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First Time Home Buyer Programs Phoenix

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Are you planning to buy your first home in Phoenix?  Being a first time home buyer can be both stressful and exciting.  It is vital you know the whole buying process and make the right decisions all the way long to avoid disastrous consequences.

Buying a home is an important decision in one’s life. Many first-timers are ill-prepared or make their decision before they are financially ready. Before purchasing a home you need to consider a few important things:

  • Will you continue with the same work or are there other plans for the future?
  • Are you single or married?
  • Are you married and have children or are planning to have children?
  • What neighborhood would you prefer?
  • Are you looking for a home near your work?

All these questions will help you decide both the size of the home and the location you will look for. If you are thinking about buying a home in Phoenix, then it would be smart to consider going through both federal and state programs:

FHA Loans

Backed by U.S. Federal housing administration, FHA loans are a great option for those who don’t have upfront funds to purchase a home. It has got flexible credit approval.

Compared to the conventional loans which require 20% down payment, FHA loans need 3.5% of your home value.  But the only factor that you need to consider is the credit score.

You need to have a credit score of at least 580 on the FICO scale to avail the minimum interest rate s of down payment. In case your down payment falls between 500 and 580, your down payment will increase up to 10%.

But all together FHA loans in Phoenix are one of the easiest federal programs, especially for first time home buyers.

VA Loans:

VA loans issued by the Department of Veterans Affairs are mainly to help the military families to get a mortgage. Compared to the other loans, this loan does not need a down payment or private mortgage insurance and have low closing costs

Since many veterans don’t have enough income or savings to meet the demand of 20% down payment after completing their service, therefore VA loans do not ask for any down payment. Moreover, since you will have the back of the government, you don’t need any private mortgage insurance as is usually needed for other loans.

VA loans come with closing costs.

The eligibility for getting qualified for this loan is:

  • Must be a current or former military member, spouse, or other beneficiaries.
  • Should have a FICO credit score of at least 620.

Along with this, you need to pay a VA fund fee of 1.25% to 2.4% of your home’s value based on your down payment.

USDA Loans:

USDA loans are for those who cannot avail conventional loans. Like The VA loans, USDA loans also do not require any down payment. And it has got a flexible credit approval process. USDA loans are for those who cannot secure a conventional mortgage.

This loan program was started by the United States Department of Agriculture (USDA) to attract new home buyers to rural and semi-rural places across the country. Initially, it was known as Section 502 single-family housing guaranteed loan program.

The eligibility criteria for the USDA loan are:

  • The income of the applicant should be lower than 115% of the adjusted U.S. Median.
  • The home must be in a qualified area.

Those applicants who are having a lower credit score may need to pay a down payment which will be around 10% of the home’s value. That is still low compared to the standard rate of 20% for conventional loans. As this loan is for those who cannot afford conventional mortgages, therefore the applicants need to prove that they are unable to get a conventional loan.

Good Neighbor Next Door Program:

Good neighbor next door program is sponsored by the U.S. Department of Housing and Urban Development (HUD) for the public servants who offer 50% discount on the purchase price of a home. It is best for teachers and emergency personnel who do not have adequate savings to purchase a home.

The eligibility criteria to avail Good Neighbor Next Door Program are:

  • Applicants must agree to reside in the house for a minimum of three years.
  • Home should be in “Revitalization area”.
  • The applicant is open for the following professionals- Police officers, firefighter, emergency medication technician, or pre-K through grade 12 teacher.

Fannie Mae/Freddie Mac:

Fannie Mae and Freddie Mac program are two different entities created by the federal government. Although both are different entities, they offer similar benefits for those who are buying a home for the first time. Both of them have:

  • Low down payment
  • Flexible credit approval
  • Multiple loan styles

Fannie Mae’s home ready program requires a down payment of 3%. But to avail this you need to have a FICO credit score of at least 620 and should be earning an income at or near the U.S. meridian. You have to get private mortgage insurance until you have accrued 20% equity. After that, you can cancel it.

Unlike Fannie Mae, the home possible loan by Freddie Mac does not need any credit score. It comes within 15-30 year fixed rate and adjustable rates of 5/5, 5/1, 7/1 and 10/1 along with the cancellable private mortgage insurance similar to home ready program. Freddie Mac offers home possible mortgages with 3% down payment.


NADL – Native American Direct Loans is backed by the Department of Veteran affairs. The best part about NADL is they don’t require any down payment and carry a set interest rate. The present interest rate is 4.5%, which can fluctuate based on market and prime rate fluctuations. For this loan, you don’t need a high credit score or purchase of private mortgage which a great relief for the first time home buyers. Its closing cost is also lower.

The only disadvantage of this loan is that it is available only to certain people in certain areas.

AzIDA Home Plus Program:

Arizona Industrial Development Authority (AzIDA) home plus program combines a 30 year fixed rate mortgage with upfront assistance which can be a great option for first time home buyers in Phoenix.

The eligibility for the program is:

  • Applicant should have a credit score of 640 or more.
  • Debt to income ratio should be below 50%.
  • Income should be below $99,170.
  • The purchase price should be below $396,680.
  • Must complete a homeownership education course.

Those who can clear the eligibility of credit score can receive up to 5% of the mortgage amount in the form of a no-interest second loan. 

The second loan can be used for the down payment, closing cost or both.

The good news is that you need not repay the second loan for at least three years or unless you refinance or sell the home.

Pathway to Purchase Down Payment Assistance:

Pathway to purchase down payment assistance is available only for certain types of homes and in certain areas. This program is supported by the Arizona Department of Housing (ADOH) and Arizona Home Foreclosure Prevention Funding Corporation (AHFPFC). Like the previous, this program also combines a 30 year fixed rate mortgage with upfront assistance.

It offers a secondary loan which provides up to 10% of a home’s purchase price, with a maximum limit of $20,000. This program is best for low to moderate-income individuals willing to stay in areas which are hit hard by the housing crisis. With the first time home buyer programs, it has become easier for first times to qualify for a loan than never before.

If this is something that you want to try to attain as a first time home buyer in Phoenix, preparation is key! Just knowing about the programs won’t help you get the home. You need to preplan and get prepared for the requirements of the programs so that you can easily get qualified for the program.

Considerations for First Time Home Buyers in Phoenix

Review your credit report:

The first and most important thing to do is to get a copy of your credit score. The sooner you check your credit score, the more likely you are to remove any upcoming errors.

Income verification:

Lenders will be confirming your income statement before confirming the loan, to make sure that you can repay the loan.

Gather the tax return files for two years, most recent pay stubs, and bank statements of the last three months.

Down payment fund verification:

Buying a home comes with many associated costs. And the major one is the down payment. Although many programs offer zero down payment offers there are some which require 3-10 percent down payment. Your assets that you will show needs to be seasoned and should have legal papers. If someone from your family pays up the down payment, you will need to show the proof of the assets along with a letter confirming the gift of funds.

Lenders will verify all the documents while processing the loan. The credit score is the most important and should be minimum 500 to qualify for the federal loan programs. Debt to income ratio varies from program to program. It is the monthly debt divided by the income. Federally insured loans often come with lower down payment and credit requirements. So, as you can see there are many options to consider for first time home buyers in Phoenix, Arizona.


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