Arkansas offers several programs specifically designed to assist those who qualify as a first-time homebuyer (meaning you haven’t owned a primary residence within the last three years). These programs may provide financial assistance, education, and counseling to help individuals achieve homeownership.
• The ADFA Move-Up program offers an affordable 30-year fixed-rate mortgage to low- to moderate-income homebuyers.
• The ADFA Smart Start program provides below-market interest rates on 30-year fixed-rate mortgages.
Down Payment Assistance
Down payment assistance programs can help reduce the upfront costs of purchasing a home by providing grants or low-interest loans to cover a portion of the down payment. These programs are particularly beneficial for first-time buyers or those with limited savings.
If you qualify for an ADFA first mortgage, you may also benefit from a second mortgage for down payment or closing costs. The down payment assistance ranges from $1,000 to $15,000 and comes in the form of a 10-year second mortgage with a rate that matches your ADFA first mortgage.
Tools & Calculators
Various online tools and calculators are available to help homebuyers estimate their monthly mortgage payments, determine affordability, and compare different loan options. These tools can assist borrowers in making informed decisions about their mortgage.
Run the numbers on your home loan.
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Mortgage calculator
Punch in your home loan amount and a new interest rate, and we’ll estimate your payoff date.
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Down payment calculator
Enter a few details about your home loan and we’ll provide your monthly mortgage payment.
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Home affordability calculator
Provide us with a few details and see how much you can afford to spend on a home purchase.
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
Refinancing Options in Arkansas: Exploring Your Possibilities
A cash-out mortgage refinance, obtained through a conventional mortgage lender, allows homeowners to borrow against the equity in their home and receive the difference in cash. This can be a good option for homeowners who need to access cash for major expenses, such as home renovations, education, or debt consolidation.
Homeowners with FHA-insured mortgages may benefit from the FHA Streamline Refinance program. This program allows borrowers to refinance their existing FHA loan into a new loan with a lower interest rate, often with less documentation and without the need for a new appraisal.
VA loan holders may consider the Interest-Rate Reduction Refinance Loan (IRRRL) to lower their monthly mortgage payments. This program allows eligible borrowers to refinance their VA loan into a new loan with a lower interest rate, potentially reducing their monthly payments.
Closing Costs and Fees in Arkansas: What to Expect
Closing costs associated with purchasing a home in Arkansas typically range between 2% and 5% of the purchase price. These costs may include loan origination fees, appraisal fees, title insurance, and other administrative charges.
The specific closing costs incurred by a homebuyer in Arkansas can vary depending on the value of the property and its location. Higher-priced homes and properties in certain areas may be associated with higher closing costs.
The Takeaway
Arkansas presents a diverse range of mortgage options, catering to the needs of different homebuyers. By staying informed about current mortgage rates, exploring assistance programs, and carefully considering refinancing options, individuals can make strategic decisions that align with their financial goals and achieve successful homeownership in Arkansas.
Remember, it is always advisable to consult with a mortgage lender or financial advisor to obtain personalized advice tailored to your specific financial situation and goals.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
Will mortgage rates drop in Arkansas?
Predicting future mortgage rate movements with certainty is challenging. However, monitoring economic indicators, such as inflation, unemployment rates, and Federal Reserve policies, can provide insights into potential rate trends.
Will mortgage rates ever go back to normal?
The definition of “normal” mortgage rates varies over time. Mortgage rates are influenced by various economic factors, and what is considered normal can change based on historical trends and current market conditions.
Will Arkansas home prices ever drop?
Arkansas home prices are already below the national average, as is the cost of living. While prices may drop in the future, don’t let that stop you from house hunting if you’re ready to make a move.
Is it a good time to buy a house in Arkansas?
The decision of whether it is a good time to buy a house in Arkansas depends on individual circumstances, financial readiness, and market conditions. Factors such as mortgage rates, home prices, personal financial situation, and long-term goals should be carefully considered.
How to lock in a mortgage rate?
To lock in a mortgage rate, you can work with a lender to secure a rate lock agreement. This agreement guarantees a specific interest rate for a certain period, typically ranging from 30 to 90 days. There may be a fee associated with locking in the rate.
How do mortgage interest rates work?
Mortgage interest rates are determined by various factors, including the Federal Reserve’s interest rate policies, inflation, unemployment rates, borrower credit scores, loan amounts, down payments, and loan terms. Lenders assess these factors to determine the level of risk associated with a loan and set interest rates accordingly.
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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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More home loan resources.
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First-Time Homebuyer Guide
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First-Time Homebuyer Programs and Loans
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Mortgage Preapproval Process