First-Time Homebuyers Programs in Arizona

Rich in geographic diversity, Arizona (or the Grand Canyon State) is a must-stop destination for sightseeing. However, with some cities hosting the hottest housing markets of 2021, Arizona continues to grow in favor amongst potential first-time homebuyers. The breathtaking sunsets and lightning storms will consistently provide entertainment in your backyard.
Will you be among those moving to this desert-like climate? If so, continue reading to learn how you can take advantage of several grants and loans to help acquire your first home.

Who is a First-Time Homebuyer in Arizona?

To qualify as a first-time homebuyer in Arizona, you must not have owned property in the past three years. You can apply for various mortgage grants and loan programs specifically for Arizona residents if you are eligible.
To take advantage of any loan program, you must purchase one of the following property types:

  • Single-family home (must become your primary residence),
  • Duplex,
  • Condominium,
  • Two-family home,
  • Manufactured home,
  • Or townhouse.

Who is Eligible to Apply for Credit in Arizona

You must meet additional criteria to qualify for Arizona’s state-based programs, including:

  • Your debt-to-income (DTI) ratio must not exceed the maximum limit of 45 to 50 percent. This range may vary based on the loan type you are applying for;
  • Annual household income must be under $109,965,
  • Credit score must be at least 640,
  • And you must complete a homebuyer education course.

Each lender will consider your current financial situation and make a decision based on their internal policies.

First-Time Homebuyers Programs in Arizona

First-time homebuyers can apply for the following programs in Arizona:

Home Plus

The Arizona Industrial Development Authority (AZIDA) offers the Home Plus program, which provides a 30-year fixed-rate mortgage combined with down payment assistance of up to five percent. This mortgage is available for first-time homebuyers and existing homeowners.
Applicants must have a credit score of at least 620 and fall within income limits.

“Home in 5” Advantage Program

Maricopa County Industrial Development’s “Home in 5” Advantage Program provides up to five percent to help with a down payment and closing costs. It also offers a loan with a competitive interest rate. Borrowers must be purchasing a home in Maricopa County; the purchase price is not limited.
This loan program allows you to borrow a 30-year fixed-rate traditional VA or FHA mortgage and receive a second loan that you can use toward your down payment and closing costs. You do not have to make any payments towards this second loan unless you refinance your first loan or sell the house.

Home in 5 Advantage Loan Program – Additional Help for Special Groups

Certain groups can receive an additional 1 percent towards their new home’s closing cost and down payment. This Home in 5 Advantage e-loan program is available for the following individuals in Maricopa County:

  • First responders,
  • U.S military veterans or qualified military personnel,
  • K-12 teachers,
  • Or income-qualified individuals who earn up to $39,500.

Tucson Pima County Home Down Payment Assistance

Tucson Pima County offers a program that allows first-time homebuyers to receive a no-payment second loan to buy a home in Pima or Tucson County. This loan is forgivable after three years, and the maximum purchase limit for an existing house is currently $198,000; the limit for new constructions is $243,000.
The borrower’s eligibility criteria include:

  • Your income must be within 80 percent of your Area Median Income (AMI), depending on household size,
  • You must successfully complete a homebuyer’s counseling program,
  • Not have cash assets exceeding $10,000.,
  • And have cash in your bank equivalent to one mortgage payment.

Other Loan Programs

While these are the state-specific grants and credits available to the residents of Arizona, you can always apply for other nationwide loan programs such as FHA, VA, and USDA loans. Simply visit the HUD website to learn about those mortgage plans.

Conclusion

If you are ready to begin the moving process, you have various options to finance your purchase. Consider the above programs and consult with a lender to find one that works best. We recommend that you compare rates from various lenders and choose the one that offers you the best value.


Federal Programs for First-Time Homebuyers

There are many first-time homebuyers programs available between federal, state, and local county and city options. You may be able to combine different types of programs to get the best deal on your home. The following federal programs are available for first-time homebuyers across the country.

Government-Backed Loans

Various government-backed loans offer low down payments to help first-time homebuyers acquire their home. FHA, USDA, and VA loans all come with little to no down payment and have their list of qualifications that applicants must meet to apply.

Unlike conventional loans, government-backed loans are insured by the government and therefore protect lenders, incentivizing them to give borrowers appealing deals. In other words, government-backed loans usually come with lower lending criteria. Consult with your lender to find out which loan is best for you.

Here are further details on each government-backed loan program:

  • FHA Loans – Secured by the Federal Housing Administration (FHA), FHA loans offer a low down payment (down to 3.5% of the purchase price), a low-interest rate, and generally a lower credit score requirement (typically a FICO score of 580) than competing loans.

Learn more: FHA Loans: Requirements and Limits

  • USDA Loans – USDA loans are backed by the United States Department of Agriculture (USDA). These loan programs allow borrowers to purchase or build in rural areas for little or no down payment. Several programs differ on loan repayment terms and interest rates, dependent on an applicant’s income.
  • VA Loans – Designed to make homeownership possible for veterans, service people, and surviving spouses, VA loans come with favorable terms, including no down payment and limited closing costs. They additionally provide a low-interest rate and do not require Private Mortgage Insurance (PMI).

HomePath by Fannie Mae

This Fannie Mae program allows first-time homebuyers to quickly purchase a Fannie Mae-owned property. Most properties partner with contractors to complete necessary repairs before closing, but buyers may still need to work with an independent contractor for additional renovations and repairs.

Those who buy properties through HomePath and complete Fannie Mae Homeview can receive up to 3% of the purchase price toward their down payment. Recipients can combine this program with a Fannie Mae mortgage.

To qualify, applicants must meet the following requirements:

  • Occupy the home as their primary residence within 60 days of the closing,
  • Complete a homeownership education course and provide proof of the certificate,
  • And the property must be listed on the HomePath system and be eligible for closing cost assistance.

HomeOne by Freddie Mac

First-time homebuyers can apply for a HomeOne mortgage which offers a 3% down payment. Recipients can combine the program with secondary forms of financial assistance to help cover the initial cost of purchasing a home.

The following requirements apply:

  • Applicants must complete a homebuyer course,
  • Use the program for a 1-unit property, including condominium units. Manufactured homes are not eligible for the program, but CHOICEHome®’s are,
  • For those purchasing as a family, at least one person has to qualify as a first-time homebuyer,
  • And at least one applicant must have a FICO credit score.

There are no income or geographic restrictions on the program.

Learn more: Fannie Mae and Freddie Mac: Why Are They Important, and How Do They Differ?

HUD’s Good Neighbor Next Door

Through Good Neighbor Next Door, offered by the Department of Housing Urban Development (HUD), teachers (pre-Kindergarten through 12th grade), firefighters, law enforcement officers, and emergency medical technicians can receive up to a 50% discount off of homes listed by the program. You will, on top of your primary mortgage, sign a second mortgage and note for the discount amount, which will have zero interest and no monthly payment requirements. The program lists properties for seven days at a time, and listings update weekly.

Applicants must meet the following requirements:

  • Live in the home as their primary residence for three years after the purchase
  • Purchase an eligible single-family home that is in a revitalization area and listed on the program’s website,
  • And must occupy the home for three years after the purchase. Should you not complete the three-year occupancy, you will have to pay part of the discount back.

FHA’s Energy Efficient Mortgage Insurance

Through Energy Efficient Mortgage Insurance, first-time homebuyers can receive a loan to cover the cost of energy-saving upgrades to their home. FHA-approved lenders can offer this program to anyone purchasing or refinancing their FHA loan.

The following requirements apply:

  • Applicants must acquire an energy savings report. The cost of the report gets rolled into the loan, so you do not have to pay out of pocket,
  • Must qualify for the purchase according to FHA credit score requirements,
  • And the total cost of the improvements must be cost-effective, meaning that the total amount spent on the improvements must be less than the expected energy saved throughout the improvements’ lifespan.

Learn more: What is a Mortgage? – Part One

State Programs for First-time Homebuyers

Along with federal programs, individual states offer their forms of assistance to first-time homebuyers. This guide will break down each state’s programs, but most states provide the following kinds of programs:

Low-Interest Rate Loans

Many states offer 30-year loans with a below-market, fixed interest rate. In addition, most loans come with a low down payment, typically around 3%. These programs will allow you to combine the mortgage with their down payment assistance programs.

Some states offer additional programs for specific groups of people, like teachers in designated areas or graduates from an accredited college or university. Be sure to check out all programs offered in your state to take advantage of any additional offerings for a group you may belong to.

Down Payment Assistance Program (DAP)

Down payment assistance programs provide borrowers with a second loan to help cover the cost of their down payment. Most programs will also offer closing cost assistance. The assistance varies between 3% to sometimes the entire 20%, capping out at a specific dollar amount. The assistance amount varies depending on income levels and the area you purchase property in.

The DAP may require repayment with an interest rate equivalent to the primary mortgage. Or, the program will defer the loan, and borrowers will not have to repay should they occupy the home as their primary residence for a specified time.

Programs for Veterans

Many states offer assistance to first-time homebuyers who are active military personnel, members of the National Guard, veterans, or spouses of veterans. The type of assistance varies by program and either comes as a low-interest loan (typically lower than the state’s already provided low-interest-rate programs) or down payment assistance.

Neighborhood Revitalization Programs

This type of program is typically available to first-time and repeat homebuyers who are purchasing homes that need significant repairs. To compensate for acquiring a home that is otherwise considered unlivable, this type of program will provide financial assistance to cover the cost of repairs.

The assistance method varies: sometimes, it is rolled into the mortgage amount, and other times offered as a grant that does not have to be repaid. Typically, applicants must prove that the repairs are necessary to occupy the home.

Mortgage Credit Certificate (MCC)

A mortgage credit certificate is a dollar-for-dollar federal tax credit that first-time homebuyers can claim for each year they live in their home. Recipients can claim a percentage of the annual interest paid on their mortgage, not to exceed $2,000, as a credit.

You can file the application when you complete your taxes or update your W-4 tax withholding to reduce the amount deducted from your paychecks. Typically this type of program does not restrict applicants to a specific type of mortgage or financing option; it can be combined with most loans. Income and purchase price limits usually apply, and applicants will need to occupy the home as their primary residence to qualify for the credit.

County and City Based Programs

In addition to federal and state-based programs, counties and towns sometimes offer first-time homebuyer programs to residents or those planning to move to the area. These programs typically provide low-interest mortgages or down payment assistance to help cover the cost of purchasing a home. Sometimes local programs also benefit repeat buyers or particular community members, like teachers or local employees.

While each state throughout the guide lists possible county and city-based programs, we recommend that you research to see if the area you are purchasing in offers a program.

The methods of awarding recipients with assistance vary, but most programs have an allocated amount of funds, and you must submit before an application deadline to be considered. Sometimes the programs operate on a rolling basis and consider each application individually. It is imperative that you read the conditions of the application process to ensure you follow the directions and get considered for the program.

The Homebuying Process

What does the process of buying a home actually entail? Read the following for a general timeline and to grasp a better understanding of where you should start the process.

Decide Where You Will Move

Are you moving to another country, state, or town? Or simply deciding to buy a home in the area you’ve been living for a while? Either way, you should have a clear idea of where you will purchase a home.

If you are torn between several locations, we recommend reviewing what the home buying process is like for first-time homebuyers in each area and also briefly looking at listings to find which options are most favorable to you. In terms of affordability, you can consult with our monthly housing affordability index to understand which metropolitan markets are affordable. The index reviews 100 cities each month to see which have the least and most affordable markets.

Get a Sense of Your Financial Situation

A crucial part of the house-hunting process is understanding how much you can afford. When looking at a home’s purchase price, it can be overwhelming to work backward to comprehend what your monthly costs look like.

To understand how much you can spend on your monthly housing costs, you can consider the following:

Debt-to-Income Ratio (DTI)

The amount of your gross monthly income that goes towards your monthly debt expenses. A lower DTI is more attractive to lenders as it plays into calculating the risk of giving you a mortgage. To determine your DTI, divide your total monthly debt payments by your gross monthly income, then multiply by 100 to get the value as a percentage. Click here for more help on calculating your DTI.

Most lenders look for a DTI below 36%, but some lenders may accept a ratio up to 43%. A lower DTI indicates that you are able to take on the mortgage loan and pay it back, which is attractive to lenders as they seek reassurance from borrowers that they will get their money back.

Know (and Raise) Your FICO Credit Score

An important qualification for most mortgages and first-time homebuyer programs will rely on you having a credit score above a certain number. Your credit score is a three-digit number that predicts how likely you will repay your debt. Lenders and programs look for higher credit scores as it ensures that they will receive the money-back that they lent and that you are a trustworthy borrower. Some programs will give you better mortgage rates and incentives if you have a higher credit score.

If your credit score is poor or fair in the early stages of your home buying process, you may want to delay your search for a bit longer and work to improve your score. Paying off debts, lowering the amount of available credit you are using at a time, disputing any errors, and opening a new line of credit may help boost your score enough to appeal to lenders and programs.

Potential Monthly Mortgage Payment

You should gauge a general idea of how much money you will spend on your mortgage and housing expenses each month. Your mortgage consists of four components, including the principal, interest, taxes, and insurance (PITI).

After determining how much you can afford to spend each month on your housing expenses, you must consider all aspects of your PITI by calculating your taxes and insurance. There are multiple tools online to help you develop solid numbers for these aspects. Deduct your monthly taxes and insurance amount from your budgeted monthly housing expenses to understand how much you can spend on your principal and interest.

Since mortgage rates fluctuate, you should research the current average rate and then use an online mortgage calculator to get a general understanding of how much you can afford to spend on a purchase price. If mortgage rates are running higher, then you will need to search for a lower purchase price, so your monthly payment does not go over budget.

There are several budgeting models you can use when determining how much to spend on your mortgage. Chase outlines several principles, but the overall consensus is that you should spend no more than 30% of your monthly, pre-taxed income on your mortgage.

Learn more: 50 30 20 Budget: A Guide With Examples

Choose a Mortgage Lender & Get Preapproved

When engaging in this part of the process, it is important to shop around for several different lenders to ensure you get the best possible deal on your purchase. You may qualify for different types of loans, and even if you only qualify for one type, there are still different fees associated with the various types of lenders you may meet with. Even if rates differ at numbers under 1%, that can still equate to thousands of dollars over the course of your loan.

As you decide on which loan options work best for you, there are some factors you should consider:

  • Interest rates fluctuate and generally come in at 3 to 4%. To receive a lower interest rate and therefore pay less each month, you can build your credit score and save for a higher down payment.
  • Annual Percentage Rate (APR) includes your interest rate and additional fees and closing costs associated with acquiring your loan. It is a wider perspective of all the items you will pay for when taking out a mortgage.
  • Private Mortgage Insurance (PMI) is insurance coverage that lenders require when you put down under 20% as a down payment. Your total loan amount and mortgage rate determine your PMI.

Looking to buy soon? Check today’s interest rate and get pre-qualified in 2 minutes.

You should go through the pre-approval process with a selection of lenders you are considering working with. Getting pre-approved will allow you to shop for homes and actually meet with agents, as the pre-approval helps guarantee that you are eligible to move forward in the buying process should you like a home you find.

This stage in the process is where you will also discuss first-time homebuyer programs, as outlined in the remainder of this guide, which you can take advantage of to get a better deal on your mortgage. Discuss all options with potential lenders and then decide which program and lender are best for you.

Learn more: Pre-Qualified vs. Pre-Approved

In this phase, you will also submit documentation to various lenders to receive a loan estimate. While the estimate is not the official approval of your mortgage application, it does provide important information about the costs associated with purchasing a home. You will read through the three-page document, then provide additional information and complete the underwriting process should you decide to proceed with the mortgage.

Find Your Home and Make an Offer

Now comes the fun part, actually looking at homes! Take a look at the available homes in your area and inquire about viewing properties with agents. Once you have found a place you can as your future home, it is time to make an offer. This is where you will discuss with your agent to decide how much you should offer, and they will work with the seller’s agent to accept, deny, or negotiate.

To assist in your home buying process, you may enlist the help of a real estate agent. The agent will show you an assortment of homes based on what you are looking for. Your agent then enters the negotiation stage with ample knowledge and the required skill set to get you the best deal on your purchase. Most homebuyers appreciate working with an agent as they have the industry knowledge and can take some of the workload off of your plate as you embark on the other stages of the home buying process. Find the top real estate agents in your area now.

If the sellers accept your offer, you will make a good-faith deposit. Then the transaction will transfer into escrow, meaning the home is taken off the market for a short time under the assumption that you will move forward with the process should there not be anything seriously wrong with the home.

This is where you will have a home inspection to ensure everything is safe and up to standard. If there is anything significantly wrong with the home, you will either be able to take back your offer or negotiate with the seller to have them fix it or lower the original offer amount to reflect the cost of repairs.

Closing

Once the home is inspected and everything is up to standard, you are ready to close on the home. This is where you will get ready to sign a collection of paperwork and cover the additional closing fees to ensure your get the home. Fees can include and are not limited to. things like the title fee, survey fee, property tax, and attorney fees. At the moment, only twenty-two states require the presence of an attorney during a closing.

Before the closing, you may also coordinate a home appraisal, follow up on matters regarding the home inspection as needed, schedule a utility transfer, change your address, and any other additional processes.

Learn more: What Can I Do if My Appraisal Comes in Low?

On average, the closing process takes between thirty to fifty days, and there are several factors that influence the timeline. If you pay in all cash, the transaction takes less time due to less paperwork. As the homebuying process increasingly goes online, this process continues to grow shorter. On the day of the actual closing, you will spend about an hour signing documents.

The closing will take place in person or online. Before the closing date, you should read through the official closing disclosure so you know the exact fees you owe and the exact terms of what you are signing. When it comes time to close, you will sign all the paperwork, get the keys, and then be ready to move into your new home!