Last Updated on September 17, 2020 by Andrew Lee
Outdoor activities, such as hunting, fishing, and hiking aren’t the only things that attract individuals to purchase a home in The Natural State. Also famed for its quality education system, like what the University of Arkansas has to offer, and its cost of living lower than the national average, there’s no wonder why it’ a good place to settle down and even raise a family.
While there are many great cities and counties in the state, those that lead the pack include Fayetteville, Bentonville, and Hot Springs (Source: Livability.com). And with the prices of houses here averaging at $111,400 – much lower than the national median of $234,900 (Source: Zillow) – home buyers have good chances of securing a mortgage with a low-interest rate.
Home Ownership Cost in the State
Homeownership costs vary, as it depends on a number of factors, including the type of home a buyer will purchase, mortgage interest rates, and the term of the home loan. In general, though, mortgage rates in the state average at 4.08%, putting it lower than the national average. Yearly payments average at $5,309. (Source: SmartAsset).
Although consumers here spend less than many other places in the country, home buyers, particularly first-timers, should take as much time as necessary in exploring their options. They should first gauge whether the benefits of buying outweigh those of renting for their particular situation.
Factors Influencing the Right Type of Mortgage to Get
The two major types of mortgages lenders offer here are the fixed-rate and the variable-rate home loans. Shoppers should base their decision on a number of factors, including their current and future financial capabilities, short- and long-term housing needs, as well as the path the market will tread.
Note that lending institutions have their own basis of qualifications, one of which is an applicant’s financial history. They take into careful consideration debt and payment history, which the FICO score reflects.
Fixed-Rate vs. Adjustable-Rate
Buyers who want to get the lowest possible interest rate may find an adjustable-rate mortgage best suited for their needs. ARMs come with a “teaser rate,” which is basically a discounted rate applied on a specified period of time. In short, they generally will have lower monthly payments for the first 1, 3, or 5 years. After this promotional period ends, lenders will already start charging the full interest rate, which can also change depending on the status of the market.
For shoppers who want security and protection against exorbitant payments, a fixed-mortgage rate may be the right option. With this kind of home loan, they don’t need to worry about negative changes in the market. They will keep paying the same amount of monthly payments for the entire life of their contract. In the United States, the most popular term is the 30-year, since it comes with the lowest possible monthly payments.
The Difference Refinancing Can Make
Existing mortgage borrowers can take advantage of refinancing offers, which can benefit them in a number of ways. In most cases, consumers opt for this program to secure better interest rates. By reducing rates, they have to spend less on the repayment of their debt. And because more money goes into repaying the money they borrowed, they can reduce the amount of time they’re in debt. Other reasons to refinance include switching from a fixed-rate to an ARM, or vice versa.
With careful preparation, homebuyers can minimize their mortgage-related expenditures while they enjoy the benefits associated with homeownership. Entering the world of the mortgage as an educated borrower also considerably mitigates the risks of foreclosure, which can severely affect one’s financial standing.
Arkansas Securities Department: www.securities.arkansas.gov/faq/
United States Census Bureau: https://www.census.gov/construction/nrs/pdf/uspricemon.pdf
Arkansas Development Finance Authority: http://adfa.arkansas.gov/
In Affordable Housing – Little Rock, AR: http://www.in-affordablehousing.org/
Freddie Mac: http://myhome.freddiemac.com/refinance/traditional-lender.html