When moving to Phoenix, you think endless days of sunshine, golf, and luxurious resorts. But it is also the fastest growing city in the US, which is good news if you’re buying a house in Phoenix. The Phoenix cost of living is reasonable, and due to the expanding population, the job market is very good, especially in the aerospace and defense, technology, manufacturing, film and digital media, bioscience, and health care sectors.
If you’re moving to Phoenix and buying a house, you’ll have many great neighborhoods such as Ahwatukee Foothills, Arcadia, Eastlake Park, and Coronado to choose from. Phoenix boasts over 200 golf courses and has a professional football, baseball, and basketball team. If you like the arts, you’ll find top-notch museums, theaters, and music. Phoenix also has a host of great places to eat, drink, and have fun.
Househunting can be a stressful, agonizing process. You might be feeling overwhelmed about how to buy a house in Phoenix. Following this step-by-step guide can help alleviate your anxiety and assist you in finding the perfect home for you and your family.
Table of Contents
The Steps to Buying a House in Phoenix
Step 1: Things to consider before you buy a home in Phoenix
One of the biggest purchases you’ll ever make is buying a home, so the more informed you are beforehand, the better. Here are some factors you’ll want to consider before buying a home in Phoenix.
- Your Income And Employment Status
To buy a home, you’ll need to show the lender you have a stable work history, not only how much money you make. Be prepared to provide recent pay stubs and W-2s. If you’re self-employed, the lender will want to see your tax returns and other documents.
- Your Debt-To-Income Ratio
Your lender uses your debt-to-income ratio (DTI), dividing your monthly debt by your monthly income, to calculate how much mortgage debt you can afford. You should determine your DTI before you apply for a loan. Generally, a DTI of 50% or less will qualify you for a mortgage, although other factors can influence that.
- Your Liquid Assets
Before you begin your search for a new home consider that you’ll need a downpayment and you’ll have to pay closing costs. Although some conventional mortgages start at 3% to 5% down, you’ll have to put 20% down to avoid paying private mortgage insurance (PMI), which will increase your monthly payments and doesn’t go toward your principal.
Closing costs are fees associated with your home purchase and paid at closing. You should plan on paying about 3% – 6% of your home’s value in closing costs. In some cases, closing costs can be added to your mortgage or paid by the seller.
- Your Credit Health
Know your credit score before considering buying a home. The better your score, the better interest rates and loan types you’ll qualify for. You can qualify for most loans with a score of 620. A credit score of 720 or better usually gets you the best loan terms. Things like your payment history, amount of debt, and credit history affect your credit score. Making payments on time and reducing debt will help raise your credit score.
- The Phoenix Housing Market
Before you purchase a home in Phoenix, you’ll want to get a good idea of the housing market, which is very competitive. Many homes receive multiple offers, and homes are selling about 2% over the list price. Homes are staying on the market for an average of 23 days. Phoenix home prices rose 28.9% over last year, and the median price is $393,000.
Step 2: How Much Can You Afford When Buying a House in Phoenix?
You’ll have other things about homeownership to consider besides purchase price, downpayment, monthly payment, and closing costs. You’ll need homeowner’s insurance, and you’ll have to pay property taxes. You might also have Homeowners Association (HOA) fees. All these factors will affect how much you can afford when buying a house in Phoenix. A general rule is that your total monthly payment (mortgage, taxes, insurance, etc.) shouldn’t exceed 25% of your monthly take-home pay.
What about maintenance? Saving for retirement? When you rent, you don’t have to worry about maintenance. If something breaks, you call the landlord. If you own your home, you’ll have to factor maintenance costs into your monthly budget, or you’ll be in trouble when the refrigerator dies on you. Saving for retirement is very important. Make sure you don’t buy too much house and end up with no savings.
Step 3: Get Pre-approved
If you have the money to pay cash for your new Phoenix home, that’s great! Unfortunately, most people don’t. You’ll need a home mortgage loan. How much you’re approved for will depend on your credit, assets, and income. But which mortgage is right for you?
With a fixed-rate conventional loan, your interest rate won’t change, even if rates go up. Most are 30-year loans, but you can also get a 15-year term where your monthly payment will be higher, but you’ll pay off your loan in half the time and save tens of thousands in interest. FHA loans are backed by the Federal Housing Administration and are easier to qualify for than conventional loans, but they have stricter requirements for mortgage insurance. If you’re an active or former service member, you’re eligible for a VA loan from the Department of Veterans Affairs. VA purchase loans allow you to make no down payment.
Pre-approval will give you the upper hand when competing with other buyers for a home in Phoenix.
Step 4: Finding a Real Estate Agent in Phoenix
When searching for a home in Phoenix, you can do a lot of “legwork” online. But you’ll eventually want to find a real estate agent to help you. Your real estate agent has access to tools you don’t to find the homes that meet your size, budget, and location requirements. They might even find homes before they hit the market. Agents set up showings at the properties you’re interested in, help you write offers, and negotiate the best deal for you. Working with a real estate agent is free. The seller usually pays the buyer’s real estate agent a commission amounting to 3% of the purchase price.
Where do you find a good real estate agent in Phoenix? If you’re just moving to Phoenix, you might not have any leads from friends and family. You should look for an agent experienced in the Phoenix market, with excellent communication skills, who makes you feel like you’re their only client, and with an impressive list of homes sold every year.
You can buy a house without a real estate agent, but the home buying process is hard enough without having to wade through it by yourself, especially if you’re a first-time buyer. A good real estate agent in Phoenix knows the local market, advises you on how much you should offer for a property, and negotiates a good price for you, giving you peace of mind that you haven’t overpaid.
Step 5: House Hunting in Phoenix
When you begin your search for a home in Phoenix, you’ll work with your real estate agent to find houses that fit your criteria. Make a list of the things you can’t live without in a home and others that would be nice to have. Here are some things to consider:
- Square footage
- Condition of home (are you looking for a turn-key home or a fixer-upper)
- Access to public transportation
- Number of bedrooms
- Swimming pool
- Property value trends
- Property/real estate taxes
Rank your items by importance and work with your agent to find homes that meet your must-haves and some or most of your nice-to-haves. Two important things to remember when making your list are location and floor plan. A terrible paint job can be fixed, but location and layout can’t be changed later.
Step 6: The Offer
Once you find that perfect home for you, you’ll want to submit an offer through your agent. Include a time frame in which the seller has to respond to your offer. You’ll also want to add an earnest money deposit, typically 1% – 2% of the purchase price, to show the seller you are serious about buying the home. The deposit goes toward your down payment and closing costs if you do buy. You’ll generally lose your deposit if you agree to buy the home and then cancel.
Once you’ve submitted the offer, the seller will either accept it, reject it, or counter it. If they accept it, you move on to the next step. If they reject it, you can either submit another offer or continue house hunting. If they counter it, you can accept the counteroffer, reject it, or counter their offer. Counters can go back and forth more than once, and your agent will handle the negotiation process. But you always have the final say in accepting or rejecting a counter offer.
Step 7: The Home Inspection and Appraisal
Once you’ve agreed to purchase the home, you’ll want to take care of a few contingencies. The first thing to do is get a home inspection. You need to know if the home has major problems such as a cracked foundation or structural issues. Your agent will ask the seller to correct serious problems before you close. If the seller is unwilling to comply, you might want to move on. Adding a home inspection contingency in your purchase offer isn’t required, but you’d be crazy not to add it.
A home appraisal is required to obtain a home mortgage loan and determines the current value of the property. If the appraised value is lower than your offer, you might run into trouble getting financing. An appraisal contingency in your offer can give you the option to back out without losing your deposit if you run into this problem.
Step 8: What To Do Before You Close
Prior to closing, you’ll want to address any issues found in the inspection report. Based on what the inspector finds, you can have your agent negotiate a lower purchase price, request credits from the seller to help cover your closing costs, or ask the seller to fix the problems.
A final walkthrough of your new home is where you’ll visually check that everything that was agreed upon is done before you close.
Step 9: Close On Your New Home
When it’s finally time to close on your Phoenix home, you’ll get a copy of your Closing Disclosure so you’re aware of all the costs involved before closing. Look it over and ask questions if you don’t understand any of the terms or conditions. You want to know exactly what you’re paying for. At the closing meeting, you’ll have lots of paperwork to sign (mortgage loan, closing documents, final escrow statement, etc.), but once you’re done, you’ll officially be a Phoenix homeowner!
If you’ve just bought your new home in Phoenix, congratulations! Now it’s time to move. Call Mentor Movers Moving and Storage (the top Phoenix movers) today at 480-376-1009 for a free quote and let us take the hassle of moving to your new home in Phoenix off your shoulders.