First-time homebuyer programs in Arizona

Arizona first-time homebuyer grants and programs

The state’s flagship Home Plus program is a public-private partnership that seeks to provide affordable housing without the use of taxpayer dollars.

There are also a few regional programs offered in certain areas of Arizona.

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Home Plus loan

The Home Plus loan program provides eligible applicants with a 30-year fixed-rate mortgage combined with down payment assistance of up to 5% of the loan. The program is compatible with conventional loans, FHA loans, VA loans and USDA loans.

The assistance money can be used for your down payment, closing costs or a combination of the two. It’s available to all residents of Arizona who meet the requirements.

You don’t have to apply directly to the government for the Home Plus loan. AZIDA has a list of recommended mortgage lenders who will register you for Home Plus assistance.

Home in Five (Maricopa)

The Maricopa County and Phoenix Industrial Development Authorities can also provide down payment assistance through the Home in Five Advantage program.

This program was created to help low- to moderate-income individuals and families buy a home in Maricopa County by granting them up to 5% assistance for down payment and closing costs. They also offer loans with competitive interest rates through approved lenders.

An additional 1% assistance is available for K-12 teachers, first responders, military personnel, veterans and individuals who earn less than $36,450 annually.

To qualify for Home in Five, applicants must:

• Have a minimum credit score of 640.
• Have an annual income of no more than $108,920.
• Have a debt to income ratio (DTI) no greater than 50%.
• Plan to occupy the home as their principal residence within 60 days of closing.
• Complete a homebuyer education course.

More: Understanding the mortgage loan process

Pima Tucson Homebuyer’s Solution (PTHS)

The Industrial Development Authorities of the City of Tucson and of Pima County work together to provide a Mortgage Loan Program to qualifying buyers purchasing homes in Tucson and Pima County.

The qualifications are similar to the Home in Five program. They include:

• A minimum credit score of 640.
• A maximum DTI ratio of 45%.
• The completion of a homebuyer education program.
• A commitment to treat the property as a primary residence and to occupy it within 60 days of closing.

More: Best mortgage lenders for first-time homebuyers

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How to qualify for down payment assistance in Arizona

If you want to get help with your down payment in Arizona, you must:

• Not have an income that exceeds $109,965, though the limit is more strict for certain programs and in certain areas.
• Complete a homebuyer education course before closing.
• Have a minimum credit score of 640 for most programs.

More: Get a free credit score and credit monitoring from Credit Sesame.

Nationwide first-time homebuyer programs

Getting a “conventional” mortgage through the private market can be tough.

You’ll often need a credit score of about 620 and a down payment of at least 5% to qualify. Plus, if you don’t put down at least 20% of the purchase price, you’ll have to pay extra each month for mortgage insurance.

More: Use these savings accounts to build up your down payment.

That’s why many first-timer buyers will prefer to use one of these government-run, nonconventional mortgage options.

FHA loans

In 1934, the government introduced Federal Housing Administration (FHA) loans to encourage homeownership across the country. At the time, only about 40% of American households owned their homes. Since its creation, the FHA has insured more than 46 million mortgages.

FHA loans are easier to obtain than conventional mortgages. The minimum credit score is typically 580, but if you provide a larger down payment, you could qualify with a score as low as 500.

The minimum down payment with an FHA loan is 3.5%, though if you put down less than 10%, you’ll have to pay a mortgage insurance premium as well. That can quickly add to the overall cost of your monthly payments.

More: FHA loan requirements

VA loans

These loans were introduced by Congress in 1944 to increase benefits to veterans. The act allowed the U.S. Department of Veterans Affairs (VA) to guarantee or insure home, farm and business loans made to veterans by lending institutions.

VA loans are available to active service members, veterans and some surviving military spouses. While they don’t require a down payment or mortgage insurance, borrowers will be required to pay a considerable funding fee to get started.

USDA loans

USDA loans also require no down payment and no private mortgage insurance. Guaranteed by the United States Department of Agriculture, they help lower-income rural and suburban Americans become homeowners.

These loans do require you to pay an upfront 1% guarantee fee and an annual 0.35% fee. But when compared to the amount you’ll pay in mortgage insurance with other types of loans, you’ll probably still come out ahead with the USDA.

That said, you may simply make too much money to qualify for a USDA loan. The current income limits in most parts of the U.S. are $86,850 for one- to four-member households and $114,650 for five- to eight-member households, though the limits may be higher if you live in a county with an above-average cost of living. The USDA’s website can tell you the limits in your area.

More: Determine monthly instalments with mortgage income calculator

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Next steps

Now that you know your options, it’s time to prepare for actually submitting an application.

First, you’ll need to make sure your credit score is in good enough shape to qualify for the program of your choice. The website Credit Sesame can help you find out your current score for free.

If your credit isn’t quite there, don’t despair. You can try contacting an organisation like Self credit repair to help you get the score you need.

Once you’re confident in your score, you can start gathering the documents you’ll need to prove you’ve got solid assets and income.

Then you’ll finally be ready to get pre-approved for a mortgage and start shopping for your first Arizona home.