Down Payment and Closing Cost FAQs for Arizona Buyers

Less than most buyers assume. VA and USDA allow zero down for eligible borrowers, FHA starts at 3.5 percent, and some conventional programs start at 3 percent. Twenty percent is a threshold for avoiding mortgage insurance, not a requirement to buy.

The persistent belief that a home purchase requires 20 percent down keeps qualified Phoenix-area renters out of the market for years. Twenty percent avoids mortgage insurance on a conventional loan — that is its only significance.

The better question is what down payment produces a payment you are comfortable with while leaving reserves intact. Emptying savings to reach 20 percent and then having nothing left for a failed air conditioning unit in July is not a win.

Closing costs typically run in the low single-digit percentage of the purchase price and include lender fees, title and escrow charges, appraisal, recording fees, and prepaid taxes and insurance.

Costs fall into three groups: lender charges (origination, underwriting, credit report, appraisal), third-party and title charges (escrow fee, title insurance, recording), and prepaid items (the first year of homeowners insurance, property tax and interest impounds).

Arizona uses escrow companies rather than closing attorneys, and who pays which title fee is partly customary and partly negotiable in the contract. Your Loan Estimate itemizes every line within three business days of application, and Jim walks through it with you rather than emailing it and hoping.

Often yes. Seller-paid closing costs — called seller concessions — are negotiated in the purchase contract and are capped by loan program based on your down payment and occupancy.

Concessions are common in Phoenix-area transactions when a home has been on the market for a while, and they are extremely common on new construction. The seller credits a dollar amount toward your closing costs, which can also be used to buy down your interest rate.

Each program caps how much can be credited. Exceeding the cap does not help you — the excess is simply lost. Structuring the offer to use the full allowable amount without waste is worth a conversation before you write it.

Yes. Gift funds from family are allowed on most programs, but they must be documented with a signed gift letter and a clear paper trail showing the transfer.

Underwriting needs to establish that the money is a gift and not an undisclosed loan. That means a signed letter stating the amount, the relationship and that no repayment is expected — plus evidence of the withdrawal from the donor's account and the deposit into yours.

The most common problem is timing and mixing. Cash deposits, funds moved between several accounts, or a gift that arrives the week of closing all create delays. Tell Jim about the gift at the beginning and it becomes routine paperwork instead of a last-minute scramble.

Yes. Arizona offers state and local down payment assistance programs, typically pairing a first mortgage with a grant or second lien covering part of the down payment, subject to income and property limits.

Programs change periodically in funding, income limits and eligible areas, and some are restricted to specific counties or to buyers who have not owned a home in the last three years. Homebuyer education is frequently required.

Assistance is not free money in every case — some structures are forgivable over time, others are repayable on sale or refinance. Understanding which structure you are accepting matters as much as qualifying for it. Jim reviews current availability against your income, target area and timeline.

No, but it counts toward it. Earnest money is a good-faith deposit held in escrow after your offer is accepted, and it is credited to your cash to close at settlement.

In an Arizona purchase contract, earnest money is deposited with the escrow company shortly after acceptance. It is not an extra cost — at closing it is applied to your down payment and closing costs.

What matters is under what circumstances it is refundable. Inspection, appraisal and loan contingencies in the contract define that, and missing a contingency deadline is how buyers lose deposits. Your agent tracks those dates; Jim keeps the loan side moving so the financing deadline is never the one you miss.

Reserves are liquid funds left over after closing, measured in months of housing payment. Some programs require them, and most underwriters view them favorably even when they are not required.

A retirement account can often count toward reserves at a discounted value, as can other liquid holdings. Requirements scale with risk factors: investment properties, multiple financed properties, and higher debt ratios all tend to raise the bar.

Even when no reserves are required, having two or three months of payments untouched after closing is simply sound. Phoenix summers have a way of finding the weakest component in a home's cooling system.