A Closer Look at Arizona’s Aid Programs for First-Time Homebuyers
Embarking on the journey to purchase your very first home is a thrilling yet costly endeavor, particularly in the state of Arizona. As of January 2023, the median house price in the state known for its stunning Grand Canyon, according to Redfin data, stands at a hefty $450,000. For prospective first-time homeowners maneuvering on a tight budget, this might feel akin to standing at the foot of Camelback Mountain with no guide or roadmap to navigate to the peak. Fortunately, accessible paths do exist that can pave the way toward owning a dwelling amidst the sun-soaked deserts. Whether your eyes are set on the bustling streets of Phoenix, the mountainous beauty of Flagstaff, the mystical charm of Sedona, or any point in between, numerous first-time homebuyer assistance programs is available to help streamline your journey.
Homeownership in Arizona: Loan Programs for First-Time Buyers
HOME+PLUS Program
Initiated by The Arizona Industrial Development Authority (AzIDA), the HOME+PLUS program is designed to ease the financial burden for first-time buyers. This program offers a 30-year fixed-rate mortgage combined with down payment assistance reaching up to 5% of the total loan principal. The first mortgage could be conventional, FHA, VA, or USDA, with the added advantage of reduced mortgage insurance, making your monthly payments more manageable. Remarkably, this program isn’t exclusive to first-time homebuyers but extends to previous homeowners too. The Arizona Department of Housing reports that this scheme has already supported over 32,000 buyers to achieve homeownership.
The HOME+PLUS program’s down payment assistance takes the form of a second loan that requires no payments and is forgivable after three years, provided you neither sell the home nor refinance the first mortgage before this period elapses. This loan does not necessitate a separate application. Instead, your eligibility is automatically assessed when you apply for a compatible first mortgage through an approved lender.
Here are the prerequisites to qualify for the HOME+PLUS program:
- A minimum credit score of 640; 680 for a manufactured home
- A maximum 45% to 50% debt-to-income (DTI) ratio, depending on the loan type
- Annual income not exceeding $122,100
- Completion of a homebuyer education course
Property requirements include:
- The property must be a single- or two-family home, condominium, townhome, or manufactured home
- The property must be located in Arizona
- The property must serve as the primary residence
Arizona Down Payment Assistance
Aside from the HOME+PLUS program, Arizona offers additional initiatives to help cover the costs of a down payment and closing fees.
Home in Five Advantage Program
The Maricopa County Industrial Development Authority (MCIDA) and Phoenix IDA have launched the Home in Five Advantage Program, primarily to help low- to moderate-income families become homeowners within Maricopa County. The program has already aided over 22,000 buyers in the Phoenix metro area, providing a collective $170 million plus in down payment assistance. This scheme provides borrowers a 30-year fixed-rate conventional, FHA, or VA loan alongside a three-year forgivable second loan that can be used towards a down payment and closing costs. No payments are required on the second loan unless the home is sold or the first loan is refinanced within the first three years.
Here are the borrower requirements:
- A minimum credit score of 640
- Annual income not exceeding $112,785
- Maximum 50% DTI ratio
- Completion of a homebuyer education course
- Occupancy within 60 days of closing
Property requirements include:
- The property must be a single-family home, condominium, or townhome
- The property must be located within Maricopa County
- The property must serve as the primary residence
- There are no limits on the purchase price
Special Group Assistance under the Home in Five Advantage Program
Under the Home in Five Advantage Program, an extra 1% in down payment and closing cost assistance is accessible for specific groups in Maricopa County. These groups include:
- Qualified U.S. military personnel and veterans
- First responders
- Teachers
- Borrowers earning less than $39,500 per year who do not have a co-signer
Home in Five Advantage BOOST
Ask your lender or real estate agent about the Home in Five Advantage BOOST. This additional program can provide an extra 0.5% down payment assistance for buyers purchasing in designated low-income neighborhoods.
Tucson Pima County HOME Down Payment Assistance Program
This locally operated assistance program is tailored for first-time homebuyers purchasing in Tucson or Pima County. The program offers up to 10% of the purchase price, given that you can contribute at least $1,000 and your income does not surpass a certain limit. It also necessitates the completion of homebuyer counseling, not having more than $10,000 in liquid assets, and maintaining the equivalent of one month’s mortgage payment in reserves at the bank.
The maximum purchase price for an existing home currently stands at $302,100, and for new construction, $358,835.
Other First-Time Homebuyer Loan Programs
Beyond these options, you can also potentially lessen your tax obligations through a Mortgage Credit Certificate (MCC). In Arizona, the MCC allows you to claim a federal tax credit of 25% of your mortgage interest, capped at $2,000 per year. For this, a minimum credit score of 640 is required, and you need to meet the set income and purchase price limits, which vary based on the size of your household and the location of your prospective property.
When exploring first-time homebuyer programs in Arizona, remember to also look at national programs that might further assist you in achieving your homeownership goals. A good starting point is Bankrate’s guide to first-time homebuyer loans and programs.
Initiating the Process
Now that you have an overview of the various options open to first-time homebuyers in Arizona, it’s time to initiate your home purchase process. The Arizona Industrial Development Authority provides a list of approved mortgage lenders who can guide you throughout the procedure, as does Bankrate. Irrespective of the program you opt for, it’s crucial to shop around for the best mortgage offers. Remember, interest rates fluctuate regularly, so if you come across a highly competitive rate, be sure to lock it in promptly.
Additional reporting by David McMillin
First-Time Homebuyer Programs in the Neighboring States
Consider exploring first-time homebuyer programs in neighboring states:
