Arizona First Time Home Buyer Down Payment Assistance Programs

If you are looking to purchase a home or if you are a first-time homebuyer in Arizona, then there are various programs that home buyers could take advantage of to help with the costs associated with homeownership.

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First Time Homebuyer Programs in Arizona

There are several first-time home buyer programs and down payment programs Arizona buyers can take advantage of. These include the Home Plus program, FHA 100% Financing, and Mortgage Credit Certificates (MCC). Here is a summary of each program, their requirements, as well as the pros and cons to help you make an informed decision.

Home Plus Program

The Home Plus program, offered by the Arizona Industrial Development Authority, provides a 30-year fixed-rate mortgage and up to 5% of the loan amount in down payment assistance (DPA). This assistance can be used to cover both the down payment and closing costs. The DPA is a deferred soft second mortgage with no interest or payments. It’s also forgiven monthly over the first three years of homeownership. This program is available for FHA, VA, USDA, and Conventional home loan programs.

Home Plus Requirements

To qualify for the Home Plus program, your annual income cannot exceed $126,351. You must also maintain a minimum credit score of 640 and meet a debt-to-income ratio (DTI) ranging between 45% and 50%. Additionally, at least one borrower must complete a homebuyer education course. Keep in mind that there may be additional requirements based on the loan and your specific situation.

Home Plus Program Pros and Cons

If you are thinking about applying for the Home Plus program, then be aware of the pros and cons so you can make a well-informed decision. Here are a few to keep in mind:

Pros

• This program is available statewide in all counties and cities within Arizona and there is no first-time home buyer requirement.
• If the buyer has money available for the down payment and closing costs, then they can either keep their current funds in savings or combine them with the DPA received with the Home Plus Program.
• The assistance is structured as a silent second mortgage. Which means the down payment assistance is gradually forgiven over the initial three years of homeownership. After three years without refinancing, the line is fully forgiven.
• Active or veteran members of the U.S. military may be eligible for an additional 1% of down payment assistance.

• The assistance funds originate from a revolving pool to ensure continuous availability.

Cons

• Eligibility for down payment assistance is subject to specific credit, DTI, and income criteria. The maximum annual income is $126,351.
• If you plan to refinance or sell the house before the 36-month forgiveness period, then you will be responsible for repaying the remaining down payment amount from your second lien.
• Manufactured Homes and Construction to Perm Loans are not allowed on any underlying mortgage type.

FHA 100% Financing

Direct Mortgage Loans offers FHA 100% Financing to eligible homebuyers in Arizona. This program enables homebuyers to obtain 100% financing without having to make a down payment. This is achieved by combining a 1st and 2nd mortgage and is compatible with FHA loans. The 2nd mortgage can be up to 3.5%, based on the lesser of the sales price or appraised value, and has a 10-year term.

FHA 100% Financing Requirements

To participate in the program, you need to meet certain requirements, including a minimum FICO credit score of 620. Apart from this, you must also complete a Homebuyer Education course, which aims to educate you about the home buying process. The types of properties that qualify for financing include single-family homes, duplexes, manufactured homes, PUDs, townhouses, and condos.

FHA 100% Financing Pros and Cons

If you are considering using the FHA 100% Finance Program, then review the pros and cons to determine if this program is right for you. Here are a few things to keep in mind:

Pros

• There is no first-time home buyer requirement or no income limitations. This program is open to anyone who meets the eligibility requirements.
• Individuals with less-than-perfect credit are welcome, and there’s no maximum debt-to-income ratio.
• The second mortgage component offers a competitive ten-year term interest rate.
• Non-Occupant co-borrowers are welcome without restrictions.
• There are both amortized and forgivable options for the second lien, offering repayment flexibility.

Cons

• To participate in this program, you must meet certain credit requirements, such a minimum of 620 credit score.
• This program can only be used for the purchase of a primary residence, investment properties cannot be purchased using this program.

Arizona Mortgage Credit Certificate

The Arizona Mortgage Credit Certificate (MCC) is a program that allows homeowners to claim a special tax credit each year, which reduces the amount of their federal income tax. Unlike a tax deduction, this is a dollar-for-dollar tax credit that enables homeowners to claim 40% of the mortgage interest paid throughout the year. They could receive up to $2,000 back on their taxes annually. Arizona’s MCCs are compatible with various down payment assistance programs including the Home Plus DPA program.

Arizona Mortgage Credit Certificate Requirements

To be eligible for Arizona’s Mortgage Credit Certificate, you must meet one of the following criteria: be a veteran, a first-time homebuyer, or purchase a home in a target area. The income limits for this program are determined by 115% of the area’s median gross income and vary by county.

Arizona Home Loan Mortgage Options

There are a variety of home loan options in Arizona that fit the needs of different types of buyers. Here is a breakdown of a few of the most common mortgage options.

FHA Loan

These loans are governed by the Housing of Urban Development (HUD) and offer flexible guidelines for borrowers with limited down payment funds and an imperfect credit score.

USDA Loan

These loans are government-insured and are meant to facilitate home purchases within a designated rural area. USDA loans help low- and moderate-income borrowers in rural areas buy a home.

VA Loan

This loan option requires $0 down payment and is designed for military personnel, veterans, and surviving spouses and is partially backed by The Department of Veterans Affairs.

Conventional Loan

This is a type of conforming loan that meets Fannie Mae or Freddie Mac requirements but is not backed by the government. Available in a range of down payments, these loans come in all shapes and sizes.

How to Apply for Arizona First Time Home Buyer Down Payment Assistance Programs

If you’re looking to apply for the Arizona First Time Home Buyer Down Payment Assistance Program, then there are some general steps you can take to apply:  

Determine your Eligibility

Depending on the specific program you choose, there will be specific criteria you must meet to be eligible. Direct Mortgage Loans is a participating lender. Contact one of our expert mortgage lenders, who would be happy to walk you through the process. 

Gather Documents & Obtain Pre Approval

Once you have confirmed your eligibility, gather your financial documents and start your mortgage application to obtain pre-approval.  

Complete a Home Buyer Education Course

If you’re applying for the Home Plus program, then you will need to complete a Home Buyer Education Requirement by taking a pre-purchase education course before closing. This course must be approved by a home buyer education provider.  

Close on Your New Home

After completing the Home Buyer Education course, you can now go house hunting and close on the house you want to call home.  

FAQ’s About Arizona First Time Home Buyer Down Payment Assistance Programs

How much is a downpayment on a house for a first-time buyer in Arizona?

The amount required for a down payment on a house will depend on the loan type and your financial situation. However, if you’re eligible for a USDA or VA loan, then you may be able to purchase a home with no money down. 

Can you buy a home in Arizona with no money down?

Eligible home buyers can buy a home in Arizona with no money down through our 100% FHA financing program. Additionally, if you’re eligible for a VA or USDA loan, then there is no down payment requirement. 

How do I know if I qualify for Arizona first time home buyer down payment assistance programs?

To qualify for the Home Plus program, you’ll need a minimum credit score of 640 and a maximum debt-to-income ratio (DTI) between 45% and 50%. Your annual income must not exceed $126,351, and you must be purchasing a single-family, detached or attached PUD, condo, or townhome. It’s recommended that you speak with a Loan Officer to determine if you qualify. 

Are there income limits for Arizona first time home buyer down payment assistance programs?

For the Home Plus program, the maximum income limit is $126,351 which is based on the borrowers pre-taxed gross income.  

What happens if I sell my home after receiving down payment assistance?

Regarding the Home Plus Program, if you sell your home after receiving down payment assistance before the forgiveness period is up, then you will have to pay the remaining amount left on the second lien.