Planning to move to the Grand Canyon State? One of the biggest draws is the affordable real estate in Arizona which has drawn in new residents from across the country — including many first time buyers!
This may be your first time buying a home and it can definitely be a nerve-racking and stressful experience. While it takes a couple of months or more from start to finish, buying a house in Arizona isn’t as complicated as it seems. Here’s a step-by-step guide explaining how to buy a house in Arizona. We’ll also cover amazing grants and programs that can make it easier and more affordable as a first time home buyer in Arizona!
How to Buy a House in Arizona
Ready to start house hunting in Arizona? Buying a house in Arizona can seem intimidating but there aren’t that many steps you need to worry about. When you work with a real estate agent and an escrow agent, they’ll handle most of the details. Your biggest concerns will be finding the right house and qualifying for your home loan. Here are the basic steps you’ll need to follow.
Determine a Reasonable Budget
The first step to buying a house in Arizona? Determining how much you can afford to pay. It isn’t enough to look at just the purchase price of a home; you’ll also want to consider:
- Private mortgage insurance (may be necessary with less than 20% down on a conventional loan)
- Property taxes
- Homeowner’s insurance
- Hidden costs of homeownership. According to Zillow and Thumbtack, the average homeowner in Phoenix faces almost $9,200 in hidden expenses.
As a general rule, you don’t want to spend more than 28% of your gross income on housing expenses.
So, how much does it cost to buy a house in Arizona? What should you expect and where is the best place to buy a house in Arizona within your budget? Here’s the median home prices in several areas:
- $273,000 is the median home price in metro Phoenix, including new construction
- $433,500 is the median home price in Scottsdale
- $198,100 is the median home price in metro Tucson
What Is Needed to Buy a House in Arizona & Get Qualified for a Loan?
After you know what you can afford, you should take the step of getting pre-approved for a mortgage before you even start looking for your dream home. You can speak with several mortgage lenders to learn about their loan options and average rates.
You’ll need to submit documentation to get pre-approved for a mortgage just as if you were applying for the loan. You’ll get a pre-approval letter that tells you how much you’re pre-approved to borrow which will help you with house hunting and make your home offer seem more serious.
Here’s what you need to get pre-approved and buy a house:
- Income verification such as W-2s, 1099s, and documentation of real estate income
- Asset verification such as bank, brokerage, and retirement statements
- Debt payment verification including mortgage statements (if you already own a house) and statements showing monthly payments for car loans, student loans, and credit cards
- Proof of rent payments for the last 12 months if you are renting
- Gift letter if you are using a gifted down payment
Your lender will also check your credit score. Most lenders require a credit score of 620 or higher with the best rates reserved for borrowers with a credit score of at least 760.
Find an Arizona Real Estate Agent
Have a pre-approval and budget in hand? It’s time to search for an experienced real estate agent to help you buy a house in Arizona. Your agent will help show you houses that fit your needs and budget, make an offer, and negotiate on your behalf. They’ll also serve as a go-between during the transaction.
Take the time to interview several real estate agents and choose someone who seems to have time for you, listens to what you have to say, and offers constructive advice.
House Hunting in Arizona
Now you’re at the really exciting part: house hunting! From choosing where to buy a house in Utah to deciding which features you absolutely want, which you need, and which you can afford, you have your work cut out for you!
As you explore houses and neighborhoods, make sure you get feedback from your real estate agent. Ask which neighborhoods they recommend in the city and let them know the most important features on your list.
Make an Offer on a Home
Found the home of your dreams? It’s time to make an offer. Your real estate agent will help you draft an offer after exploring comparable sales and make sure important contingencies are in your offer. Depending on your situation, you may need a contingency that your current home sells first, for example.
Negotiation & Home Inspections
After your offer is submitted to the homeowner, they can make a counteroffer. They may want a higher asking price, fewer contingencies, or less assistance with closing costs. Your real estate agent will help you during this process to make sure the final contract is fair to you.
After the offer is accepted, you are officially “under contract.” It will take about 60 days from this point to buy a house in Arizona and actually move in. Before closing, any contingencies will need to be met including a home inspection which will probably be a requirement from your lender (and it’s just a good idea anyway!).
Close & Move in!
When closing day finally comes, you’ll meet with the escrow officer for the signing. Your lender will transfer the funds and the documents and money held in escrow will be exchanged. You’ll get the keys to your new house and be ready to move in!
First Time Home Buyer Programs in Arizona
As a first time home buyer in Arizona, you can qualify for a number of down payment assistance programs and grants that make it easier to afford a home. Depending on the program, you may qualify for looser loan standards or a loan or grant to help with the down payment.
Note: you can still qualify for first time home buyer grants in Arizona and special loan programs even if you have owned a home before! You are generally considered a first time buyer if you haven’t owned a home in at least three years.
Here are some of the best programs to explore.
This program is administered by the Arizona Industrial Development Authority (Arizona IDA) and offers 30-year fixed-rate home loans with down payment assistance of 0% to 5%. You can use the down payment assistance toward closing costs or your down payment but it’s only offered with Home Plus mortgages.
The program is available in every county and city of Arizona but your annual income can’t exceed $105,291.
The P2P Down Payment Assistance program is a partnership between the Arizona Home Foreclosure Prevention Funding Corporation (AHFPFC) and the Arizona Department of Housing (ADOH). It offers 30-year fixed-rate home loans with down payment assistance that works as a second mortgage for up to 10% of the purchase price of the home. The down payment assistance is a 5-year lien with 0% interest and no monthly payments that will be forgiven after 5 years.
The P2P program is only available for home buyers in 26 target zip codes in cities such as Phoenix, Bull Head City, Kingman, and Yuma.
The Home in Five program is available to moderate and low income borrowers, including first time home buyers in Arizona, who are buying a home in Maricopa County. You can get up to 5% toward closing costs and a down payment plus a mortgage with a competitive rate.
Eligible individuals, including veterans, military personnel, K-12 teachers, and first responders can qualify for an additional 1% assistance.
Buying a house in Arizona’s Pima County? Tucson home buyers can qualify for the Pima Tucson Homebuyer’s Solution program which is available to first-time and repeat home buyers. The program offers 30-year fixed-rate mortgages and assistance of 2.5% to 6% that can go toward closing costs or the down payment.
With an FHA, USDA, or VA loan, you can qualify for 2.5%, 3%, 4%, 5%, or 6% assistance. Conventional loan borrowers can qualify for 3%, 4%, or 5% down payment assistance.
Unlike some programs, you can combine this program with HOME assistance or a Mortgage Credit Certificate (MCC) which is available through the Pima Industrial Development Authority.
The Mortgage Credit Certificate is a tax credit for 40% of your annual mortgage interest of up to $2,000 per year as long as you live in your home. This program is available only to first time home buyers in Arizona.
MCCs are currently only valid for properties in Pima County and the city of Tucson. There is a one-time program fee of $500 plus an annual administrative fee of $100. The program is administered by the Community Investment Corporation.
National First Time Buyer Programs
When you buy a house in Arizona, you may also qualify for national first time home buyer programs:
- Federal Housing Administration (FHA) loans which require only 3.5% down
- Department of Veterans Affairs (VA) loans which are available to military families and veterans and come with low closing costs, no private mortgage insurance (PMI), and no down payment requirement
- U.S. Department of Agriculture (USDA) loans which require no down payment on homes in qualifying rural and semi-rural areas
- Good Neighbor Next Door program sponsored by HUD which works like a discount of 50% on the purchase price of a home in a qualifying Revitalization Area for public servants
- Native American Direct Loans (NADL) for Native American veterans through the Department of Veterans Affairs
- HomeReady program from Fannie Mae which requires 3% down
- Home Possible program from Freddie Mac which requires a 3% down payment
Ready to get started buying a house in Arizona? Turn to the experts at Mentors Moving & Storage to handle the heavy lifting and logistics on moving day!