From boom to bust and back, Arizona has been a volatile place over the past decade. Arizona’s housing market is on the mend, but not all is rosy. Job growth has been strong, for instance, but the state’s unemployment rate was a higher-than-average 5.6 percent in May 2016. Home prices have rebounded, but a large share of Arizona homeowners remain underwater. And new construction has yet to ramp up.

Still, Arizona remains an affordable housing market, and there are plenty of programs available to help first-time buyers come up with a down payment. This page offers detailed instructions to navigating the housing market and getting a mortgage in Arizona.

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Check Mortgage Rates in Arizona

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Your ability to get a mortgage, and the price you’ll pay for the loan, hinges primarily on your credit score. However, factors in state and local markets also can affect the availability and costs of mortgages.

For all its well-publicized problems with foreclosures, Arizona’s foreclosure rate has fallen below the national average. Arizona is among the so-called non-judicial foreclosure states, which means lenders need not endure a lengthy legal process before repossessing homes. Typically, states with judicial foreclosure processes have higher foreclosure percentages. To learn more about what drive’s interest rates on home loans, check out MoneyGeek’s mortgage rates guide.

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Qualifying for Down Payment Assistance in Arizona

The Arizona Housing Finance Agency offers several programs for first-time buyers. The HOME Plus Home Loan Program combines a 30-year fixed-rate loan with a grant for down payment assistance. Borrowers can get a grant for a down payment for as much as 5 percent. To qualify, borrowers must have a FICO score of at least 640 and an income of no more than $92,984. The purchase price of the house is capped at $371,936, and the borrower must complete a homebuyer class before closing on the house.

The state’s Pathway to Purchase program is more generous but more restrictive. It gives qualified buyers a second mortgage equal to 10 percent of the purchase price up to $20,000 to be used towards a down payment or closing costs for a home in one of 17 targeted municipalities in Arizona. The second mortgage can be forgiven after five years. Income limits and price caps are the same as the HOME Plus program, but Pathway to Purchase is available only in 17 cities that were hit hard by the foreclosure crisis. Those cities include Arizona City, Goodyear, Red Rock, Tucson and Yuma.

Pima County, home of Tucson, has a separate down payment assistance program that provides up to 5 percent of the loan amount to buyers. Borrowers must have household income of no more than $82,600 and a FICO score of at least 640.

For more general information about down-payment assistance and other types of financial aid, see MoneyGeek’s first-time homebuyers guide.

Financial Assistance in Arizona for First-Time Buyers

See MoneyGeek’s comprehensive list of closing cost assistance, down payment assistance and other financial aid.

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Need Help? Find a HUD-Approved Housing Counselor in Arizona

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Understanding Home Affordability in Arizona

Home prices have rebounded, but affordability has yet to pose major challenges for buyers in Arizona. In Phoenix, for instance, 70 percent of homes sold in the first quarter of 2016 were in reach of a median-income family, the National Association of Home Builders/Wells Fargo Housing Opportunity Index shows. The calculation uses a median price of $215,000 and median family income of $62,900. In Tucson, where the typical price was $163,000 and median family income was $56,700, more than three-quarters of homes sold were affordable to the typical buyer. Even in pricier Flagstaff, where the typical home sold for $260,000, 58 percent of homes sold were in reach of a median-income family.


How Arizona Home Prices and Mortgage Interest Rates Affect Monthly Payments

Metro Area Estimated Monthly Mortgage Payment* Q1 2016 (Change from Previous Year) 2015 Median Home Price 2014 2013
Phoenix-Mesa-Scottsdale $1,048 $223,100 (+8.20%) $216,400 $198,500 $183,600
Tucson $864 $183,800 (+3.20%) $182,900 $175,800 $169,600

Source: National Association of Realtors Q1 2016 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q1 2016 and a 30-year fixed mortgage with today’s rates.

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Research Loan Limits in Arizona

Since the Federal Housing Finance Agency considers Arizona an affordable housing market, the limit for Fannie Mae and Freddie Mac loans is $417,000 for the entire state, mirroring the loan limits in much of the country. Borrowing more than $417,000 means you’ll need a jumbo loan, a type of mortgage that typically carries a higher interest rate and more onerous qualifying guidelines.

For FHA loans, the limit is $271,050 in all of Arizona, except Flagstaff, where the FHA cap is $362,250. For a county-by-county look at loan limits, look here:

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Buying a Home in Arizona: What the Experts Say

Paula Serven

Paula Serven is an agent at Dominic & Co. International Real Estate in Scottsdale. She is the 2016 president of the Arizona Association of Realtors.

Rocke Andrews

Rocke Andrews is president of the National Association of Mortgage Brokers and a loan originator in Tucson. Educated as an engineer, he’s a longtime mortgage professional.

Arizona’s housing market went through an intense boom and bust. What’s it like now?

Serven

Starting in 1990, we escalated for 15 years in steady increments. Then the market changed, and there were a lot of zero-down loans. The market is going back in a good direction now.

Andrews

Arizona was hit hard by the drop in real estate prices, though Tucson was not quite as bad as Phoenix. In the recovery, Phoenix has rebounded quicker and higher than Tucson. The lack of properties here is noticeable, but buyers do not necessarily have to offer over list price to find a home.

What’s the biggest challenge for buyers?

Serven

In our lower end, under $350,000, it’s a very tough market. People are clamoring for houses in that price range. From $500,000 to $900,000, that market is a little slower. And for the over $1 million market, that’s quite a bit slower.

Andrews

The biggest challenge I see is the down payment. A close second is student debt. While not much can be done about student debt, there are several down payment programs in Arizona with income limits around $90,000 a year. These can help first-time borrowers substantially, but they do require a minimum credit score of around 640.

What tips do you give first-time buyers?

Serven

Get pre-qualified. The rules are changing every day, so find someone who’s experienced in lending. And you need a Realtor – not just somebody who’s doing this passively, but someone who’s doing it every day. Buying a house is an emotional roller coaster, so you’ve got to work with someone you have a good feeling about.

Andrews

It may sound self-serving, but the best advice is to visit a loan originator first. They will uncover any credit issues, and they can educate you about loan programs and possible down payment assistance. Also, minor credit issues or a low score can be quickly remedied.

How is Arizona’s housing market different from other states?

Serven

We have a very diverse state. In Flagstaff, for instance, prices are very high. And we have a lot of rural areas with lower prices.

Andrews

Arizona’s market is unique in the fact that property values fell to a great degree here. Our economy relied a great deal on home building, which is just now recovering. This resulted in a lack of inventory that is in the process of being overcome by new subdivisions now. The drought has made new subdivisions a bit harder to get approved.

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Don’t Forget Arizona’s Closing Costs

Arizona’s closing costs are on the high side, a Bankrate survey shows. A borrower who takes out a $200,000 loan can expect to pay an average of $1,969, which is among the highest in the nation. The higher closing costs are partly due to a steeper average broker or originator fee of $1,151 and typical survey fee of $620.

However, closing costs can be negotiable and can vary from one lender to the next. So, shopping around can pay off. For more about the expenses that accompany taking out a mortgage, visit MoneyGeek’s closing costs page .

Average Closing Costs in the Grand Canyon State

Average Origination
Fees
$1,208
Average Third-Party
Fees
$761
Average Total Closing
Costs
$1,969

Source: Bankrate’s 2015 survey of closing costs.

Above Water? Refinancing a Mortgage in Arizona

The harder they fall, the harder they bounce back. That description applies to Arizona’s housing market, which was one of the epicenters of the bust. Home prices soared 57 percent from early 2011 to early 2016, according to the Federal Housing Finance Agency. That was the second-best five-year run in the nation, trailing only Nevada’s 68 percent.

However, Andrews says “Arizona still has quite a few properties underwater.” If you still owe more than your home is worth, forget refinancing. But if the rising tide has lifted your equity, it might be an opportune moment to take advantage of the rock-bottom rates of mid-2016. Say you’ve got a $208,000 loan at 5 percent interest, for a monthly payment of $1,117. If you refinanced the same amount at 3.5 percent, your payment would fall to $934. If you have an FHA loan, which includes expensive mortgage insurance premiums, and a loan-to-value ratio that has fallen below 80 percent, this might be the time to refinance into a conventional loan, which won’t force you to pay mortgage insurance.

One caveat: Arizona’s flood of foreclosures has receded, but the aftermath continues to complicate loan underwriting, Serven says. Some lenders still scrutinize condo associations and homeowners associations and refuse to approve loans in communities without sufficient reserves. For help analyzing the costs and benefits of a refinancing, see MoneyGeek’s guide to refinancing your mortgage

Other Arizona Mortgage Resources

HOME Plus Home Loan Program

This page lays out the details of a state initiative that combines a 30-year fixed-rate loan with a grant for down payment assistance.

Pathway to Purchase program

This state initiative gives qualified buyers a 10 percent second mortgage that can be used as a down payment. The program is available only in 17 cities.

Pima Tucson Homebuyer’s Solution Program

Learn about Pima County and City of Tucson’s down payment assistance program.

Mortgage Credit Certificate Program

Tucson buyers might be eligible for a federal tax break through this program.

Trellis

Formerly Neighborhood Housing Services of Phoenix, this nonprofit offers various homebuyer services.

Energy efficiency program

Arizona’s Weatherization Assistance Program helps eligible homeowners lower their electric bills.

City of Phoenix down payment assistance

The Open Doors Homeownership Program gives loans of up to $15,000 for low-income, first-time homebuyers. The income limit is $50,300 for a family of four.

Maricopa County down payment assistance

Through the Home in 5 Advantage Program, thousands of qualified buyers have received grants of 3 percent to 5 percent to go towards closing costs or down payments.