If you’re looking to buy a house in Maricopa County, Arizona, and you’re coming up short on your down payment, there’s help. The Home in Five Advantage Program offers a 5 percent grant (aka free money!) for the down payment and closing costs.

The program, which the Industrial Development Authority of the County of Maricopa and The Industrial Development Authority of the City of Phoenix kicked off in the fall of 2012, is aimed at low- and moderate-income families who obtain an FHA, VA, or USDA-RD loan.

“This by far, in the past five years, has generated more business and leads for me than any other program of its kind,” Lisa Brown, branch manager of AmeriFirst Financial Inc. in Tempe, told the Phoenix Business Journal in a February article.

Check your home buying eligibility. Start here (Apr 25th, 2024)

Arizona Home in Five qualifications

So far, so good. You don’t even have to be a first-time homebuyer to take advantage of this grant. However, there are a number of requirements you must meet in order to qualify for the program, including:

• Your credit score has to be at least 640 and you can have no more than a 45 debt-to-income ratio.
• You have to qualify under the normal loan guidelines. In other words, you have to make enough money and your credit has to pass muster.
• You’re required to attend a homebuyer education course and prove you did so by showing the certificate earned at the end of the course.
• Your home must go through a professional home inspection (which is a common and wise step for homebuyers anyway). This will help raise any red flags if there are any major problems or challenges with the house.
• The home has to be located in Maricopa County, which includes the City of Phoenix.
• You have to move into the house within 60 days of closing escrow.
• You can’t use the loan to refinance; you have to be buying a house.
• You (and all borrowers, like your spouse) can’t make more than $88,340.
• The house you’re eyeing can’t cost more than $300,000.

Extra money for veterans

If you’re a qualified United States Military Personnel, you can get an extra 1 percent on the down payment and closing costs.

To be considered qualified, you must be a veteran who served in the active military and did not leave with a dishonorable discharge;  active duty United States military; active reservist; or active member of the National Guard.

Drawbacks to the Home in Five Program

A couple downsides to the program: there is a 2 percent administrative fee and the interest rate on a Home in Five Advantage loan is going to be higher than the lowest traditional FHA loan rate, according to the Phoenix Business Journal.

“There are some people that would benefit more from a conventional (or traditional FHA) loan, and that’s where a loan officer’s expertise comes in,” Brown said in the Phoenix Business Journal article. “But if you qualify for the program, why not take an extra 3 percent from Maricopa County versus not getting anything?”

Home in Five fuels Phoenix Recovery

The program comes at a time when the housing market in the Phoenix area is showing signs of recovery.  In fact, home prices in Phoenix jumped 18.8 percent from March 2012 to March 2013. That gain was the largest increase of any city in the United States.

While U.S. home prices went up about 10.5 percent in March 2013 over March 2012, Arizona home prices went up 16.8 percent over the same year-long period, according to Core Logic, a real estate data provider.

The only states that experienced bigger increases were Nevada (22.2 percent) and California (17.2 percent).

“Some of the previously hard-hit markets like Phoenix, Sacramento and Miami continue to experience a dramatic turnaround, while a new set of areas like Atlanta, Minneapolis and Seattle have begun to show strong signs of upward momentum,” Lawrence Yun, National Association of Realtors chief economist, said.

Although it’s a good sign for sellers and the economy that home prices are on the rebound, the fact remains that what’s driving prices up is the dwindling supply.

“The low number of sellers is what’s unusual, not the number of buyers, which is only slightly above normal,” Michael Orr, a real estate expert at ASU’s W.P. Carey School of Business, said in a report released earlier this month. “Higher prices would normally encourage more ordinary home sellers into the market, but many are either locked into their homes because of negative equity, or they’re simply waiting for prices to go up more.”

The report also revealed the median price of a single-family home in Phoenix was $175,000, about a 30-percent increase from the same time a year ago.

Also fueling the fire is Phoenix’s growing population. The report says 50,000 to 60,000 people are expected to move to the region this year. About 12,000 new single-family homes are being built.

“Builders are scratching their heads, trying to figure out what to do,” Orr said. “They don’t want to overbuild as they did during the peak, and they don’t want to build a bunch of new homes for people who can’t secure the mortgages needed to buy them with such tight lending conditions.”

Whatever the builder’s final decisions are, the Home in Five Advantage Program will be a great incentive to buy in or around Phoenix for those who qualify.

Check your home buying eligibility. Start here (Apr 25th, 2024)