Phoenix, AZ Mortgage Rates

Living in Phoenix, Arizona

Phoenix, now the fifth largest city in the U.S., is on a roll. It has a strong job market, rising median household income and a young vibe. As if that weren’t enough to attract homebuyers, the city also claims to host more sunshine than any other major metropolitan area in the country.

By many measures, Phoenix is already popular with buyers. Sale prices have been on a steep upswing since 2011. In rapidly growing Maricopa County, where Phoenix is located, the median sale price earlier this year was $275,000, a 5.8% rise from the same time last year, according to the Arizona Regional Multiple Listing Service. Sellers, meanwhile, are benefitting from the interest, too; homes lately have been selling at about 98.2% of their original list prices.

With that kind of interest, many buyers might assume this is not the best time to crack the Phoenix housing market. Earlier this year, the city had less than a three-month supply of homes for sale, but that was up 26% from the year before. Phoenix homes aren’t staying on the market long: an average of just 52 days at the start of 2019. Still, in Maricopa County, inventory is growing, and the number of homes for sale has risen 18.7% over the past year.

The rules and costs of buying a home in Phoenix

As in most states, a number of rules and regulations govern homebuying in Phoenix and throughout Arizona. Here is what you need to know:

Home seller and buyer laws

According to Arizona law, sellers are required to disclose all important facts they know of to buyers in the form of a property disclosure statement, even if they aren’t directly asked for the information. The form asks for details about ownership, building safety, environmental hazards and the state of the home’s utilities and sewage system. At the bottom of the form, sellers are asked to list anything else that might adversely affect the value of the property.

Arizona — and, by extension, Phoenix — allows for both judicial and non-judicial foreclosures, which means it’s up to the lender to decide whether or not to go through the court system in the event of having to foreclose on a home. Still, in

Arizona, non-judicial foreclosures are more common since they are often cheaper and take less time. In either case, Arizona law allows for so-called deficiency judgments, which means the lender may, under certain conditions, be able to sue you after foreclosure to recoup any losses.

Arizona is what is commonly described as a community property state. This means all property acquired during a marriage — including any real estate property — must be split equally in the event of a divorce or annulment, regardless of the circumstances or whose name is on the title. This is different from living in a so-called equitable distribution state, where a judge typically decides how to split a couple’s assets based on factors such as individual income and whether the couple has children.

It’s important to know what type of state you may be living in. For example, if you plan on taking on a VA or FHA loan in a community property state, your spouse’s debt will be considered when your mortgage is under review for financing, even if the spouse is not on the loan for qualifying purposes.

Arizona is an escrow state. This means it does not require buyers to hire an attorney to close on a home. Instead, buyers are allowed to use a representative from an escrow or title company.

Taxes

Unlike many other states, Arizona does not charge real estate transfer taxes. In 2008, the Arizona Association of Realtors helped pass legislation to prohibit state and local governments from imposing such a tax.

In Arizona, property tax exemptions are determined on a local level. In Maricopa County, widows, widowers and people with a qualifying disability may be eligible to have the assessed value of their property reduced with a corresponding reduction in tax. For those who aren’t exempt, the median property tax amounts to $1,418 per year for a home worth $238,600, or about 0.59% of the home’s fair market value, according to Tax-Rates.org.

Conforming loan limits

The conforming loan limit for a single-family home in Maricopa County, and the rest of Arizona, is $484,350. This number represents the maximum amount that two government-sponsored entities, Fannie Mae and Freddie Mac, are willing to insure on conforming loans, which generally offer the best interest rates for buyers who have good credit. Loans over this limit are called “jumbo loans,” and they’re generally riskier for both lenders and buyers.

Programs for homebuyers in Phoenix

If you’re thinking of buying in Phoenix, you may be able to keep housing costs down with one of the following programs.

Home in Five Advantage

The Home in Five Advantage program helps low-to-moderate-income buyers buy a home in Maricopa County. The program provides a more affordable, 30-year, fixed-rate mortgage and up to 7% of the loan to help pay down payment and closing costs. Veterans, first responders and teachers are eligible to receive an additional 1%. The program can be used for new and existing homes, townhomes and condominiums, and there is no purchase price limit.

To qualify, buyers must complete a homebuyer education class and have:

Learn more

HOME PLUS Home Loan Program

This program from the Arizona Industrial Development Authority offers creditworthy buyers 30-year, fixed-rate mortgages combined with down payment assistance, up to 5% of the total loan cost, along with reduced mortgage insurance premiums on conventional loans.

To qualify, buyers must meet the following requirements:

  • The home must be in Arizona and be used as a primary residence
  • The home’s purchase price cannot exceed $396,680
  • The borrower’s annual income cannot exceed $99,170
  • For couples, at least one buyer must complete a homeownership education course
  • All buyers must meet certain credit score requirements, depending on loan type

Learn more

Open Doors Homeownership Program

This program is designed to help first-time homebuyers purchase a home worth up to $208,000 in Phoenix. Based on need, eligible buyers can receive a deferred-payment loan worth up to $15,000 to be used to cover down payment and closing costs. The loan must be repaid if the buyer moves, sells or refinances within the first 15 years of home ownership; after that, the loan is forgiven. It can be used with other assistance programs.

To qualify, buyers must meet the following requirements:

  • The borrower must be a first-time homebuyer or not have owned a previous home for at least 36 months
  • Total annual household income cannot exceed 80% of the area median income
  • The buyer must attend pre-purchase homebuyer education and counseling
  • The property must be a primary residence and in compliance with City of Phoenix ordinances
  • The buyer must qualify for a 15-year or 30-year, fixed-rate mortgage that meets FHA guidelines
  • The buyer must contribute at least $1,000

Learn more

Rate shopping tips

Here are tips to help you find your best rate on a mortgage:

Contact at least three lenders on the same day

Talking to lenders on the same day ensures they’re all working with the same base interest rate, since rates change daily. Before contacting lenders, pull together information on your income, length of employment, assets and any debt you owe. This will most likely mean checking pay stubs, credit card statements and statements for all financial holdings, such as retirement accounts.

Give each lender the same information

As you’re filling out forms, make sure you’re giving each lender the same information so you can make a true apples-to-apples comparison for the loan terms you’ll be given.

Add up all lender fees to determine the total cost of your loan.

Besides paying interest on your mortgage, you’ll probably need to pay additional lending fees. These might include an application fee, underwriting fees, a fee to record your mortgage and a fee for any discount points you take on in exchange for a lower interest rate. To see what these fees might do to the final cost of your loan, ask lenders to quote you an annual percentage rate, or APR. This is an interest rate that better reflects the total cost of your mortgage because it includes discount points, loan origination costs and mortgage insurance.

Know when to lock in the rate

Once you have a loan that meet your needs, ask a lender to “lock in” the interest rate in writing so you’re protected if interest rates should rise before you close on your home. Lenders are generally willing to lock in a rate for 30 to 60 days, although some might be willing to lock it in for 120 days. Your lender may also be willing to offer you a “float down” if interest rates actually do down while your loan is being processed.

The information in this article is accurate as of the date of publishing.