What to know about buying a house in Arizona

Arizona first-time home buyers are facing quickly-rising home prices, like much of the nation. That can make saving for a down payment feel like a challenge.

But there’s good news, too. Arizona has some generous down payment assistance programs that could help you bridge the gap between your savings and your down payment and closing costs needs.

And there’s other support in the state as well. From special mortgage programs to homebuyer education and counseling, Arizona offers plenty to help you get the keys to your own front door.

Verify your home buying eligibility in Arizona. Start here (Nov 1st, 2021)

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Arizona home buyer overview

The median home sales price in Arizona was $306,860 in August 2021, according to Arizona Realtors. That represented an increase of 23.7% year over year.

Unfortunately, there were few signs that the property market was cooling at the time of this writing. And the number of homes listed was still falling.

However, things might change if the Copper state follows nationwide trends that show fewer purchasers chasing more homes. Let’s hope that starts to help Arizona first-time home buyers soon.

Arizona Home Buyer Overview
Average Home Sale Price in Arizona $306,860
Minimum Down Payment in Arizona (3%) $9,200
20% Down Payment in Arizona $61,370
Average Credit Score in Arizona1 706
Maximum Arizona Home Buyer Grant2 Loan of up to 10% of the purchase price in Pima county incl. Tucson

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

Verify your home buying eligibility in Arizona. Start here (Nov 1st, 2021)

First-time home buyer loans in Arizona

First-time home buyers with a 20% down payment in the state of Arizona can get a conventional loan with a low interest rate. And they’d never have to pay for private mortgage insurance (PMI).

Of course, few first-time buyers have saved enough for 20 percent down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:

  • Conventional 97 — From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. You can usually stop paying mortgage insurance after a few years
  • FHA loan — Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re typically on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
  • VA loan — Only for veterans, active-duty military members, reservists, and National Guard. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
  • USDA loan — For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
  • Home Plus AZ — May include competitive interest rate and mortgage insurance package, and can be used with down payment assistance. More information below

Note that most of these programs require you to buy a primary residence. That’s a home you’ll live in full-time, not a vacation home or investment property.

Still, depending on the loan type you choose, you could potentially get into your new house with minimal cash out of pocket.

These programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs.

If you’re not sure which program to choose for your first mortgage loan, your lender can help you find the right match based on your finances and home buying goals.

Find the best first-time home buyer loan for you (Nov 1st, 2021)

Arizona first-time home buyer programs

The Arizona Industrial Development Authority administers Home Plus AZ, which is a mortgage program open to Arizona first-time home buyers everywhere in the state.

You’ll have to choose a lender from an approved list and undertake a home buyer education course, but those are common requirements for such programs. As are income limits, which bar people with high household incomes (over $112,785 for most loans) from participating.

You may pay a slightly higher mortgage rate with Home Plus AZ compared to other mortgage programs. But that’s typically counteracted by the lower mortgage insurance premiums on offer.

Check your Loan Estimate’s annual percentage rate (APR) to see what you’ll actually pay and compare that with Loan Estimates you get from other lenders outside the program.

Credit score minimums are higher (starting at 640) with Home Plus AZ, which is a bit tougher than the 620 minimum on mortgages from Fannie Mae and Freddie Mac — and much worse than the 580 minimum for FHA loans. So you may have to look elsewhere if your score’s an issue. Check out the Home Plus AZ webpage and FAQs for more details.

So far, Home Plus AZ doesn’t sound all that exciting. So why explore further? Well, because it has a great down payment assistance program, which we’re getting to next …

Arizona first-time home buyer grants

Home Plus AZ doesn’t provide grants. But it does provide interest-free, forgivable loans that last only three years. And you can borrow up to 5% of the home’s purchase price, depending on the type of mortgage you choose and your personal circumstances.

These loans require no monthly payments. And your loan balance is reduced by 1/36th of the amount you borrowed each month. So, at the end of three years, you owe nothing.

Just note that, if you sell within that time, you’ll have to repay the portion of your original debt that is yet to be forgiven. And refinancing within that time could require repayment as well. Still, three years is a short time.

Home Plus AZ may not be the only home buyer assistance program in your town, city, or county. So make sure you check out other, local down payment assistance programs in case one of those suits you better.

There’s a list of city programs below. But do an internet search “[your city or county] down payment assistance” to make sure you don’t miss any.

Verify your home buying eligibility in Arizona. Start here (Nov 1st, 2021)

Buying a home in Arizona’s major cities

Home prices in Phoenix and Mesa are higher than the Arizona-wide average, though those in Tuscon are just a bit lower. However, the rate at which real estate prices rose between August 2020 and August 2021 was lower than the average for Arizona. So there’s good news and bad news for those wanting to buy in a big city.

Phoenix first-time home buyers

The median list price in Phoenix was $405,000 in August 2021, according to Realtor.com. That was up 9.5% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

  • $12,150 for 3% down payment
  • $81,000 for 20% down payment

The City of Phoenix says that it provides down payment assistance to home buyers whose household income is no greater than 80% of the area median income (AMI) where they’re buying, as shown on the Median Annual Income Table.

However, if further information is available on the city’s website, it was buried too deep for us to find. So you should call (602) 262-3111 to ask for details.

Tucson first-time home buyers

The median list price in Tucson was $299,900 in August 2021, according to Realtor.com. That was up 20% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

  • $9,000 for 3% down payment
  • $59,980 for 20% down payment

The City of Tucson’s HOME down payment assistance (DPA) program is administered by Pima county and is available countywide.

That program provides loans, with no monthly payments, of up to 10% of the purchase price. Indeed, it says “If layered with other approved DPA resources, HOME may cover up to the remaining balance to equal 20% total subsidy to remove PMI [private mortgage insurance] on a Conventional Loan.”

Pima’s DPA fact sheet says that there’s a “Period of Affordability” during which you’ll have to repay the loan if you sell the home or transfer (including refinance) your main mortgage. But that otherwise excellent sheet doesn’t specify how long that period is, nor whether interest is charged.

You can call the Pima County Housing Center at (520) 724-2471 to fill in the gaps.

Mesa first-time home buyers

The median list price in Mesa was $393,100 in August 2021, according to Realtor.com. That was up 17.5% year over year.

If you want to buy a home at that median price, your down payment options might fall between:

  • $11,790 for 3% down payment
  • $78,620 for 20% down payment

“The City of Mesa Housing and Community Development’s (HCD) Homeownership Assistance Program (HOA) provides down-payment, closing costs, and (with exceptions) soft second loans for City of Mesa residents,” according to the City’s website. That link takes you to a comprehensive 51-page guide to the program.

That specifies that the amount you can borrow can be “the minimum amount required to make the purchase feasible.” And the time before the loan is forgiven grows longer the more you borrow. So you’re free and clear after five years if you borrow up to $15,000. But then there’s a sliding scale, rising to 15 years for those who borrow $40,000 and over, and topping out at 20 years for new construction and refinances.

As you can imagine, there’s a pile of eligibility criteria and rules within the 51 pages that make up the guide. But it would be well worth plowing through them if you think you could benefit from the program.

Where to find home buying help in Arizona

All the organizations we’ve listed above should provide advice freely to any first-time home buyer in Arizona or their local area.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides lists for statewide, regional, and local resources:

Statewide and regional first-time home buyer resources in Arizona

City and county home buyer resources

What are today’s mortgage rates in Arizona?

You can see today’s live mortgage rates in Arizona here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

Verify your new rate (Nov 1st, 2021)

1 Source: Experian.com 2021 study of 2020 data

2Based on a review of the state’s available DPA grants at the time this was written

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