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About the Arkansas Dream Down Payment Initiative (ADDI)
The Arkansas Dream Down Payment Initiative (ADDI) provides up to 10% of the home's sale price, with a maximum of $10,000, as a forgivable second mortgage for low-income first-time homebuyers in Arkansas. Administered by the Arkansas Development Finance Authority (ADFA), the ADDI program is structured as a soft second mortgage that requires no monthly payments and carries 0% interest. The full loan amount is forgiven over five years in equal annual installments of 20% per year, meaning after five years of continuous homeownership the entire balance is written off.
To qualify for the Arkansas Dream Down Payment Initiative, buyers must meet ADFA's low-income limits, which vary by county and household size. These limits are stricter than the standard ADFA program thresholds because ADDI specifically targets lower-income households. Applicants must not have owned a principal residence in the past three years, must complete 8 hours of homebuyer counseling through a HUD-approved agency, and must use the ADDI funds in combination with an ADFA first mortgage (either the StartSmart or Move-Up loan program). The home must be the buyer's primary residence in Arkansas.
Among Arkansas down payment assistance options, ADDI stands out as the only fully forgivable program administered by ADFA. The standard ADFA Down Payment Assistance Program offers more money ($1,000 to $15,000) but requires repayment over 10 years. ADDI's forgivable structure makes it the better choice for buyers who can qualify under the lower income limits and plan to stay in their home for at least five years. For buyers whose income exceeds the ADDI thresholds, the standard ADFA DPA is the next best option.
How much assistance
Eligibility
- Income limits: Must meet low-income limits based on county and household size
- First-time buyer required: Yes — Must not have owned a principal residence in the past 3 years.
- Geographic restrictions: Statewide. Must be used with an ADFA first mortgage.
- Homebuyer education required: Yes
How to Apply for Arkansas Dream Down Payment Initiative (ADDI)
Step 1: Check your income eligibility
ADDI targets low-income households, so income limits are stricter than the standard ADFA programs. Limits vary by county and family size. Contact ADFA at 501-682-5466 or visit adfa.arkansas.gov for current income limit tables. Your total household income, including all wage earners in the home, must fall at or below the published limits for your county.
Step 2: Complete 8 hours of homebuyer counseling
ADDI requires 8 hours of homebuyer education and counseling through a HUD-approved agency, which is more extensive than the standard ADFA education requirement. Search for HUD-approved counseling agencies in Arkansas at hud.gov or call 800-569-4287. The counseling covers budgeting, mortgage readiness, and the responsibilities of homeownership. You must complete this before closing.
Step 3: Find an ADFA-approved lender
All ADDI loans must be originated through an ADFA participating lender. The lender will process your ADFA first mortgage (StartSmart or Move-Up) and the ADDI second mortgage together. Search the lender directory at adfa.arkansas.gov/find-a-lender.
Step 4: Get pre-approved for your ADFA first mortgage
Provide your lender with two years of tax returns, 30 days of pay stubs, two months of bank statements, and a valid photo ID. The lender will verify your income, confirm first-time buyer status, and reserve both the first mortgage and ADDI funds through the ADFA MITAS Lender Portal.
Step 5: Find a home and go under contract
The home must be your primary residence in Arkansas. Your lender will confirm the property meets ADFA requirements. ADDI provides up to 10% of the agreed sale price, capped at $10,000.
Step 6: Close on your home
The ADDI forgivable second mortgage is recorded at closing alongside your ADFA first mortgage. There are no monthly payments on the ADDI portion. As long as you own, occupy, maintain, insure, and pay taxes on the home, 20% of the ADDI loan is forgiven each year for five years.
Real Cost Example
On a $247,000 home in Little Rock using an FHA loan, the minimum 3.5% down payment is $8,645. The ADDI program provides up to 10% of the sale price, which on this home would be $24,700, but the program caps at $10,000. So a Little Rock buyer would receive the full $10,000 maximum, covering the entire $8,645 down payment with $1,355 remaining for closing costs.
Estimated closing costs in Little Rock run $5,000 to $7,500. After applying the leftover $1,355 from ADDI, you would still need approximately $3,645 to $6,145 out of pocket for closing costs and any required reserves.
If you pair ADDI with the ADFA StartSmart first mortgage (currently 5.25% for government loans), you get both a below-market interest rate and forgivable down payment assistance. On a less expensive home, say $85,000 in a smaller Arkansas city, ADDI would provide $8,500 (10% of sale price), which would cover the entire 3.5% FHA down payment of $2,975 plus most of your closing costs.
Combining With Other Programs
The Arkansas Dream Down Payment Initiative must be paired with an ADFA first mortgage, either the StartSmart program (for first-time buyers, currently at 5.25% for government loans) or the Move-Up program (for repeat buyers, currently at 6.125%). This combination gives you a below-market interest rate on your primary mortgage plus forgivable down payment assistance through ADDI.
Whether ADDI can be stacked with the standard ADFA Down Payment Assistance Program ($1,000 to $15,000 repayable second mortgage) on the same transaction is not clearly stated in ADFA's public materials. Both are structured as second mortgages, which may limit combining them. Contact your ADFA-approved lender or call ADFA at 501-682-5466 to confirm current stacking rules before counting on both programs.
ADDI cannot be used with non-ADFA first mortgage products. If you are working with a lender who does not participate in ADFA programs, you would not qualify for ADDI. However, most major lenders in Arkansas participate in ADFA programs. Search the approved lender directory at adfa.arkansas.gov/find-a-lender.
Pros and Cons
The biggest advantage of the Arkansas Dream Down Payment Initiative is that the assistance is fully forgivable. After five years of homeownership, you owe nothing back, making it effectively free money for buyers who stay in their home. The $10,000 maximum is enough to cover the entire down payment on homes up to $285,000 when using an FHA loan, which covers most of the Arkansas housing market. The 0% interest rate and no monthly payment structure mean ADDI adds zero to your monthly housing costs.
The primary downside is the strict low-income requirement, which disqualifies many moderate-income buyers who could otherwise use help with their down payment. The 8-hour counseling requirement is also more time-intensive than the standard ADFA education requirement. For buyers whose income is above the ADDI limits but still needs assistance, the standard ADFA DPA offers up to $15,000 with a 10-year repayment term. Buyers who expect to sell or move within five years should weigh whether the prorated forgiveness still makes ADDI worthwhile compared to the standard DPA.
Frequently Asked Questions
Program details last verified: May 12, 2026