In Arizona, the average home value is $428K, which is roughly 10.6% higher than it was in the previous year. It is also significantly more expensive than the national average home value of approximately $358K.
Arizona monthly mortgage rates are mid-range in comparison to other states; on average, residents pay around $1,116 per month on a mortgage. Home value and mortgage rates aren’t the only factors to consider when deciding where to buy a home. The cost of living in your state of choice is also an important factor.
While the thought of purchasing a home may seem overwhelming, understanding the different steps involved can make the process smoother. In this guide, MoneyGeek lays out the essentials for Arizona homebuyers to expedite the homebuying process and avoid accruing unnecessary debt.
The average cost of a home in Arizona is $428K which is higher than the national average of $358K.
Typically, prospective homebuyers are required to make a down payment of 20%. Depending on your buyer profile, you may qualify for a zero-down-payment or low-down-payment program.
If you’re looking to buy a home in Arizona, you should identify your preferred neighborhoods, compare mortgage rates and compile pertinent documents.
Choose an Ideal Location
Location is one of the most significant factors to consider when buying a home. Your ZIP code or where you choose to live can greatly impact your home and mortgage expenses as well as the cost of living.
Since there is no “perfect” location, it’s also wise to consider your priorities and non-negotiables, like neighborhood culture, access to amenities and recreational activities and schooling options.
Because there are so many options to choose from, finding your perfect home can feel overwhelming and stressful. One surefire way to find the best place to buy a house in Arizona is to consult a real estate agent. A great agent can expedite the homebuying process by picking potential homes based on your needs and budget.
Asking trusted friends and family for recommendations is also generally a good place to start. If you already have preferred agents, you could also ask for recent client references.
When choosing a real estate agent, MoneyGeek recommends looking for one with the following characteristics:
- Strong understanding of the local housing market
- Verifiable real estate license
- Highly skilled at communication
- Reasonable rates for services
Purchasing a new home is a major financial commitment, so it’s important to find the right real estate agent for you.
The cost of living in Arizona can vary widely depending on your preferred city or county. Before you apply for a mortgage in your chosen place of residence, calculate how much the following items may cost:
- Utilities (like electricity and water)
- Income, property and real estate taxes
- Gas or public transportation costs
- Car insurance rates
- Health insurance premiums
MoneyGeek also has a cost of living calculator that can help you approximate your expected monthly costs.
Living in Arizona may cost less than in other states. While the average home price is higher than the national average, the average monthly mortgage payment is relatively moderate. To save on costs, you may choose to live in a suburban or non-metropolitan area. While these areas are more affordable, they may lack access to hospitals, malls, schools or other social amenities.
Even though a city like Flagstaff has a higher median home value, the cost of living may actually be lower than in a metropolitan area like Phoenix. Because of this, it’s important that you weigh both factors when deciding where to purchase your home.
Calculate Mortgage Rates
Factors such as credit score, income, interest rates, loan type and size can impact the cost of your mortgage. To choose a suitable mortgage rate for your unique situation, it’s best to know your non-negotiables and balance these factors. Shopping around and comparing different lenders is also a smart way to find a great mortgage rate.
There are different types of mortgages available to homebuyers in Arizona. The cost of your home loan depends on your chosen lender, credit score, debt-to-income ratio and more. Having good credit can also result in lower rates.
While mortgage rates regularly fluctuate, we included the average mortgage rates in Arizona for various types of loans below:
- Conventional home loans: 5.41% to 6.45%
- VA loans: 5.92% to 6%
- USDA loans: 1% (modified payment assistance) and 3.5% (low-to-very-low-income borrowers)
- FHA loans: 5.38% to 6.49%
Please remember that not all profiles are eligible for the above loan types. USDA loans, for example, are only designed for those who live in rural areas and meet certain requirements.
Computing your mortgage expenses can show the ideal amount to set aside so that you’re financially ready to purchase a house. MoneyGeek’s mortgage calculator allows users to customize factors based on their specific profile.
If you don’t know what kind of loan you need, we also provide an in-depth analysis of FHA and conventional loans. We’ve even included a calculator tool for both loan types so you can figure out the best one for you.
After you’ve chosen your preferred loan type, it’s time to shop for your mortgage lender. Whether you’re a first-time homebuyer or need housing assistance, there might be a lending program in Arizona that fits your needs.
Your financial profile will impact the terms of your loan. Because of this, you should be mindful of factors like your credit score, gross income, debt-to-income limit and down payment ability. When analyzing your mortgage application, lenders typically assess your:
- Credit score: Although this isn’t a requirement for all loan types, borrowers with a fair credit score (or higher) are preferred.
- Debt-to-income (DTI) ratio: A DTI ratio refers to the amount you make relative to the amount of debt you have.
- Down payment: If you can make a larger down payment upfront, you can usually get a lower interest rate and cheaper monthly payments.
- Gross income: Certain lenders have a minimum income requirement since how much you earn tends to reflect your ability to repay the loan.
If your application doesn’t meet a specific lender’s requirement, you may want to improve that factor before applying with the lender.
Prepare Down Payment Requirements
Depending on the mortgage type you choose, you’ll be required to make a specific downpayment. Conventional loans typically require a 20% downpayment while others, like a VA or USA loan, don’t require a downpayment. To get the best rate for your situation, you should spend some time researching which loans you’re eligible for.
One of the largest costs to anticipate during the homebuying process is the down payment. A typical down payment rate for a conventional loan is 20%. There are also low-down-payment and zero-down-payment options that may require as little as a 3.5% or 0% downpayment, respectively.
A VA home loan doesn’t require a down payment, however, only military members, veterans and surviving spouses are eligible. Additionally, a down payment can determine your interest rates and monthly mortgage payments. Typically, making a higher initial down payment will result in lower monthly payments.
Mortgage insurance is another potential cost that Arizona homebuyers must consider. In the event a borrower defaults on payments, lenders are protected by mortgage insurance. Those with FHA or USDA loans, as well as borrowers that paid less than a 20% down payment, require mortgage insurance. This does not apply to VA loans, which don’t require mortgage insurance.
Conventional loans generally require private mortgage insurance (PMI). One upside to paying a PMI is that borrowers can cancel it after a few years of making timely monthly payments.
Arizona offers multiple programs to homeowners that need housing or down payment assistance. First-time homebuyers in Arizona, for example, may need help securing a down payment to apply for a loan. In Arizona, you can find programs such as:
- HOME Plus: The Arizona Department of Housing offers a 30-year fixed-rate mortgage along with down payment assistance to help with related housing costs, like closing costs.
- USDA loans: The U.S. Department of Agriculture in Arizona offers loans for single-family housing as long as borrowers are within the low- to very-low-income brackets.
In case these programs don’t fit your needs, there are other options in Arizona worth exploring.
Get Pre-Approved for a Mortgage
After you’ve chosen a mortgage lender, you can get pre-approved for a mortgage. Pre-approval offers you the opportunity to clarify any terms with your lender and make sure they align with your budget. Thus, it’s a very important step in the homebuying process.
Pre-approval isn’t the same as getting prequalified. Prequalification only gives you a ballpark figure for your loan. On the other hand, pre-approval subjects your application to a hard credit check, which will impact your credit score.
When applying for a home loan in Arizona, you usually need the following:
- Social Security number
- Photo ID
- W-2 forms
- Investment statements
- Bank account statements
- Current pay stubs
- Tax returns
- Other mortgage statements
Depending on your profile, you may need to gather other pertinent documents. Reach out to your desired lender so that you can prepare these ahead of time.
Time is of the essence during the pre-approval phase. If you’re able to collect the necessary ahead of time, you could have a smoother application process.
A pre-approval letter from your mortgage lender is valid for only 30 to 60 days, so it’s essential that you only apply for pre-approval when you’re ready to purchase a home. After this time, your letter will expire and you will have to reapply.
A pre-approval letter indicates the amount a lender is willing to loan a borrower. Additionally, it tells the lender that you’re financially capable of taking out a mortgage and serious about owning a home. There isn’t a cap on how many pre-approval letters you can request. However, it’s worth noting that lenders perform hard credit inquiries that can negatively affect your credit score.
Generally, a pre-approval letter includes the following terms of your loan agreement:
- Interest rate
- Loan term
- Loan type
- Maximum loan amount
- Monthly mortgage payment
The contents of a pre-approval letter vary from lender to lender. Some lenders simply use the provided information, while others might ask for additional documents.
Again, it’s important to keep in mind that a lender’s pre-approval letter is typically valid for 30 to 60 days, so make the most of this time. You can discuss the best terms for your needs and financial capacity with your desired lender.
Conduct a Home Inspection
A home inspection is another key step in the homebuying process. Third-party experts can provide an in-depth rundown about the home’s current state and note any necessary repairs. This is usually paid for by the buyer, but the current homeowner may cover it in the closing cost.
Although it can seem costly at the start, hiring an excellent home inspector can end up saving you more money. You can usually get a solid lead through your real estate agent, friends or family who recently purchased a house.
Home inspections should produce a written report about the condition of the following, according to the International Association of Certified Home Inspectors:
- Attic, insulation and ventilation
- Basement, foundation and crawlspace
- Cooling systems
- Doors and windows
- Electrical systems
- Fireplace (if any)
- Heating systems
There are also special types of home inspections, such as those for pests or wood-destroying organisms (WDO), mold and structural foundation.
Home inspections aren’t typically required. However, certain cities in Arizona might require one be completed before the home is purchased. It might also be best to account for additional inspections so you’re certain that your potential home is in good condition.
When you reach out to your preferred home inspector, ask them if they conduct other inspections, in addition to standard inspections. This way, you’ll know your expected costs. MoneyGeek found that a special inspection can cost between $100 and $700.
Conducting a home appraisal is an essential step before purchasing a home in Arizona. An expert will verify the value of the home based on the current market and similar properties. Appraisals are designed to assist borrowers so that they can avoid overborrowing.
A home appraiser will thoroughly inspect the interior and exterior while also measuring the perimeter of the property. They may also check other features in the home to ensure their estimate is accurate. After the inspection, the appraiser will provide a written report.
Close Your Mortgage Loan
Once you’ve reviewed the terms of your loan, the next step is to close your mortgage. During this step, you may need to pay closing costs, but depending on your situation, these might be covered by a financial assistance program in Arizona. Keep in mind that you might also need to pay third parties for a pest inspection, legal work and more.
After you’ve accepted the terms of your loan, you’ll be required to sign the following documents:
- Final loan application: This signifies that the information you provided to the lender is factual. If any financial details, such as your income, have changed since the document was drafted, you should notify your lender.
- Mortgage note: This document identifies you as legally responsible for paying the mortgage and outlines the mortgage amount, interest, payment dates and terms.
- Closing disclosure: This document details the terms of your loan agreement, and lenders are required by law to provide it at least three business days before you close on your mortgage.
- Property deed: This discloses details about the property and transfers ownership of the home to the homebuyer.
Be sure to thoroughly review all documents and consult an expert if there are terms you don’t understand. This way, you’re fully aware of your obligations.
To give you a rough idea, closing costs usually account for 2% to 5% of the home’s total purchase price. These costs account for the following:
- Credit report: Lenders request information from a credit reporting agency to learn more about a borrower’s financial background.
- Escrow: The lender creates an account for a borrower’s home-related expenses, like homeowners insurance and property taxes.
- Appraisal fee: This is the amount you’ll pay an appraiser to assess the value of your property.
- Title insurance premium: In the event of a legal issue with a property title, this premium covers the lender.
- Third-party fees: As a homebuyer, you’re also responsible for third-party charges, like those for home and pest inspection, as well as recording fees.
Please note that there may be other fees or expenses that aren’t included in this list.
Again, when you’re looking for the best place to buy a home in Arizona, be sure to shortlist preferred locations, calculate your mortgage rates and compile pertinent documents. You also need to have a pre-approval letter, perform a home inspection and appraisal and close your mortgage.
Once you’ve completed these steps, you’re now a homeowner in Arizona — congratulations! Moving forward, you should prepare to manage your mortgage payments alongside other expenses.
To be a responsible homeowner, you must have an emergency fund and consistently maintain your home. It’s important to avoid unexpected expenses by anticipating cleaning costs or repairs for appliances and home security systems. You can also avoid paying more by maintaining a good to excellent credit score, as this will lower your mortgage rate.
Arizona Homebuying Details
Along with general research, Arizona homeowners need to watch out for certain homebuying requirements specific to the state. We advise our readers to consult a real estate professional or their lender to help them with Arizona-specific requirements.
Although this isn’t required by law, the Arizona Department of Real Estate recommends homebuyers check the following before purchasing a home:
Harmful gasses or minerals such as radon and asbestos can negatively affect your health and home environment.
This hazard can cause damage to your home’s foundation or basement.
Mold can produce toxic chemicals that pose a significant risk to human and animal health, especially to those with poor immune systems.
Seller's Property Disclosure Statement
Sellers are mandated by Arizona law to disclose all known facts about a property to buyers.
Although small, termites can damage the structure of your home. In extreme situations, termites can cause ceilings and floors to collapse.
Frequently Asked Questions About Buying a Home in Arizona
MoneyGeek answered the most commonly asked questions about how to buy a home in Arizona to help make the homebuying process smoother for you.
- Arizona Department of Real Estate. "Topics to Research Before Purchasing Real Estate." Accessed October 23, 2022.
- Consumer Financial Protection Bureau. "Get a Prequalification or Preapproval Letter." Accessed October 23, 2022.
- Consumer Financial Protection Bureau. "What Is Mortgage Insurance and How Does It Work?." Accessed October 23, 2022.
- Home Plus Arizona. "Home Plus Arizona." Accessed October 23, 2022.
- International Association of Certified Home Inspectors. "Home Inspection Standards of Practice." Accessed October 23, 2022.
- U.S. Department of Agriculture. "Single Family Housing Direct Home Loans in Arizona." Accessed October 23, 2022.