Considering to buying a house in Arizona and don’t know where to start? Find out the nitty-gritty of home buying, from financing options and costs to Arizona first-time homebuyer programs.
Have you ever dreamed of owning a piece of the American Southwest? Arizona is a great choice with its beautiful desert landscapes, sunny weather, and diverse cultural attractions. It’s a tempting option for anyone looking for a new place to live.
But before you get too excited about the idea, it’s important to understand how buying a home in Arizona goes. This guide covers everything from Arizona real estate market trends to financing options to help you find the perfect home. Read on!
Arizona Real Estate Market Trends
According to real estate marketplace company Zillow, the typical house in Arizona is valued at around $423,568 as of the end of October 2023. Over the last year, there has been a 4.3% drop in this value, which is crucial info for those thinking about selling or buying property in Arizona. Moreover, houses in Arizona usually get sold pretty quickly, with an average time of about 20 days from listing to going pending.
How to Buy a House in Arizona
Here’s a step-by-step guide on how to buy a home in Arizona.
1. Save for a Down Payment
If you’re thinking about using a loan to buy your home, you’ll have to put down a down payment. This is the initial chunk of money you pay upfront to secure your loan.
Since the down payment is a percentage of the home’s price, the actual amount can vary a lot depending on the home and where it is. To get a rough idea of how much to save, check out the median home prices in the neighborhoods you’re interested in within Arizona.
On average, people usually put down about 12% for a home. But remember, the down payment isn’t the only thing you need to save up for. There are other expenses to consider as well.
2. Find a Good Real Estate Agent
Think of your real estate agent as your guide and partner throughout the home-buying journey. Your agent will be by your side from the first house showing to the closing date, so it’s essential to team up with someone you have confidence in.
Your real estate agent plays a key role in helping you discover homes that match your budget and preferences. You’ll get valuable information about the various neighborhoods in Arizona through your agent.
Take the time to interview different agents, getting a feel for their expertise, communication style, and what their past clients say about working with them. This way, you can ensure you’re partnering with an agent who understands your needs and makes you feel comfortable throughout the Arizona home-buying process.
3. Get Preapproved for a Mortgage
If you’re not paying cash for your home, you’ll likely need to get a mortgage. There are various types of mortgage loans, and the initial step is to apply for preapproval.
Preapproval is essentially an estimate of the amount a lender is willing to loan you. It’s based on fundamental financial information and a soft check of your credit score.
In Arizona’s competitive real estate markets, having a preapproval letter is crucial before you begin house hunting. It gives you a clear idea of your budget and makes you a more competitive and serious buyer in the eyes of sellers.
4. Choose the Right Location
If you have the flexibility to choose where to buy a house in Arizona without being tied down by work or other commitments, it’s a smart move to compare housing prices and the overall cost of living in different cities within the state.
This comparison can help you find the best deals that align with your budget and preferences.
For instance, in Phoenix, the median home price is around $440,000, while in Tucson, it’s approximately $331,027 – notably lower than the statewide median. Both cities offer excellent prospects for relocation and investment.
Currently, the typical home value in Arizona is $423,568, but don’t stress if this figure doesn’t precisely match your budget. Home prices can vary significantly from one city to another and even within different neighborhoods.
Additionally, it’s worthwhile to examine past home value trends. This information can provide insight into how much your home’s value might appreciate in the coming years, aiding you in making an informed decision.
5. Start House Hunting
When you’re out touring homes in Arizona, it’s crucial to be observant and take into account key factors that can significantly impact your decision.
Start by focusing on the home’s location and the neighborhood it’s situated in. Take note of its proximity to schools, amenities, and commute times to make sure it suits your lifestyle.
Evaluate the overall condition of the property by checking for signs of wear, structural issues, or any potential maintenance needs. Look out for features like natural lighting, functional layout, and storage space and compare them with your preferences.
These considerations will help you make an informed decision and find a home that not only meets your immediate needs but also supports your long-term comfort and convenience.
6. Make an Offer
Once you find the house you like, it’s time to craft an appealing offer. Your offer should encompass several key elements to make it attractive to the seller.
Include the proposed purchase price, a preapproval letter demonstrating your financial readiness, and proof of funds for the down payment.
Additionally, outline any contingencies and the terms of purchase in your offer. Common contingencies involve a home appraisal and property inspection.
Depending on your situation, you might choose to waive certain contingencies or sweeten the deal by offering cash, making your offer more enticing to the seller.
It’s typical for sellers to respond with counteroffers. This opens up a negotiation phase where you can either accept, reject, or make further counteroffers.
Once both parties agree on the terms, the next steps involve signing the purchase agreement and initiating an escrow account.
7. Get a Home Inspection
In Arizona, conducting a home inspection is a crucial step to uncover any potential issues with the property. It’s essential to enlist the services of an Arizona home inspector, who can thoroughly examine the property and provide you with a detailed report.
The home inspection report will highlight any structural or mechanical issues. Armed with this information, you can then approach the home seller to address necessary repairs.
Alternatively, if the property exhibits severe damages, you may choose to back out of the deal.
In addition to a home inspection, your mortgage lender will likely require a property appraisal. The purpose of the appraisal is to ensure that the lender doesn’t provide a loan amount exceeding the fair market value of the property.
To meet this requirement, it’s advisable to hire a professional Arizona home appraiser. The appraiser will assess the property and determine its current market value. The lender will then offer a loan amount equivalent to the appraised value.
If there is a shortfall, you may need to consider increasing your down payment or renegotiating the terms of the offer to proceed with the transaction.
8. Close on the House
Once all contingencies are satisfied, and you’ve completed the final walk-through to your satisfaction, it’s time to seal the deal – the closing process.
This final step involves paying the closing costs, signing the necessary paperwork, and finally receiving the keys to your new home.
About three days before the closing date, your lender will provide you with the closing disclosure.
This document contains comprehensive details about your mortgage, including the type of mortgage, monthly payment details, loan term, interest rate, mortgage origination fees, and the funds you’re required to bring to the closing.
During the closing, you’ll be joined by various parties, including your agent, the seller, their agent, and the settlement agent – who could be a real estate attorney, an escrow representative, or a title company representative.
At the closing, you’ll wire the closing costs and down payment to the escrow account, which will then facilitate the transfer to the seller after deducting any necessary fees.
Once all the paperwork is signed and the financial transactions are completed, you’ll officially become the proud owner of your new home with the keys in hand.
Cost of Buying a House in Arizona
When buying a house, there are costs you need to be aware of to plan accordingly. Here are the main costs of buying a house in Arizona.
Down Payment
While your down payment isn’t technically a cost, as it contributes to reducing your loan amount, it does represent a substantial cash outflow and is often considered the primary barrier to home buying.
The minimum required down payment varies depending on the type of loan. Most lenders ask for a down payment of around 3 to 5%, but if you want to avoid paying private mortgage insurance, you’ll need to aim for at least 20%.
Closing Costs
When purchasing or refinancing a home, it’s essential to budget for closing costs. Mortgage closing costs refer to the fees and expenses you incur when securing a loan for your home, in addition to the down payment.
Typically ranging from 3 to 5 percent of the loan amount, these costs encompass various charges such as title insurance, attorney fees, appraisals, taxes, and other related expenses.
Property Taxes
As a homeowner in Arizona, you’ll be responsible for paying property taxes on your home. Typically, these taxes are processed through the county assessor’s office where your property is located.
Property taxes in Arizona are collected semi-annually, in October and March. Depending on the timing of your home purchase, you may be required to prepay your property taxes up to the upcoming due date.
Homeowner Association Fees
In Arizona, numerous homes are situated in communities governed by homeowner associations (HOAs). If your home falls under the jurisdiction of an HOA, you might be obligated to prepay your HOA dues.
This prepayment is often part of the closing process when you purchase a home. These dues contribute to the maintenance and upkeep of community amenities and services provided by the homeowner association.
Mortgage Payments
A mortgage is an extended-term loan intended to assist you in purchasing a house. Beyond repaying the loan’s principal amount, you are also required to make periodic interest payments to the lender.
This arrangement allows you to gradually pay off the borrowed amount while covering the cost of borrowing over the life of the loan.
Financing Options
In case you don’t have enough funds to acquire the property in cash, you have various financing options to become a homeowner in Arizona. Here are some of these options.
- Conventional loans: Commonly offered by banks and lenders, conventional loans typically involve a down payment and feature competitive interest rates. They are often a favorable option for buyers who meet certain qualifications and financial criteria.
- FHA loans: FHA (Federal Housing Administration) loans are supported by the U.S. government and are an excellent option for individuals who may not have the typical upfront funds required for a home purchase. In contrast to conventional loans, which typically demand a 20% down payment, FHA loans only require a 3.5% down payment based on your home’s value.
- VA Loans: VA (Veterans Affairs) loans are insured by the Department of Veterans Affairs to assist military families in securing mortgages. Recognizing that many veterans may not have sufficient income or savings for a standard 20% down payment after their service, VA loans do not require any down payment.
- USDA loans: The USDA (United States Department of Agriculture) supports USDA mortgages through the Section 502 Single Family Housing Guaranteed Loan Program, aiming to encourage new homebuyers to invest in rural and semi-rural areas across the country.
First-Time Homebuyer Programs in Arizona
Many first-time buyers find it difficult to secure financing or even a real estate agent to walk them through the Arizona home-buying process. On financing, here are some first-time homebuyer programs in Arizona today.
Arizona Housing Finance Authority (AHFA)
The Arizona state government provides various support for homebuyers through programs offered by the Arizona Industrial Development Authority (AzIDA) and the Arizona Department of Housing (ADOH).
These programs include mortgages, down payment assistance, closing cost assistance, and other benefits. To access these offerings, homebuyers need to apply through a network of state-approved lenders.
Applicants are required to meet certain criteria, including income and credit score requirements (with a minimum score of 640). Additionally, borrowers must complete a homebuyer education course to qualify for these programs.
Neighborhood LIFT
The Neighborhood Housing Services of Phoenix (NHS Phoenix) oversees the Neighborhood LIFT Program. This program presents an opportunity for individuals looking to purchase a home in the City of Phoenix. Participants in this program can receive up to $7,500, which can be used for the down payment and closing costs.
To be eligible for the Neighborhood LIFT Program, borrowers need to meet Area Median Income (AMI) requirements. Additionally, participants must apply for a 30-year fixed mortgage home loan.
This initiative is designed to provide financial assistance to qualified individuals, helping them overcome barriers to homeownership by offering support with down payment and closing costs.
Freddie Mac Home Possible Mortgage
Freddie Mac provides Home Possible mortgages, offering down payment options as low as 3%. These loans come in various terms, including 15- to 30-year fixed-rate options, as well as adjustable-rate terms like 5/5, 5/1, 7/1, and 10/1. One notable feature is the ability to cancel private mortgage insurance.
Another advantage of the Home Possible® loan is that you do not necessarily need a credit history to qualify. This flexibility makes it more accessible for individuals entering the housing market without an extensive credit history.
Fannie Mae HomeReady Mortgage
The HomeReady loan, offered by Fannie Mae, only requires a down payment of 3%. To qualify for this loan, you need to have a credit score of at least 620 and maintain an income at or close to the U.S. median.
With a HomeReady loan, private mortgage insurance is required. However, a notable benefit is that once you have accumulated 20% equity in your new home, you have the option to cancel the private mortgage insurance.
This flexibility allows homeowners to potentially eliminate this additional cost once a significant level of equity is established.
Investing in Real Estate in Arizona
Investing in the Arizona house market is a great way of multiplying your dollar and securing a better future for yourself. Wondering how to get started? Here are three major ways to get yourself a slice of the Arizona real estate pie:
- Flipping houses:
House flipping is a real estate investment strategy where an investor acquires a property with the intention of renovating and selling it for a profit. This approach involves a short-term investment horizon, as the goal is to hold the property only for the duration of the renovation process.
Once the property is refurbished, the investor lists it for sale with the aim of realizing a financial gain from the increased value resulting from the improvements made during the renovation.
- Real estate investment trusts:
Real estate investment trusts (REITs) enable individuals to invest in real estate without directly owning physical properties. Instead, when you invest in a REIT, you are essentially investing in a company that owns and manages a portfolio of income-generating real estate assets.
These assets can include various types of properties such as apartment buildings, offices, commercial spaces, hotels, and more. REITs are publicly traded on stock exchanges, making them a liquid and accessible investment option.
- Buying rental properties:
Buying a rental property in Arizona is a common real estate investment strategy. Individuals purchase residential or commercial properties with the intent of leasing them to tenants. This approach can provide a steady stream of rental income and the potential for property appreciation over time.
Tax Benefits of Owning a Home in Arizona
Owning an Arizona house doesn’t just provide you with a shelter. You also reap some tax incentives, such as:
- Mortgage interest deduction:
One of the widely recognized advantages of owning a home is the mortgage interest deduction. This allows homeowners to reduce their taxable income by deducting the interest they pay on their mortgage.
- Property tax deduction:
Property taxes are imposed by local governments and are used to fund essential services, such as schools, public safety, and infrastructure. Homeowners can deduct the full amount of property taxes they pay on their primary residence.
- Home office deduction:
If you work from home, you might qualify for a home office deduction. To get the home office deduction, you need to use a part of your home regularly and only for work.
- Capital gains exclusion:
When you sell your main home, you might be eligible for a big tax advantage called the capital gains exclusion. This exclusion can be a hefty tax break, especially in places where home values are increasing, like Arizona.
Selling Your House in Arizona
Here’s a step-by-step guide to sell your house in Arizona:
- Find a Real Estate Agent
If you want to sell your Arizona home for a good price without too much hassle, find a seasoned local real estate agent. The best ones know what local buyers like and how to reach them. They’ll help you from listing your home to closing, giving you advice and support along the way.
- Set a Price
Setting the right price is vital for selling your home well. One way to figure this out is to look at other similar homes for sale and ones that recently sold in your neighborhood. Adjust the price based on this info to get the amount for your listing.
- Prepare Your Home for Sale
Even when it’s a sellers’ market, fixing up your home will ensure you get the best price. Consider these common repairs:
- Small fixes like new light switches
- Fixing up the roof of an older home
- Adding GFCI (ground-fault circuit interrupter) outlets
- Market your Home
To make your home look its best for potential buyers, get professional photos taken and show off a clean, furnished space. Begin by tidying up, doing a thorough cleaning, and enhancing your home’s curb appeal. A nicely staged home can speed up the selling process and get you a better deal.
- Show your Home
When you’re showing your home, being organized is crucial. Use a spreadsheet with buyers’ and agents’ contact details. Stay flexible and try to arrange showings when it works for the buyers. This helps the selling process run smoothly.
- Negotiate an Offer
Negotiating isn’t just about the sale price; it involves agreeing on contract details, how closing costs are shared, the timeline, and more with the buyer or their agent. To get an advantage, consider creative seller concessions.
These might add to your closing costs but can make the deal more appealing to buyers, potentially resulting in a higher final sale price.
- Close on the Sale
Closing is the last step in a real estate deal. This is when the property title officially moves from the seller to the buyer, and both sides settle their closing costs.
Choosing an Arizona Real Estate School
Getting credentialed can help you stand out in a competitive market. By joining a reputable real estate school in Arizona, you’ll get the training and knowledge to start a career in real estate.
When choosing a real estate school, the following tips come in handy:
- Get recommendations from friends who have passed through real estate schools
- Consult licensed realtors who have first-hand knowledge of the best real estate schools
- Do your own research on which real estate school stands out for various reasons such as pass rate, accessibility, and course content
Once you choose a real estate school, here is what you can expect when you finally enroll:
- Ethical issues in real estate: You will be expected to learn about ethical issues that exist or might crop up in real estate transactions, such as fairly treating your clients regardless of gender, race, or age.
- Principles of real estate: This course lays the groundwork for new realtors, especially those aiming to develop essential skills for a strong reputation in the real estate industry. It covers effective time management and other soft skills and hard skills, such as evaluating a property’s value and escrow processes.
- Legal aspects: Real estate is a legal-heavy industry. You can expect to learn legal topics, such as contract law and conveyancing.
- Industry practices: Here, you will learn real estate best practices and code of conduct for real estate professionals.
After a period of study and learning, you’ll be required to sit for an exam to gauge your knowledge and earn your certification. Here are tips to help you ace real estate exam:
- Develop a study schedule to help you focus.
- Join study groups to test your real estate knowledge.
- Consult a licensed real estate agent for practical real estate questions.
- Peruse past real estate exams to get a gist of what to expect.
How to Get a Real Estate License in Arizona
Are you looking to become a licensed real estate professional in Arizona ? Follow these steps:
- Complete approved pre-licensing education that takes 90 hours to complete.
- Sit and pass the course exam at an approved real estate school.
- Obtain requisite documents, including the fingerprint clearance card, disciplinary actions disclosure form, and disclosure document checklist.
- Schedule and sit for the Arizona real estate license exam.
- Look for a reputable sponsoring broker.
- Apply for your license.
Key requirements to get licensed include:
- Original Arizona Exam Score Report(s)
- Pre-Licensure Education Certificate – the 90-hour certificate with the authorized signature
- Proof of Legal Presence
- Disciplinary Actions Disclosure Form (LI-214/244)
- DPS issued AZ Fingerprint Clearance Card
- Contract Writing Course Certificate (a six-hour course is included in the Pre-Licensing package)
- Disclosure Document Checklist Form (LI-400)
Invest in Arizona Real Estate
Real estate is one of the surest investments you can make. Judging by past trends, Arizona presents a great opportunity for bargain hunters, first-time homeowners, and even established investors.
Look for a reputable real estate agent and explore the multiple financing options at your disposal. You will hardly regret your decision to own a piece of the Grand Canyon State!
