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Arizona First-Time Home Buyers: Tips and Tricks

Homeownership has long been a treasured part of the American dream. Yet if you’re an Arizona first-time home buyer, the white picket fence can start to seem like more of an obstacle than a gateway. According to a survey from the rental platform Apartment List, roughly 70% of young adults believe that they cannot afford to buy a home.

We’re here to walk you through the process. We’ll show you what to expect as you start your journey toward homeownership, as well as programs that can help make your dream home a reality.

Questions to Ask as an Arizona First-Time Home Buyer

Before you get started, you’ll need to take stock of your situation. Here are four questions you can ask yourself as an Arizona first-time home buyer:

What Type of Home Do I Need?

You’ve got choices in the types of home you can select from:

  • Single-family home
  • Duplex
  • Triplex
  • Quadplex
  • Townhouse
  • Condominium

Put some thought into the features you want that are outside the home itself, such as the neighborhood, the location, the size of the yard, the school district and more.

Another critical decision to make is whether to buy move-in ready or a fixer-upper. You may have been inspired by a lot of renovation reality TV shows, but the cost and time required to fix up a house can be prohibitive for some young buyers, so take into account the additional investment before making your purchase.

How’s My Financial Health?

Mortgage lenders and brokers will carefully evaluate your financial situation to determine your eligibility for a loan, as well as what type of interest rate you qualify for.

Ideally, you’ll want to have:

  • A good credit score (generally 620 or better)
  • A debt-to-income ratio below 50%
  • Savings that cover upfront costs and three to six months of emergency spending

These aren’t barriers to homeownership, necessarily. But understanding your financial health beforehand can help you know whether to pursue a conventional mortgage or a program that gives you a leg up.

How Much Home Can I Afford?

Technically, this question is two decisions. First, you’ll have to figure out the size of the mortgage loan you qualify for, based on your current financial situation. Second, you’ll need to decide the size of the loan that’s wise for you and your family.

In other words, just because you qualify for a $400,000 loan doesn’t mean it’s wise to buy a house at this price. You want to purchase a home at a price you can repay manageably without taking on an unnecessary amount of debt.

This decision will also involve determining what type of down payment you can make. Customarily, Arizona first-time home buyers are expected to make a 5% down payment on a home. However, certain circumstances can allow you to put down less.

You’ll need to consider this decision based on your current savings and how this down payment will affect your purchasing ability.

Who Will Walk Me Through the Process?

If it all sounds intimidating, don’t worry. An experienced realtor can help you every step of the way, including:

  • Assessing your needs and price range
  • Locating the right home for you
  • Making an offer on a house
  • Securing a loan
  • Completing the sale

Realtors make a commission off of the sale, but their input is well worth it, especially if you’re buying a home for the first time.

How to Buy a Home for the First Time

Every Arizona first-time home buyer should be familiar with the process of buying a house. We’ll walk you through the steps so you know what to expect.

Locate a House

When it comes to locating your dream home, you have options. Ask family and friends in your desired area to be on the lookout for you. Jump in the car and look for “for sale” signs in different neighborhoods. Scout online real estate websites. But your best option may be working with a realtor who’ll have a better understanding of the current market and what homes are for sale.

Secure Financing

If you’ve carefully evaluated your financial situation, you’ll be in a better position to know what loan options are available to you.

If you have good credit and can afford to put 20% down, you may wish to take advantage of a conventional mortgage. Otherwise, there are several programs that can help make your first home more affordable — we’ll circle back to these options in a moment.

Make an Offer

By this point, you’ll likely be working with a real estate agent who can help you put together an offer on the home and present it to the seller’s real estate agent. The seller can either accept the offer, reject the offer, or issue a counteroffer which you, the buyer, can then accept or reject.

But before you commit to a final price, don’t forget to leave yourself some financial wiggle room. You want to be able to cover closing costs, unexpected repairs and any appliances after your new house officially becomes your home.

Account for Closing Costs

Finally, it’s crucial to understand closing costs.  They broadly refer to costs associated with the sale of a home, usually related to fees such as:

  • Origination and underwriting of a mortgage
  • Real estate commissions
  • Taxes
  • Insurance
  • Record filing

These fees typically aren’t high, but can be roughly 2% to 5% of the home’s total purchase price. Make sure you have enough in your budget to cover these final expenses.

Conventional Mortgage

A mortgage is a loan used to purchase a house or piece of property.  “Conventional mortgage,” or “traditional mortgage,” usually refers to a home loan that the U.S. government does not insure.

Instead, most mortgages are governed by lending rules established by the following organizations:

  • The Federal National Mortgage Association (Fannie Mae)
  • The Federal Home Loan Mortgage Corporation (Freddie Mac)

Mortgages that follow the rules set by these agencies are referred to as “conforming loans.” In contrast, non-conforming loans are not bound by these standards.

Conventional mortgages are typically issued in 15-, 20- or 30-year terms, which is the timeframe to repay the loan.

Advantages of a Conventional Mortgage

If you can afford a solid down payment and are in good financial health, a conventional mortgage is a good option. Conventional mortgages offer Arizona first-time home buyers the best interest rate. Plus, overall borrowing costs tend to be lower than other loan programs, even if interest rates are higher.

If you use a conforming loan, you may be able to secure a conventional loan for as little as 3% down. This can be an excellent option for first-time buyers who might have trouble scraping together a down payment.

Disadvantages of a Conventional Mortgage

A conventional mortgage can be difficult to attain for many first-time buyers since it requires you to have:

  • A credit score of 620 or higher
  • Stable income
  • Few other debts
  • Typically need a 5-20% down payment

Even if you can purchase a home with a down payment below 20%, many lenders will require you to purchase Private Mortgage Insurance (PMI), which will raise your monthly costs.

Arizona Loan Programs for First-Time Home Buyers

What if you find yourself with less-than-stellar credit, or you don’t have that much rattling around in your savings account? Several government-backed options are available. These programs have varied requirements, but they can generally put homeownership within reach of first-time buyers with lower credit, savings or income.

FHA Loans

The Federal Housing Administration (FHA) insures loans with down payment requirements that are based on your credit score:

  • Scores 580 and above require a down payment of 3.5%
  • Scores of 500 to 579 require a down payment of 10%

However, if you make a down payment of less than 20% you’ll be required to purchase FHA mortgage insurance. This insurance policy comes with monthly premium payments, as well as a fee of 1.75%.

Additionally, Arizona first-time home buyers should be cautious about using an FHA loan for a fixer-upper property. Because of the stringent lending requirements associated with these properties, you may have to negotiate extensive repairs to be done prior to closing to qualify for the loan.

Still, this can be a viable option for those with lower credit or less money for a down payment, provided you have the income to make your monthly payments.

USDA Loans

As you might expect from loans backed by the U.S. Department of Agriculture, USDA loans are aimed toward rural or suburban home buyers. These loans are used for low-income buyers who cannot secure other types of home loans.

If your home is in an approved setting, these loans don’t require any down payment, making it easier to get a loan of this type. However, you may still need to meet income limits which vary by state.

Here in Arizona, you must meet the following income limits:

  • For families of 1 to 4: $90,300
  • For families of 5 or more: $119,200

The above figures are averages, and you’ll need to consult with a real estate agent for more details. While the requirements here are narrow, this can be a good option for first-time home buyers looking to avoid a down payment.

VA Loans

The U.S. Department of Veterans Affairs (VA) provides loans to current or former military personnel or their families.

To qualify, personnel must be in the military currently or have been dishonorably discharged after a particular length of service. Survivors of personnel killed in the line of duty are also eligible for these loans.

The advantage of these loans is twofold:

  • VA loans don’t require any down payment
  • VA loans don’t require any mortgage insurance

A funding fee is attached to these loans, but you can roll it into your monthly payments to simplify the process.

Ready to Buy Your First Home?

You’ve come to the right place. Based out of Phoenix, Arizona, Agave Home Loans has helped countless clients achieve their dreams of owning homes of their very own.

We want to help you do the same. Our team members are committed to seeing that your needs are met, as well as your budget. To learn more, contact us today, and we can provide additional insight on the process of buying your first home.


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Marshall Gottlieb - Co-Owner and CEO
Marshall spent seven years in hospitality and the restaurant industry prior to beginning a career in real estate and lending. After obtaining a finance degree with an emphasis in investments from Northern Arizona University, he began working at Quicken Loans. He spent seven years there as a banker and then Senior Director prior to co-founding Agave Home Loans. (NMLS ID: #1107208)

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