Think a Tempe home is out of reach because of the down payment? You are not alone. Many first-time buyers have solid income but limited cash for closing. The good news is you may not need as much as you think. In this guide, you will learn the main down payment assistance options in Tempe, who typically qualifies, timelines, documents to prepare, and smart ways to start with less cash. Let’s dive in.
What down payment assistance covers in Tempe
Down payment assistance, or DPA, helps reduce the cash you need at closing. It can come as a forgivable grant, a deferred second mortgage, a repayable second mortgage, or lender credits. Some programs can also help with closing costs.
Most programs pair with a fixed-rate primary mortgage and have income and purchase price limits. Many also require homebuyer education before closing. Always confirm current rules with the program administrator or your lender.
Arizona and Tempe programs at a glance
State programs
The Arizona Department of Housing administers mortgage and DPA options designed for low and moderate income buyers. Programs often combine a fixed-rate loan with a forgivable or deferred second to help with down payment or closing costs, and many require homebuyer education. Explore the latest offerings directly on the Arizona Department of Housing.
City resources
Tempe’s Housing and Community Development office is a helpful starting point for local referrals and updates on any city-supported assistance or counseling. Visit the City of Tempe Housing & Community Development pages to learn more.
Mortgage Credit Certificates
Some years, state or local agencies offer Mortgage Credit Certificates that reduce federal tax liability by turning a portion of your mortgage interest into a tax credit. Benefits and eligibility vary and may pair with certain mortgages. See HUD’s overview of MCCs for the general concept on HUD’s site.
Nonprofit and employer help
Community organizations and some employers may offer small grants, forgivable loans, or matched savings. A HUD-approved housing counselor can help you identify current opportunities and classes in the area. Use the HUD counseling agency search tool to find a local counselor.
Low-down mortgage options to pair with DPA
Down payment assistance works best when paired with a low-down mortgage product. Here are common options Tempe buyers use.
FHA loans
FHA loans allow as little as 3.5 percent down and accept qualified gift funds for down payment and closing costs. They are widely used by first-time buyers. Learn more via HUD’s FHA guidance.
VA loans
If you are an eligible veteran or servicemember, VA loans often require no down payment. Review benefits and qualification details on the VA Home Loans page.
USDA loans
USDA Rural Development loans can offer no down payment for qualifying buyers and eligible properties. Most addresses in Tempe are not USDA eligible, but some nearby areas may be. Check program information on USDA Rural Development.
Conventional 3 percent options
Fannie Mae HomeReady and Freddie Mac Home Possible allow down payments as low as 3 percent with flexible income and occupancy rules. Many lenders can layer these with DPA or lender credits. Learn more from Fannie Mae HomeReady and Freddie Mac Home Possible.
Who typically qualifies
While each program has its own rules, most share common themes. Your lender and program administrator will confirm exact requirements.
- First-time buyer status is often defined as no ownership in the past three years. Some programs may allow exceptions for veterans or specific target areas.
- Income limits usually apply and are based on area median income for Maricopa County, adjusted by household size.
- Purchase price caps are common and are updated periodically.
- Credit and debt-to-income requirements follow the primary mortgage guidelines. DPA does not replace standard underwriting.
- Owner-occupancy is required. Investor or vacation homes do not qualify.
- Property types often include single-family homes, certain condos, and townhomes. Some programs add property condition rules.
- Repayment terms vary. Assistance may be a forgivable grant, a deferred second that becomes due when you sell or refinance, or a repayable second with interest. Ask for the forgiveness schedule and any recapture rules.
- Homebuyer education is often required before closing. Completing it early keeps your timeline on track.
Timeline and what to expect
Buying with DPA follows the same general steps as any purchase, with a few extra checkpoints. The process is straightforward when you plan ahead.
- Pre-approval: 1 to 7 days, faster if your documents are ready.
- Home search and offer: varies by neighborhood and inventory.
- DPA application and review: some programs require a reservation before or at contract, others process alongside underwriting.
- Underwriting and appraisal: typically 2 to 4 weeks after your offer is accepted.
- Closing: most buyers close within 30 to 45 days of contract acceptance. DPA steps can add time, so start early.
Tip: Not all lenders participate in every program. Confirm your lender is approved for the DPA you want and can coordinate funds for closing.
Documents to gather early
Having a clean file helps your lender and any DPA administrator move quickly. Expect to provide:
- Government ID and Social Security Number for all borrowers
- Recent pay stubs and employer contact for verification
- W-2s for 2 years, 1099s if self-employed, and recent federal tax returns
- Bank statements and other asset statements for the past 2 to 3 months
- Gift fund letters and donor bank statements if using gift funds
- Rental history or landlord contact if requested
- Divorce or separation documents if applicable
- Student loan statements and status
- Homebuyer education certificate if the program requires it before closing
- Purchase contract and property details once you are under contract
Smart strategies to start with less cash
You can stack several tactics to reduce the money you need to close.
- Get pre-approved early. Your pre-approval clarifies the down payment you need and which programs fit your profile.
- Choose a low-down mortgage. FHA at 3.5 percent, VA at 0 percent for eligible borrowers, and conventional 3 percent options are dependable starting points.
- Pair your loan with DPA. Use state or local assistance to cover part of the down payment or closing costs.
- Use gift funds and seller concessions. Documented gifts can count toward your down payment. Negotiate seller credits toward closing costs within loan limits.
- Ask about lender credits. Some lenders offset closing costs in exchange for a slightly higher rate. Rebecca’s vetted lenders can walk you through tradeoffs.
- Finish homebuyer education early. Do not let a course requirement delay your funds at closing.
- Budget for upfront items. Even with DPA, you will want cash for earnest money, inspections, appraisal, HOA applications, and initial escrows.
- Explore employer or nonprofit assistance. A housing counselor can point you to current local grants or matched savings.
Your next steps in Tempe
- Meet with a HUD-approved housing counselor to review DPA options and education requirements. Start with the HUD counseling agency search.
- Get pre-approved with a lender experienced in Arizona DPA and your preferred loan type.
- Ask your lender which DPA programs they participate in and whether they can reserve funds early.
- Complete any required homebuyer education before you make an offer.
- Confirm property eligibility, including price caps and any target area rules, before writing a contract.
- Coordinate timelines among your lender, DPA administrator, escrow, and your agent to avoid funding delays at closing.
Buying your first place in Tempe should feel exciting, not overwhelming. If you want a clear plan from pre-approval through keys, reach out. With neighborhood expertise and a calm, step-by-step approach, Rebecca Smith Real Estate can connect you with vetted lenders, help you compare options, and guide your Tempe home search with confidence.
FAQs
How does Tempe down payment assistance work for first-time buyers?
- Most programs provide a grant or a second mortgage that helps with down payment and closing costs, paired with a fixed-rate primary loan and basic eligibility rules like income limits and owner occupancy.
What income limits apply to Tempe first-time buyer programs?
- Programs commonly use area median income for Maricopa County and adjust by household size, but limits vary by program and are updated periodically.
Can I combine an FHA loan with Arizona DPA in Tempe?
- Yes, many buyers pair FHA with state or local assistance, provided the lender participates and the program allows the combination.
Do Tempe programs require homebuyer education before closing?
- Many do, and completing the course early helps avoid funding delays and may unlock program eligibility.
Will I have to repay assistance if I sell or refinance?
- It depends on the program; some are forgivable after a set period, while deferred second mortgages can become due upon sale or refinance.
Are condos and townhomes in Tempe eligible for DPA?
- Many programs allow single-family homes, certain condos, and townhomes, subject to property eligibility and the primary loan’s guidelines.
