Arizona First-Time Homebuyer Programs
Arizona offers first-time homebuyers several programs that help with down payment and closing cost assistance to make buying a home a reality. To qualify, you’ll need to meet income and credit requirements and, in some instances, complete a homebuyer education course.
We’ll go over the types of programs available and walk through how to decide what’s the best program for your needs.
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First-time homebuyer programs in Arizona
The Arizona Industrial Development Authority (AzIDA) offers a statewide down payment assistance program, while many cities and counties offer their own assistance programs for down payments and closing costs. The requirements can vary by program, so homebuyers should review these carefully to ensure they qualify.
Home Plus is a statewide down payment assistance program available through the Arizona Industrial Development Authority (AzIDA). Open statewide to all qualified borrowers, the funds can be used for the down payment or closing costs (or both) on a 30-year fixed-rate mortgage. Assistance is provided in the form of a three-year, 0% interest, deferred soft second mortgage that is fully forgiven after 36 months. If you choose to sell or refinance during the first three years, you would be required to repay whatever remains from your soft second mortgage for the down payment assistance.
- Annual income must be at or below $122,100
- One borrower must complete a homebuyer education course
- Must have minimum credit score of 640
- Maximum debt-to-income ratio (DTI) between 45% and 50%
Pros and cons
Available for down payment and/or closing costs
No interest/no payments required
Fully forgiven after living in the home for three years
Minimum credit score of 640 required for all borrowers
Annual income must be at or less than $122,100
Maximum DTI cannot exceed 50%
Must complete homebuyer education course
The Open Doors Down Payment Assistance Program
Available through the City of Phoenix Housing Department, the Open Doors Down Payment Assistance Program offers qualified buyers up to 10% of the home’s purchase price, in the form of a soft second mortgage. This 0% interest loan may be applied to the down payment, closing costs or both. The length of time to receive loan forgiveness will depend on the loan amount: Loans of $15,000 or greater take 15 years to receive full forgiveness, while loans under that amount will be forgiven in five years. To be eligible for forgiveness, borrowers must use the home as their primary residence for that entire time frame.
If the borrower defaults on the primary mortgage leading to foreclosure, the down payment assistance loan will be due in full. If the borrower sells, refinances or defaults on the loan agreement, they will need to repay a prorated portion of the second soft loan. However, they could avoid repayment if the refinance results in a better rate and loan term and is not a cash-out refinance.
- Must own and stay in the house for between five and 15 years, based on loan amount
- Household median income cannot exceed 80% of the area median income
- Must contribute $1,000 of your own funds toward purchase
- Must complete homeownership counseling
Pros and cons
0% interest loan
Can be applied to down payment and closing costs
Forgiven over loan term
Can be refinanced for better interest rate and loan term
Must meet income requirements
Must remain in home for entire period of affordability
Purchase price cannot exceed 95% of HOME Homeownership Value Limits
Property location should be inside the Phoenix city limits
HOME Down Payment Assistance Program
Available to homebuyers in Tucson and Pima County (excluding tribal lands), the HOME program offers up to 10% of the home sale’s price in down payment assistance. Borrowers must contribute at least $1,000 of their own money on the home purchase, but the costs of a home inspection and home warranty (required) can be used towards meeting this requirement.
- Maximum income between $42,950 and $81,000 based on family size
- Must complete homebuyer counseling
- Must qualify for program-approved mortgage
- Must have amount equal to one month’s mortgage payment deposited in bank account
Pros and cons
Up to 10% of home’s sale price in down payment assistance
Monthly payments aren’t required
Available to homebuyers in Tucson and Pima County
Must meet income requirements
Homes must meet HUD’s minimum housing quality standards
Home warranty purchase required
Maximum purchase price of $302,100 for existing homes, $358,835 for new construction
Pima Tucson’s Homebuyer’s Solution Program
Available from the Industrial Development Authorities of the County of Pima and the City of Tucson, the Pima Tucson Homebuyer’s Solution Program provides down payment assistance ranging from 2% to 4% of the first mortgage loan amount. As long as the borrower remains in the home for at least three years, the down payment assistance acts as a grant so it won’t need to be repaid.
- Income cannot exceed $122,100
- Must stay in home for three or more years
- Minimum credit score of 640
- Maximum debt-to-income ratio is 45%
Pros and cons
Get up to 4% of first mortgage amount toward down payment
Won’t have to repay if in the home three or more years
Maximum income is $122,100
Minimum credit score of 640 required
Home must be located in Pima County
DTI ratio cannot exceed 45%
Mortgage Credit Certificates
With mortgage credit certificates, homebuyers can claim a maximum of $2,000 of their annual mortgage interest as a federal tax credit. Open to first-time homebuyers statewide, this isn’t a one-time credit. Instead, borrowers can take the federal tax credit for each year they remain in the home during the mortgage loan term.
- Must be a first-time homebuyer or purchase home in targeted area
- Maximum income ranges between $82,800 and $123,620, depending on location
- Maximum home purchase price must be between $349,525 and $448,442, depending on location
- Must apply and be approved before home closing
Pros and cons
Provides federal tax credit for life of mortgage
All home types qualify
Must apply and be approved before home closing
Incurs a one-time $500 program fee
Incurs a yearly $100 administrative fee
Arizona first-time homebuyer qualifications
Applying and qualifying for a first-time homebuyer program in Arizona requires some time and research by the borrower. Taking the time to complete these steps will go a long way in becoming a qualified homebuyer.
Start with these steps for each of the Arizona first-time homebuyer programs featured above:
→ Step 1: Know the income limits. Most first-time homebuyer programs aim to help low- and moderate income earners, so it’s important to see what the Arizona income limits are for each program. These typically are based on location and family size.
→ Step 2: Receive mortgage approval from a program-approved lender. Each program works with its own list of approved lenders, so find out who those are first so you can choose one that qualifies. It’s important to discuss the loan program’s requirements with the lender, particularly if you have concerns with your credit score or debt load.
→ Step 3: Complete the homebuyer education requirements. Many Arizona programs require borrowers to complete a qualified homebuyer education program that covers the pros and cons of homeownership. Specifically, pay attention to when the class must be completed, as some must be completed before making an offer on a home.
→ Step 4: Understand any payback requirements. To receive assistance free and clear in these programs, you may have to remain in your home for a minimum amount of time. You may also have to repay some or all of the assistance if you refinance or sell the home or default on the home’s primary mortgage.
→ Step 5: Don’t be surprised by high interest rates. Mortgage loans through Arizona’s first-time homebuyer programs may come with higher interest rates than other loan options. Find out what the rate is as soon as possible to ensure you can afford it.
Understanding Arizona first-time homebuyer down payment assistance
When applying for one of Arizona’s first-time homebuyer programs, some of the terms may be confusing. It’s important to know what those terms mean as they apply to the program and any repayment requirements.
Deferred second mortgage
A deferred second mortgage is a mortgage that’ll have to be repaid when the borrower sells or refinances the primary mortgage or pays off the primary mortgage.
Forgivable second mortgage
With a forgivable second mortgage, you won’t have to repay the loan so long as you meet the requirement to live in your house for a specific period of time. The time period varies by loan program. However, if you do leave before then, you may be required to repay part or all of the loan.
Grants are money that homeowners don’t have to repay. It’s possible that the mortgage may have a higher rate if the down payment assistance is offered as a grant.
Mortgage credit certificate
Mortgage credit certificates allow homeowners to claim up to $2,000 of mortgage interest as a federal tax credit. Homeowners can take the federal tax credit for the life of the mortgage loan.
How much of a down payment do I need to buy a house in Arizona?
Down payment requirements vary by the loan program. For instance, VA and USDA loans don’t require a down payment. With conventional loans, the minimum down payment is 3% of the loan amount. As for FHA loans, the minimum down payment is 3.5% if the borrower has a credit score of 580 or higher; it rises to 10% if the borrower’s credit score is between 500 and 579.
Can I qualify for down payment assistance in Arizona?
To determine if you qualify for down payment assistance in Arizona, you’ll need to meet income, credit and debt-to-income requirements. In addition, since several of the programs are city or county-specific, you may also need to purchase a home within a designated geographic area.
How do I apply for Arizona first-time homebuyer down payment assistance?
To apply for Arizona first-time homebuyer down payment assistance, follow the program’s application process and ensure you meet all the requirements. You’ll need to work with a participating lender in the program you choose.
Other first-time homebuyer loan programs
Not guaranteed by any government agency, a conventional loan is available to borrowers with a minimum credit score of 620. These loans typically have stricter requirements than government-backed loans.
Backed by the Federal Housing Administration (FHA), FHA loans have less stringent requirements, such as a minimum credit score of 500 and no income limits. Down payment requirements could be higher than those of a conventional loan.
Backed by the U.S. Department of Veterans Affairs (VA), VA loans are available to active and former members of the military and eligible surviving spouses. These loans won’t require a down payment or mortgage insurance, and closing costs also are capped at 1% of the loan amount.
Backed by the U.S. Department of Agriculture, USDA loans are designed to assist rural homeowners. As such, they have strict requirements regarding the borrower’s income and the home’s location.
What are the best first-time homebuyer loans?
The best home loan option for a first-time homebuyer depends on that borrower’s ability to qualify, such as paying a minimum down payment and having the minimum credit score.
Home price trends in Arizona’s major areas
Rising home values in Arizona along with higher mortgage interest rates makes for highly monthly mortgage payments.
According to the National Association of REALTORS®, the monthly mortgage payment for a typical home in Maricopa County — home to Phoenix, the state’s capital and the fifth-largest city in the U.S. — the monthly mortgage payment increased by nearly $1,000 in the third quarter of 2022 (the most recent data available), ending up at $2,427 from $1,431 in the year before. Meanwhile, in Pima County — where Tucson can be found — the monthly mortgage payment increased more than $650 over that same time period, from $976 to $1,634.
Is there a first-time homebuyer tax credit in Arizona?
Yes, first-time homebuyers can apply for a mortgage credit certificate that would allow them to claim up to $2,000 on paid mortgage interest as a federal tax credit for each year of the mortgage loan.
What are the current mortgage rate trends in Arizona?
Our current mortgage rates forecast predicts that rates will probably remain high compared to recent years but could start trending downward as we enter 2024. According to Freddie Mac’s Primary Mortgage Market Survey, as of December 28, 2023, the average rate for a 30-year fixed-rate mortgage is 6.61%. This average is 5.93% for 15-year fixed-rate mortgages.
You can find mortgage interest rates for Arizona and your specific city at the LendingTree mortgage rates page.