The average down payment on a house in Arizona will vary based on the price of the property and the kind of mortgage the homebuyer uses. The more expensive the house, the more down payment is required. For example, if the lender requires 3% down, you’d have to put down $4,500 on a $150,000 home and $18,000 on a $600,000 home.
Different loan programs have different minimum requirements for down payments. You may have heard you have to put 20% down, but many mortgages are available with lower down payments. You may even be eligible for a mortgage with no down payment if you meet specific requirements.
Continue reading to learn about the down payment requirements for various loan programs and how those programs affect the average down payment in Arizona.
Down Payment Requirements For A Mortgage In Arizona
The down payment requirements for your mortgage will depend on what kind of loan you apply for. The loan programs also have differing requirements for credit scores and other details about you and your finances.
Conventional loan
Conventional loans are offered by credit unions, banks and other lenders. Conventional loans must meet the rules of Freddie Mac or Fannie Mae, entities that invest in mortgage loans. The minimum down payment on a conventional mortgage for a single-family home is 3%.
However, if your down payment is less than 20% of the purchase price, you will be required to pay for mortgage insurance, also known as private mortgage insurance (PMI). PMI protects the lender if you don’t pay your mortgage as agreed. The cost of PMI will be added to your monthly mortgage payment, raising the cost of buying the home.
FHA loan
An FHA loan is a home loan option that the Federal Housing Administration guarantees. If your credit score is at least 580, you may qualify for a mortgage with a down payment of just 3.5%. If your credit score is between 500 and 580, you may qualify for an FHA loan, but you must put at least 10% of the purchase price down.
You must pay FHA mortgage insurance when taking out an FHA loan. If you put down less than 10%, you’ll pay for insurance for the life of the loan or until you refinance. If you put down 10% or more, you pay for mortgage insurance until you’ve built 20% equity in the property.
VA loan
If you are eligible for a VA loan, you may be able to buy a house with zero down payment. VA loans require you to meet minimum active-duty service requirements. Current service members who’ve served for at least 90 consecutive days are eligible. Requirements for veterans, National Guard members and Reserve members depend on when you served. Surviving spouses of veterans may also qualify for a VA loan.
VA loans don’t require mortgage insurance, but you must pay a one-time VA funding fee for the loan.
USDA loan
The United States Department of Agriculture (USDA) guarantees zero down payment mortgages for some homebuyers in rural areas. There’s no set credit score requirement, but you must show that you can manage debt. To qualify for the guaranteed loan program:
- You cannot earn more than 115% of the median household income for the area./li>
- You must buy the home to use it as your residence, not as a rental.
- You must be a U.S. citizen, a non-citizen national, or a qualified alien.
Only houses in some rural regions are eligible for financing with a USDA loan.
How Much Is An Average Down Payment On A House In Arizona?
The kind of loan you get is a big factor in how much the average down payment is. Let’s look at what those percentages mean here in Arizona.
According to Redfin, the median sales price for a home in Arizona was $411,000 in December 2022.
Here’s what the down payment for a $411,000 house would be at different percentages, based on the mortgage program:
- 3% (Lowest down payment for a conventional loan): $12,330
- 3.5% (Lowest down payment for an FHA loan): $14,385
- 10% (Down payment for FHA loan if you have a low credit score): $41,100
- 20% (Conventional loan, no mortgage insurance): $82,200
If you buy a home for less than $411,000, the amount of a minimum down payment can be lower. For example, if you find a house for $250,000, an FHA loan’s 3.5% down payment would be $8,750.
The National Association of Realtors® says that first-time homebuyers throughout the country made an average down payment of 7% in 2021. Repeat buyers, who may be using money from the sale of a previous house for their down payment, made an average down payment of 17% in 2021. Both groups of buyers are putting down less than they did in 1989. Back then, first-time buyers put down an average of 10% and repeat buyers made an average down payment of 23%.
Bigger Or Smaller Down Payment: Which Is Better?
You may wonder if it’s better to make a big down payment or a small down payment. There are benefits to choosing either route. Here are some factors to consider when deciding what size of down payment works for your finances.
Mortgage insurance: If you put down less than 20%, you will have to pay mortgage insurance in most loan programs. The premiums for mortgage insurance will increase how much you must pay each month for your mortgage. In some cases, such as with a 3.5% down payment for an FHA loan, the only way to eliminate the mortgage insurance is to refinance the loan.
Monthly mortgage payments: The more money you put down at the start of the loan, the less you borrow. When you make a larger down payment, you have lower monthly payments than you would if you’d put down less money. You also pay more interest over the life of the loan if you borrow more.
Money for renovations: If you use all your savings for a down payment, you may not have the cash you need to repair or renovate the home you purchase. You may want to make a smaller down payment and use some of your savings to fix up the home.
Taking advantage of low rates or prices: Saving enough money for a 20% down payment can take a long time. During that time, mortgage interest rates can rise, making it more expensive to finance a house. Home prices are also likely to increase, meaning you’ll need to save even more to meet your goal of 20% down. Buying a home when interest rates or home prices are low may make sense even if you don’t have a big down payment saved up.
Finance The Home Of Your Dreams With Arizona Central Credit Union
Thanks to the variety of home mortgage programs available. You can probably find a loan even if you don’t have a lot of savings available for a down payment. When you’re ready to buy a home, start the process by prequalifying for a home loan with Arizona Central Credit Union. Once you know how much home you can afford, look through our mortgage options to see what program fits your needs.
Contact one of our mortgage specialists if you have questions about mortgages or down payments. They’ll be happy to help guide you to a mortgage product that fits your financial goals.
