Rent to Own in Arizona
Finding Home Down Payment Assistance in Arizona
Is Down Payment Assistance a Loan?
Have you been curious about the differences between down payment assistance and traditional loans? Many people are confused about whether repayment is necessary, and rightly so. There are several different kinds of assistance available.
The Mortgage Reports explains that there are four primary types of down payment help.
These variations include:
- Completely free, grant-based money that requires no future repayment
- Assistance money that is tied into a loan but forgiven after a given amount of time
- Loans with deferred payments that need repayment upon a change in residence
- Cash loans that are wrapped into the original mortgage loan and are repaid completely
If you’re seeking down payment assistance of any kind, it’s important to understand the financial and legal verbiage. Some down payment assistance actually happens in the form of a second mortgage. Although this is still a benefit, it means that you will be charged interest.
A less common type of down payment assistance is a matched savings program. This program is not a loan, but offers homebuyers the chance to contribute to a dedicated down payment savings account. The amount invested is then matched by a donor or financial institution.
How Does Down Payment Assistance Work?
Sometimes, the facts surrounding the home-buying process get twisted. To set the record straight about how down payment assistance really works, here are a few basic principles.
- There are over 2,000 down payment assistance programs nationwide. These cater to many different types of individuals, families, locations, and income levels.
- Programs are administered through state or local housing authorities, nonprofit organizations, and even through private lenders.
- Down payment assistance programs use qualification standards to determine which individuals are eligible. Families can earn a certain amount of money towards the cost of a home, particularly at closing time.
- Down payment assistance is either provided as a grant or as part of a loan; down payment assistance loans have varying interest rates.
To better understand how the assistance process could work in your own situation, be sure to consult a real estate professional and trusted mortgage advisor.
Who is eligible?
There are several important Arizona down payment assistance requirements to be aware of as you begin your home search. In general, many nationwide programs have set standards and qualifications to follow. These requirements also vary by state and county.
One thing is for certain–don’t let your preconceived notions keep you from applying. Statistics from the Urban Institute show that between 22% and 51% of people in metropolitan areas would be eligible for down payment assistance programs if they were to apply.
Factors of eligibility include:
- General family finances, including cash savings, credit scores, and income thresholds
- First-time homebuyer status (this includes anyone who hasn’t owned a home in 3 years or more, including former homeowners)
- A career in public services, including teachers and emergency responders
- A home that qualifies according to the median home price in a given area
- The use of the home as a primary residence, as opposed to an investment property
What Down Payment Assistance Programs are There?
Many down payment assistance programs are nationwide. This means that if you’re a current Arizona resident looking to move out of state, many options are available. There are also several resources for in-state use only. At an even more granular level, some programs are available in specific cities or counties.
Below is a list of several of the most popular zero- or low-down payment assistance programs.
USDA home loans
The United States Department of Agriculture offers zero money down home loans for qualified buyers. The USDA process involves the traditional steps of applying, underwriting, and paying closing costs. These loans are particularly beneficial in qualifying rural areas and for young, first-time homebuyers.
USDA loans offer no money down at time of closing, competitive interest rates, low mortgage insurance (paid monthly), and lenient and flexible credit qualifications. Homebuyers must be United States citizens who can show consistent income and an appropriate debt to income ratio.
VA home loans
To qualify for a VA home loan, buyers must apply through the Department of Veterans Affairs. Generally, these loans are reserved for active duty service members, veterans, spouses, and qualifying beneficiaries. Under the VA process, first-time homebuyers are eligible for better loan terms than buyers purchasing a subsequent home.
Home in Five home loans
The Home in Five Advantage Program is designed specifically for low-income individuals in Maricopa County, Arizona. This down payment assistance option offers 5%, which can go towards a down payment and closing costs. There are specific conditions that the buyer must meet, and selected homes also have a set of criteria to meet.
Qualifying public service providers, such as K-12 teachers and emergency responders, may be eligible for additional cash benefits from Home in Five.
Home Plus home loans
The Arizona Home Plus mortgage program is designed for Arizona residents whose household income is less than $105,291 annually. The program is steadily growing in popularity and is meant to help first-time homebuyers make more home purchases in the state. The program advertises up to $19,200 in down payment assistance and offers flexible mortgage loan options for buyers of all financial backgrounds.
Learn more about our Rent-to-Own Programs
How Much is a Down Payment on a House in Arizona?
For Arizona residents, the amount due in a down payment is proportional to the amount of the home loan. This dollar amount also fluctuates based on the type of loan you qualify for or that you select. For an accurate picture, you’ll need to enter this information into a mortgage calculator:
- The price of the home you wish to buy
- The percentage of the down payment you plan to contribute
- The term (or length) of your mortgage in years
- The interest rate you qualify for through your chosen lender
In turn, the mortgage calculator will factor in several components that make up your overall monthly payment. These numbers will determine:
- How much you’ll pay in principal and interest each month
- How much you’ll pay in property taxes and homeowners insurance
- The estimated cost of private mortgage insurance (PMI)
Mortgage calculators can’t offer a guarantee of what your exact payment situation will be, but they do provide a helpful starting point as you search for homes and set your budget.
Find out how much home you can afford here!
Resources for Arizona Homebuyers
According to the United States Census Bureau, from 2014-2018, the owner-occupied housing rate in Arizona was 63.6%. In that same time frame, Arizona home prices saw an increase. In general, home prices and median income levels work in tandem to illustrate the level of affordability for Arizona families.
If you’re looking to purchase a home in Arizona and want more information about assistance, the following resources are excellent places to begin.
Arizona Department of Housing
The Arizona Department of Housing offers a general overview of homeownership assistance options in the state. You’ll also find in-depth information about assistance agencies, foreclosure resources, and fair housing laws. If you’re an investor, you’ll also discover important resources about managing second properties and rentals.
The United States Department of Housing and Urban Development has a special resource page focused on housing information in the state of Arizona. Through these resources, you’ll learn how to locate special housing counseling services and programs. It’s also a great place to learn about homeownership for seniors, disaster relief, and energy efficiency.
City of Phoenix Affordable Housing
If you live in or around Phoenix, the City of Phoenix has an affordable housing page dedicated to city-wide assistance. Here, you’ll learn about the Section 32 Homeownership Program. This special incentive is designed for buyers who fall below 80% of the Area Median Income (AMI).
Begin Your Arizona Home Search Today
With so many resources available for Arizona residents, there’s no reason why you should count yourself out of the home buying process. Begin your home search with CENTURY 21 Northwest Realty, and uncover an impressive listing of homes for all budgets.
Contact us today to take the first steps towards securing the home (and down payment option) of your dreams!