Arizona is one of the fastest-growing states in the U.S., growing by nearly 2% between 2020 and 2023 alone. In fact, Arizona had the fourth-largest growth rate in the country in that same time, and the state has seen its population expand by nearly 7% since 2020, which is also one of the highest rates in the country.

All those new Arizona residents need a place to live, which means the state has also seen the housing market heat up over the past few years. Many people across Arizona may be confused about different mortgage terms or simply wish to learn more about what resources are available in Arizona for homebuyers.

Let’s explore more details about the state of the housing market in Arizona and how friendly the state is for homebuyers.

Arizona First Time Home Buyer Options

For people looking to purchase a home, digging through the various options for getting a mortgage can make your head spin and knowing which options are right for you means doing an honest assessment of your financial history and expected future.

Can you afford a 20% down payment? Do you qualify for a VA loan? Is your credit score high enough? Everyone has a unique situation, but here are a few of the terms you’ll likely encounter when you apply for a mortgage in Arizona and what they mean:

Conventional loan

  • Not guaranteed by any government agency
  • Usually requires at least 5% down payment up to 20%
  • Generally conventional mortgages carry lower interest rates
  • Requires good credit score, which varies by lender but is generally at least 640

Government-backed loan

  • Issued by private lender but insured or guaranteed by a federal authority, such as the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) or U.S. Department of Agriculture (USDA). Each agency has specific requirements and terms.
  • Lower down payment amount, which varies, but usually around 3.5%
  • Lower credit score requirement of 580
  • Generally comes with higher interest rate

Repayment options

The typical first time home buyer will opt for a 30-year fixed-rate mortgage, which means the person repays the loan over 30 years at a rate that does not change. In fact, as many as 90% of homebuyers choose that type of loan. But that’s not the only option. Here are a few others:

ARM: In an adjustable-rate mortgage, the interest the homebuyer is charged changes over time based on a metric or index the lender and buyer agree on. Homeowners who intend to put their homes on the market after making some improvements will often choose this type of program, as they do not intend to stay for the long-term.

5/1 ARM: In this 30-year mortgage, the interest rate is fixed for the first five years of the term and varies every year after that based on an agreed-upon index. While the rate varies, most of these loans include a cap on how drastically the rate can rise.

15-year: With this type of mortgage, you will repay the loan in half the time of a traditional 30-year mortgage, so you will pay less money in interest over the life of the loan, though your monthly payment will be much higher.

Other terms to know

The kind and duration of your mortgage constitute only a portion of the factors to contemplate when seeking a loan for the acquisition of a new home. Consider down-payment assistance loans because it may save you a lot of money.

Below, you will find some other terms that Arizona homebuyers should acquaint themselves with:

Mortgage Insurance: Mortgage insurance serves as a safeguard for the lender should the buyer default on the loan. It entails an additional monthly payment made by the borrower until they’ve repaid a minimum of 20% of the entire loan amount.

Equity: Equity is a notion denoting the variance between the outstanding mortgage balance and the property’s value. This is why borrowers who can provide a substantial down payment are said to possess superior equity. Fluctuations in property values can also impact a home’s equity.

Closing Costs: These are one-time expenses incurred before a buyer can assume ownership of a property. The exact amount varies based on the state, county, and the home’s value. These costs encompass fees imposed by the buyer’s lender, commissions for Realtors, title fees, and transfer taxes. Most buyers can anticipate covering at least 2% of the home’s purchase price in closing costs

Housing Market in Arizona

Arizona ranks fourth among all states when it comes to both the sheer number of additional residents between 2017 and 2018 and the percentage of growth.

Top 10 states by numeric growth, 2018-2020

Texas 379,128
Florida 322,513
California 157,696
Arizona 122,770
North Carolina 112,820
Washington 110,159
Georgia 106,420
Colorado 79,662
South Carolina 62,908
Nevada 61,987

Top 10 states by percentage growth, 2017-2018

Nevada 2.1%
Idaho 2.1%
Utah 1.9%
Arizona 1.7%
Florida 1.5%
Washington 1.5%
Colorado 1.4%
Texas 1.3%
South Carolina 1.3%
North Carolina 1.1%

Population growth is helping increase activity in the home sales and prices across the state of Arizona. Home values in Arizona have risen by more than 7% over the past five years, about a percentage point higher than the overall U.S. increase. In just the past year, home values have risen nearly 6%, which puts Arizona at No. 12 in the nation.

Top 10 states by year-over-year increase in median home value

Idaho 15.8%
Utah 11.3%
Indiana 8.8%
Georgia 8.7%
Nevada 8.2%
North Carolina 7.6%
Michigan 7.3%
New York 7.1%
Tennessee 6.4%
Nebraska 6.4%
Arizona 5.9%

Not only are homes becoming more valuable in Arizona, they are selling faster. Today, the typical home that sells in Arizona is on the market for just two months; compare that to 2014, when the typical time on the market was 84 days, nearly three months.

Arizona median days on market, annual averages

2010 106
2011 98
2012 89
2013 82
2014 91
2015 80
2016 78
2017 70
2018 63
2019 69

Several cities in Arizona are helping push the state’s place among the nation’s hottest housing markets. For instance, the Phoenix-Mesa metro area posted the 15th-highest median sales price increase among all U.S. major metro areas. Other cities, such as Hereford and Youngtown, have seen huge spikes in price over just the past couple of years.

Top 25 Arizona cities by median sales price change, 2016-2018

Hereford 51%
Youngtown 42%
Scottsdale 39%
Cave Creek 38%
Rio Rico 36%
Green Valley 35%
Florence 35%
Cottonwood 34%
Payson 34%
Buckeye 33%
Waddell 32%
Somerton 31%
Sun City 31%
Chandler 29%
San Tan Valley 28%
Casa Grande 28%
Phoenix 28%
Litchfield Park 27%
El Mirage 27%
Tempe 27%
Prescott Valley 27%
Mesa 27%
Peoria 27%
Gilbert 26%
Bullhead City 26%

Resources for Arizona Homebuyers

Several programs exist to assist individuals with securing a mortgage, making a down payment or other necessities of home ownership in Arizona. Some of these are programs unique to Arizona or cities in the state, while others are federal programs available across the country.

HOME Plus Program: This program, administered by the Arizona Industrial Development Authority, provides 30-year mortgages and down payment assistance to qualified buyers, and the program offers many different tiers of assistance, depending on the buyers’ credit score and other factors.

Home in Five Advantage: This program provides up to 7% down payment and closing cost assistance to buyers in Maricopa County.

Pima Tucson Homebuyer’s Solution: This is a conventional loan program that includes the option of down payment assistance for individuals with a household income under $99,000 who are buying in Pima County.

FHA: The U.S. government sets loan limits for FHA-backed mortgages that vary by county and type of dwelling. In Arizona, the FHA home loan limit is $314,827 for single-family dwellings in all counties except Coconino County, where the single-family loan limit is $362,250.

USDA: The USDA Rural Development Single Family Housing Direct Loan Program sets income and property eligibility limits. Generally, properties in non-rural areas, or those in communities with populations of at least 35,000, are not eligible. In Arizona, individuals are considered low income at various levels depending on where they live:

  • Flagstaff metro area: $56,000
  • Lake Havasu City metro area: $47,300
  • Phoenix-Mesa metro area: $55,300
  • Prescott metro area: $48,800
  • Tucson metro area: $48,500
  • Sierra Vista metro area: $46,700
  • Yuma metro area: $40,550
  • Apache County: $39,350
  • Gila County: $41,050
  • Graham County: $45,900
  • Greenlee County: $48,100
  • La Paz County: $39,350
  • Navajo County: $39,350
  • Santa Cruz County: $39,350

VA: The Department of Veterans Affairs has no cap on what veterans can borrow, but the department does have limits on the amount the VA will back. These limits vary by county and are based on the value of the home. For single-family dwellings in Arizona, the limit is $453,100 for all counties.

Getting a Mortgage in Arizona

The dream of homeownership can often seem like an uphill battle, especially if your credit challenged to say the least. See first time home buyer loans with bad credit. From affording your ideal house to navigating the confusing maze of financing options, it’s enough to make anybody’s head spin. But the hot housing market in Arizona may well be worth the investment of time and money.