Frequently Asked Questions
How much do I need to save before buying a home in Arizona?
The amount depends on your loan type and purchase price. FHA loans require a minimum of 3.5 percent down. Conventional loans can go as low as 3 to 5 percent down depending on the program. On top of the down payment, buyers should budget for closing costs, which typically run between 2 and 4 percent of the purchase price on a financed transaction, and upfront costs like the home inspection and earnest money deposit. On a $450,000 purchase with 5 percent down, a reasonable total cash estimate before seller concessions is $28,000 to $33,000.
What is the difference between pre-qualification and pre-approval?
Pre-qualification is an initial review of your income, assets, and credit to give you an estimate of what you may qualify for. Pre-approval goes deeper, involving verified documentation and a formal underwriting review. In the Phoenix market, most listing agents and sellers expect to see a pre-qualification letter with any offer. A stronger pre-approval can give you an edge in competitive situations.
What credit score do I need to buy a home in Arizona?
The minimum credit score depends on the loan type. FHA loans generally allow scores as low as 580 with 3.5 percent down, or as low as 500 with 10 percent down. Conventional loans typically require a minimum of 620, though the best rates go to borrowers with scores of 740 and above. VA loans do not have a set minimum score, though most lenders apply their own overlays. A higher credit score directly affects your interest rate, which affects your monthly payment and the total cost of the loan over time.
How long does it take to close on a home in Arizona?
A typical purchase transaction in Arizona closes in 30 days from contract acceptance. We can close in as few as 10 days, but discuss your scenario with CT Home Loans before setting that as an expectation. Some loan types or more complex financial situations can take longer. Cash transactions can close in as little as 10 to 14 days. Getting fully pre-qualified before you make an offer and having your documentation ready speeds the process considerably.
First Time Homebuyer Questions
What is earnest money and do I get it back?
Earnest money is a good faith deposit made when your offer is accepted. In the Phoenix market, sellers most commonly ask for 1 percent of the purchase price rounded up to the nearest $1,000. The deposit goes into escrow and is credited toward your total funds due at closing, so it is not an additional cost on top of everything else. If you back out of the contract for a reason covered by a contingency in the contract, the earnest money is returned to you. If you back out outside of a contingency, you may forfeit it.
What first time homebuyer programs are available in Arizona?
Arizona has several programs designed to help first time buyers with down payment and closing cost assistance. The Arizona Industrial Development Authority offers programs through the Home Plus and Home in Five initiatives. Maricopa County and the City of Phoenix have their own assistance programs with income and purchase price limits. FHA, VA, and USDA loans also offer low or no down payment options depending on eligibility. The best way to find out which programs you qualify for is to go through a pre-qualification with a broker who has access to multiple program options.
Why do mortgage rates change every day?
Mortgage rates are priced in real time based on activity in the bond market, specifically the market for Mortgage-Backed Securities. Investor demand for those securities changes throughout the trading day in response to economic data, Federal Reserve commentary, inflation readings, and global events. When demand for mortgage bonds is high, rates go down. When demand falls, rates go up. This is why you can get a different rate quote in the morning than you received the afternoon before..
Does the Federal Reserve set mortgage rates?
No. The Federal Reserve sets the Federal Funds Rate, which is the rate banks charge each other for overnight lending. Mortgage rates are set by the bond market and follow the 10-Year U.S. Treasury yield much more closely than they follow the Fed Funds Rate. That said, Fed policy decisions and forward guidance influence bond market expectations, which means Fed announcements often move mortgage rates even before any actual rate change takes effect.
What is the relationship between inflation and mortgage rates?
Inflation is one of the most direct drivers of mortgage rates over time. Lenders need to earn a real return above the rate of inflation, so when inflation rises, mortgage rates tend to follow. Monthly inflation reports like the Consumer Price Index and the Personal Consumption Expenditures index are among the most closely watched economic releases in the mortgage market. A higher than expected inflation reading can push rates up the same day the report is released.
When is the best time to lock my mortgage rate?
There is no reliable way to perfectly time a rate lock. Rates can move in either direction based on events that are genuinely unpredictable. The most practical approach is to lock when the rate makes the monthly payment work for your budget and your goals, rather than waiting for a rate that may or may not materialize. A float down option, which some lenders offer, allows you to capture a lower rate if rates improve after you lock, and is worth asking about..
Rates and What Moves Them
Will mortgage rates go down in Arizona?
Mortgage rates in Arizona follow national bond market conditions rather than state-specific factors. Rate forecasts from economists and housing analysts vary widely and have consistently been difficult to predict accurately. The most useful framing is not when rates will drop but what your payment looks like at today's rate, whether you can refinance if rates improve later, and whether waiting has a real cost in terms of rising home prices or lost time building equity.
When does it make sense to refinance?
Refinancing makes sense when the long-term savings outweigh the cost of the new loan. The traditional rule of thumb is to refinance if you can lower your rate by at least 1 percent, but the better calculation is the break-even point: divide your total closing costs by your monthly savings to find how many months it takes to recoup the cost. If you plan to stay in the home longer than that break-even period, refinancing is worth considering. Other reasons to refinance include switching from an adjustable to a fixed rate, shortening the loan term, or accessing equity through a cash-out refinance.
Refinance and Home Equity
What is a cash-out refinance and how does it work?
A cash-out refinance replaces your existing mortgage with a new, larger loan. The difference between your old loan balance and the new loan amount is paid to you in cash at closing. Most conventional lenders allow you to borrow up to 80 percent of your home's appraised value. The cash can be used for any purpose, including home renovations, debt consolidation, or other major expenses. Because it replaces your entire mortgage, a cash-out refinance makes the most sense when the new rate is close to or better than your current rate.
What is a HELOC and how is it different from a cash-out refinance?
A HELOC, or Home Equity Line of Credit, lets you access your home equity without replacing your existing mortgage. It functions similarly to a credit card: you are approved for a maximum credit limit based on your equity and can draw from it as needed during the draw period, typically 10 years. You only pay interest on what you borrow. A HELOC is often a better fit than a cash-out refinance when you already have a low first mortgage rate that you do not want to give up, or when you need flexibility to draw funds over time rather than in a single lump sum.