Documents in Portable Document Format (PDF) require Adobe Acrobat Reader 5.0 or higher to view,download Adobe® Acrobat Reader.

Online Banking

What can we help you find?

Do I have to Put Down 20% to Buy a Home in Northwest Arkansas?

Do I need to Put Down 20% To Buy A House?

With home prices still at record highs, many potential homebuyers—whether first time buyers or buyers with low or moderate incomes—may find it difficult to come up with a traditional down payment amount. Though it is possible to get a conventional home loan with less than 20% down, most lenders prefer you to have at or near that number. And reaching that magic number also means you can avoid higher interest rates and private mortgage insurance fees.

However, if you worry that you’ll never be able to save enough for a 20% down payment, you’re not alone. In fact, 52% of buyers with loans put down less. So how do you get an affordable mortgage loan with less money down?

Fortunately, there are a number of mortgages that don’t require a 20% down payment. In this post we’ll cover the ins and outs of many of the low down payment home loans that we offer here at CS Bank, including down payment, credit, income, and eligibility requirements. Keep reading to find an answer that works for you!

FHA Loans

The Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (HUD), offers government-backed loans with competitive interest rates and less-stringent qualification requirements (including a lower down payment), to make owning a home more accessible to low and moderate income families—though there is no income limit.

In fact, FHA down payments can be as low as 3.5%. FHA loans are often utilized by first-time home buyers because of these low down payment requirements, but they are available to anyone who qualifies—more on this below.

Common Questions about FHA Loans

Let’s take a look at some frequently asked questions about FHA to learn more about how they work and see if they would be a good fit for your home purchase.

What are the FHA loan eligibility requirements?

To qualify for an FHA loan, you, as well as the home you would like to purchase, have to qualify for the program.

Requirements for borrower:
  • Credit score of at least 580
  • Debt-to-income ratio of no more than 50%, including the FHA Loan
  • Down payment of at least 3.5% of the home price
  • Proof of employment and income

Requirements for home:
  • Total loan amount can’t exceed FHA loan limits, which vary by county. Starting January 1, 2023, local limits for single family homes are
  • Carroll County, AR: $472,030
  • Boone County, AR: $472,030
  • Madison County, AR: $472,030
  • Barry County, MO: $472,030
  • Must be primary residence
  • Property can be single family or multi-family (up to 4 units)
  • Must meet minimum property standards (Be “Safe, Sound, and Secure”)

What are FHA loan fees?

In addition to closing costs (3-6%), your loan will have an upfront ‘Mortgage Insurance Premium’ (MIP) equal to 1.75% of the loan. This can be paid as part of closing costs or rolled into the loan itself.

Somewhat similar to private mortgage insurance (PMI), which you will pay on conventional home loans where you put less than 20% down, MIP helps to secure your loan for your lender. However, unlike PMI, it doesn’t stop being required when you’ve paid off 20% of your loan. If you had a 10% down payment, the fee ends at 11 years. If you put less down, it will continue for the life of the loan.

What are the different types of FHA Loans?

Just like traditional loans, FHA loans can have different terms including:
  • Fixed Rate Mortgage: FHA 203(b) loans are the most popular option and offer a fixed interest rate and payment over the life of the loan.
  • Adjustable Rate Mortgage (ARM): It’s also possible to get an FHA ARM. As HUD explains, “FHA offers a standard 1-year ARM and four ‘hybrid’ ARM products. Hybrid ARMs offer an initial interest rate that is constant for the first 3-, 5-, 7-, or 10 years. After the initial period, the interest rate will adjust annually.” ARMs offer a lower interest rate at the beginning, which increases at set intervals. If you don’t plan on staying in your home in the long term, or if you would benefit from a lower payment in the first few years, an ARM might be a useful choice.
  • 15 Year Term: Will have a higher monthly payment but lower interest rates and MIP payments than 30 year FHA loans. Additionally, your home will be paid off over time, and you will also pay less interest over the life of the loan. They also sometimes allow lower credit scores or higher debt-to-income ratios.
  • 30 Year Term: The most common home loan length, spreading payments over 30 years results in the lowest monthly payment. Check out our guide Should I Choose a Short Term or Long Term Fixed Mortgage Loan? For more information on the differences between 15 and 30 year mortgages.

How do I apply for an FHA Loan?

Though these loans are backed by the government, you can apply for a FHA loan through CS Home Mortgage, just like you would for a conventional home loan. Visit our FHA Mortgage Loans page for more information or contact a lender to discuss eligibility.

FHA loans allow you to borrow up to 96.5% of the purchase price or appraised value.

VA Loans

The Department of Veterans Affairs offers these government-backed loans to active military personnel, veterans, and certain family members. If you are current or former military and looking for a low-down payment loan, VA loans can make a great option. In fact, VA loans offer 100% financing (no down payment) for qualified borrowers.

Common Questions about VA Loans

Like FHA loans, VA loans have a lot of specific requirements and attributes that set them apart from conventional loans. Here are some common questions customers have about them.

How much can you borrow with a VA Loan? Do you pay mortgage insurance if you put down less than 20%?

You can borrow the full amount (100%) of the home’s price, as long as what you pay for it is equal to or less than its appraised value. And unlike conventional and FHA loans, you will never be required to pay mortgage insurance, no matter how much money you put down.

However, VA loans do have something comparable to FHA’s MIP—what is called a ‘funding fee’. The amount you pay will depend on whether it’s your first VA loan and how much money you put down. Fees currently range from 1.4-3.6% and can be paid at closing or spread out over the life of your loan. If you are a first time VA loan borrower and put down at least 5%, your fee will only be 1.4%. Visit VA Funding Fee And Loan Closing Costs for more details.

What are the main benefits of VA loans?

In addition to 100% financing, VA borrowers enjoy these benefits:
  • Lower interest rates than conventional loans
  • Low closing costs
  • More flexible credit and debt-to-income ratio requirements
  • Lifetime benefit—use it each time you buy a home

How is VA Loan eligibility determined?

Eligibility requirements can get a little confusing, because they are determined by where and when you served, how long you served, your service commitment, and your duty status. Complete eligibility requirements can be found on the VA website, but here are the basic rules:

  • If you are a veteran who served after October 17, 1981, you need to have served for 24 continuous months, with 90-181 days of active duty (depending on time of service). For those who served before 1981, check guidelines for specific requirements.
  • If you are or were in the National Guard or Reserve, you need to have been on active duty for at least 90 days.
  • If you are a surviving spouse of a veteran who was missing in action, died in action, or died from a disability related to his or her service, you may also qualify to receive the benefit. 
In order to apply for a VA loan, you first need to certify your eligibility, which can be done on the VA’s eBenefits site. Your lender may also be able to help you get your COE (Certification of Eligibility).

Additionally, just like an FHA loan, the home itself must meet minimum standards for safety and habitability, before the loan is guaranteed. The home must also be a primary residence and at least 75% of the space must be used for residential purposes.

How can I apply for a VA Loan?

Once you have your COE in hand, it’s easy to apply for a VA loan with your local mortgage lender. CS Home Mortgage. Visit our VA Mortgage Loans page for more information or to contact a mortgage lender to discuss your eligibility.

Government backed VA loans allow military families to borrow up to 100%

USDA Rural Development Loans

Homebuyers in Northwest Arkansas and Southwest Missouri may also be eligible for USDA mortgages, which extend affordable loan options to homebuyers residing in low-population regions of the U.S. These loans are also government-backed, by the U.S. Department of Agriculture through their Single Family Guaranteed Loan Program, and make home buying more accessible to individuals in rural areas who don’t have the funds for a 20% down payment. In fact, like VA loans, they also offer 100% financing, no down payment options.

Common Questions about USDA Loans

In some ways USDA loans are more straightforward than other government-backed loans, but they still have some specific requirements and rules that borrowers must follow.

How much can you borrow with a USDA Loan? Do you have to pay anything at closing?

Just like VA loans, you can borrow 100% of the cost of your home. That’s because the USDA guarantees 90% of your loan value for your lender, which means lenders are taking on less risk. But that doesn’t mean you’ll owe nothing at closing.

Fee schedules for USDA loans are a little different than FHA and VA loans. Regardless of your down payment size, you will need to pay both an upfront fee (1%) at closing on top of the usual closing costs. If your appraised value comes in higher than your loan amount, it might be possible to roll these costs into your loan.

Lastly, USDA loans have an annual fee (currently .35% of your current loan balance) which is added onto your monthly payment. It’s not mortgage insurance—no matter how much you pay off on your loan, this fee won’t go away. Fortunately, it’s not a lot, and as your loan balance decreases, the monthly cost will, too.

What are the requirements?

As with any of these loan programs, there are some specific requirements that both borrowers and properties must meet. These include:

Borrower Income: your household income can’t exceed 115% of median household income for your area. In Carroll and Boone Counties the maximum annual income for a family of four would be $103,500. Use their Income Eligibility Tool to determine if your income level qualifies.

Property Requirements:
  • Property must be your primary residence and can’t be used to produce income (i.e., a rental).
  • Property must meet certain habitation standards.
  • Property must be located in an eligible, rural location. Use the USDA Eligibility Map to look up the eligibility of individual properties.
  • There’s a maximum loan amount for USDA loans. In the areas CS Bank serves, the loan cap is currently set at $336,500.

Can the funds only be used for home purchase?

No. In fact, you can use these loans to build a home (including completing site prep), or to purchase and repair or renovate an existing property.

What are the terms?

USDA Section 502 Guaranteed Loans are only available as 30-year fixed rate loans. Interest rates are not set by the USDA and can vary based on the lender.

How do I apply for a rural development loan?

As with the other government loan programs, USDA Rural Development Loans are offered through partnerships with your financial institution. Visit our Rural Development Loans page to learn more, reach out to a CS Home Mortgage Lender, and apply.

Read more about Rural Development loans in What is a Rural Development Loan and How Do I Get One?

How much cash do I need to buy a home in Northwest Arkansas?

The answer to this question is: it depends—on your financial situation, the homes you are looking to buy, and what loan products you qualify for. But if you are planning to buy a home in the future, it’s a good idea to begin creating a plan for covering your upfront costs, including closing costs, fees, and your down payment amount. Before you do that, however, you’ll need to have a general idea of the cost of homes that you might consider, and a big part of that calculation is determining what you can reasonably afford—a topic we cover in depth in our First-Time Home Buyers Guide For Northwest Arkansas.

Here are a few typical home prices in the area to give you a general idea of costs:
While homebuyers won’t need to put down 20% for any of the loan products we discussed in this post, it is likely you will be required to have funds available at closing for a smaller down payment, as well as fees and standard closing costs, which usually range from 3-6% of your loan amount, depending on the loan you chose.

Once you have a better idea of which low down payment mortgage product you’ll pursue, you can calculate how much you’ll need to save or set aside for your down payment. Remember, the down payments we discussed in this post range from 0% to 15%, depending on the loan and your credit. You can use our Mortgage Loan Calculator to help you figure out your monthly costs to determine affordability. Once you take all these aspects into account, you will have a basic idea of how much money you’ll need to have upfront to purchase your home.

Apply For a Loan Down Payment Mortgage Today

At CS Home Mortgage, we offer a wide variety of home loan products to meet your specific lending needs, from low down payment loans to loans with flexible credit and income requirements. As a full-service mortgage lender, we not only offer a variety of conventional and government-backed loans, but also will work with you, one-on-one, from preapproval to closing, to ensure a smooth application process.

Have other questions about low down payment mortgage options? Ready to apply for a loan? Visit a local branch location in Eureka Springs, Berryville, Harrison, Huntsville, Holiday Island, Arkansas or Cassville, Missouri. Contact an experienced Mortgage Lender to learn more about your choices, or visit our Home Loans page to apply.