Bottom Line: Arizona Housing Finance Authority offers two down payment assistance programs that can provide 3-5% of your home purchase price (up to $15,000) to help cover down payment and closing costs, making homeownership achievable with minimal upfront cash.
One of the biggest obstacles to homeownership is saving thousands of dollars for down payment and closing costs. AZFA's down payment assistance (DPA) programs eliminate this barrier by providing funds that can be combined with your mortgage to purchase a home with as little as $1,000-$3,000 of your own money.
How AZFA Down Payment Assistance Works
AZFA down payment assistance is a second mortgage that layers on top of your primary mortgage. This assistance can be used for down payment, closing costs, prepaid expenses, and discount points. The funds are provided at closing, so you don't need to save these thousands of dollars yourself.
AZFA offers two distinct assistance programs with different terms, amounts, and repayment structures. Choosing between them depends on your location, income, and preference for monthly payments versus forgiveness.
AZFA Assistance Programs: Side-by-Side Comparison
Home Plus DPA
Traditional assistance with monthly payments
Assistance Amount
3% of first mortgage amount (maximum $15,000)
Interest Rate
First mortgage rate + 1%
Example: If first mortgage is 6%, DPA is 7%
Loan Term
10 years (120 monthly payments)
Monthly Payment
Yes - approximately $116 per month per $10,000 borrowed
Forgiveness
None - must be repaid in full
Availability
All Arizona counties
Refinancing
Can refinance first mortgage; DPA stays in place
Payoff at Sale
Remaining balance due when you sell or refinance
Home in Five Advantage
Forgivable assistance for targeted areas
Assistance Amount
5% of purchase price (varies by area, typically up to $25,000)
Interest Rate
0% (no interest charged)
Interest-free for entire life of assistance
Loan Term
5 years until fully forgiven
Monthly Payment
None - $0 monthly payment required
Forgiveness
20% forgiven annually (fully forgiven after 5 years)
Availability
Targeted areas only (check county eligibility)
Refinancing
Can refinance; unforgiven balance stays as lien
Payoff at Sale
Only unforgiven portion due (0% if 5+ years)
Which Program is Better?
Home in Five Advantage is generally preferable due to no monthly payment, 0% interest, and forgiveness after 5 years. However, it's only available in certain targeted areas and may have different income limits.
Home Plus DPA is available statewide and provides assistance for any qualifying buyer, though it requires monthly payments and doesn't offer forgiveness. Most buyers choose this program simply because they don't qualify for Home in Five geographically.
Home Plus DPA: Complete Details
How Home Plus DPA Works
Home Plus DPA provides 3% of your first mortgage amount as a second mortgage to cover down payment and closing costs. This assistance is structured as a 10-year loan at an interest rate 1% higher than your first mortgage rate.
Example Scenario
Purchase Price: $350,000
Down Payment: 3.5% FHA = $12,250
First Mortgage Amount: $337,750
Home Plus DPA (3%): $10,132
DPA Interest Rate: 7.0% (if first mortgage is 6.0%)
DPA Monthly Payment: $117.78 for 10 years
Total Your Cash Needed: ~$2,118 (for closing costs not covered by DPA)
What Can DPA Funds Cover?
- ✓ Down payment (3.5% for FHA, 3% conventional, 0% for VA/USDA)
- ✓ Closing costs (title, escrow, recording fees, etc.)
- ✓ Prepaid items (property taxes, homeowners insurance, HOA)
- ✓ Discount points to buy down your interest rate
- ✓ FHA/VA funding fees or mortgage insurance
Important Terms to Know
Silent Second Lien
The Home Plus DPA is recorded as a second mortgage (lien) on your property. It's "silent" in that it doesn't require monthly payments to AZFA - instead, your monthly payment is included in your total mortgage payment through your lender.
10-Year Amortization
Unlike your 30-year first mortgage, the DPA is paid off over 10 years. This means higher monthly payments relative to the balance, but you'll own it free and clear after 120 months.
Refinancing Impact
If you refinance your first mortgage, the Home Plus DPA remains in place and continues its original payment schedule. You cannot roll it into a new refinance without AZFA approval.
Early Payoff
You can pay off the DPA early at any time with no prepayment penalty. This is common when selling or refinancing the home before the 10-year term ends.
Home in Five Advantage: Complete Details
How Home in Five Advantage Works
Home in Five Advantage provides 5% of your purchase price as an interest-free second mortgage with no monthly payments. The loan is forgiven at 20% per year over 5 years, meaning if you stay in the home 5 years, you owe nothing back.
Example Scenario
Purchase Price: $350,000
Down Payment: 3.5% FHA = $12,250
Home in Five DPA (5%): $17,500
DPA Interest Rate: 0%
DPA Monthly Payment: $0
After Year 1: $3,500 forgiven (20%), $14,000 owed if you sell
After Year 3: $10,500 forgiven (60%), $7,000 owed if you sell
After Year 5: $17,500 forgiven (100%), $0 owed if you sell
Geographic Eligibility
Home in Five Advantage is only available in specific census tracts designated as "targeted areas" by AZFA. These are typically areas where AZFA wants to encourage homeownership and community development.
Check Property Eligibility: Your lender can verify if a specific property address qualifies for Home in Five Advantage, or you can search AZFA's targeted area map on their website. Common qualifying areas include parts of Phoenix, Tucson, Mesa, and various rural communities.
Forgiveness Schedule
| Years in Home | Amount Forgiven | Balance if $17,500 DPA |
|---|---|---|
| Less than 1 year | 0% | $17,500 owed |
| 1-2 years | 20% | $14,000 owed |
| 2-3 years | 40% | $10,500 owed |
| 3-4 years | 60% | $7,000 owed |
| 4-5 years | 80% | $3,500 owed |
| 5+ years | 100% | $0 owed |
Important: Forgiveness Anniversary Date
Forgiveness is calculated from your closing date anniversary each year. If you close on March 15, 2025, you reach your first forgiveness milestone on March 15, 2026. Selling or refinancing even one day early can cost you thousands in unforgiven assistance.
Qualifying Requirements for AZFA Down Payment Assistance
Basic Eligibility
-
First-Time Buyer Status:
Must be first-time buyer OR not owned home in past 3 years (veterans exempt from this requirement) -
Primary Residence:
Property must be your primary residence, not investment or vacation home -
Homebuyer Education:
Complete 8-hour approved homebuyer education course before closing -
Arizona Property:
Home must be located in Arizona -
AZFA Approved Lender:
Must work with AZFA-approved lender like Todd Uzzell Home Loans
Credit & Income
-
Credit Score:
Minimum 640 for most programs (620 possible with compensating factors) -
Income Limits:
Must be under county-specific income limits (typically $100k-$150k depending on household size and location) -
Purchase Price Limits:
Home price must be under county limits (typically $400k-$550k) -
Debt-to-Income Ratio:
Generally max 45-50% including both mortgages -
Reserves:
May need 1-2 months reserves depending on loan type
Can I Combine AZFA DPA with Other Loan Types?
Yes! AZFA down payment assistance can be layered with FHA, VA, USDA, or conventional financing:
- • FHA + AZFA DPA: Most common combination, 3.5% down total
- • VA + AZFA DPA: 0% down from VA, use DPA for closing costs
- • USDA + AZFA DPA: 0% down from USDA, use DPA for closing costs
- • Conventional + AZFA DPA: 3% down minimum, strict credit requirements
How to Apply for AZFA Down Payment Assistance
Contact an AZFA-Approved Lender
Not all lenders offer AZFA programs. You must work with an approved lender like Todd Uzzell Home Loans. We'll review your financial situation and determine which AZFA programs you qualify for. Call 480-330-1724 or email [email protected] to get started.
Complete Homebuyer Education
Take an 8-hour homebuyer education course from an approved provider. This can be done online at your own pace and typically costs $75-125. You must complete this before closing. Popular providers include:
- • Framework Homeownership (online)
- • eHome America (online)
- • Local housing counseling agencies (in-person or online)
Submit Loan Application & Documentation
Provide required documents including:
- • Last 2 years W-2s and tax returns
- • Recent pay stubs (last 30 days)
- • 2 months bank statements
- • Government-issued ID
- • Proof of all income sources
Get Pre-Approved for Both Loans
We'll submit your application to underwriting for pre-approval on both your first mortgage and your AZFA down payment assistance. You'll receive a pre-approval letter showing the maximum home price you qualify for and confirming your assistance amount.
Shop for Homes Within Limits
Find a home within AZFA's purchase price limits for your county. Work with a real estate agent who understands AZFA programs and knows you have assistance approved. Your pre-approval letter demonstrates you're a serious, qualified buyer.
Lock Rate and Process Loan
Once your offer is accepted, we'll lock your interest rate for both the first mortgage and DPA. The loan will go through full underwriting, appraisal, title work, and final approval from AZFA.
Close and Receive Assistance
At closing, your AZFA down payment assistance funds are applied to your down payment and closing costs, significantly reducing the cash you need to bring. You'll sign documents for both your first mortgage and your DPA second mortgage.
Frequently Asked Questions
Do I have to repay AZFA down payment assistance?
It depends on which program you use. Home Plus DPA requires monthly payments over 10 years and must be repaid in full. Home in Five Advantage has no monthly payments and is forgiven 20% per year, so if you stay in the home 5 years, you owe nothing back. If you sell before 5 years, you repay the unforgiven portion.
Is AZFA assistance a grant or a loan?
AZFA assistance is structured as a second mortgage (loan), not a grant. However, Home in Five Advantage functions like a grant if you stay in the home 5 years since it's fully forgiven. Home Plus DPA is strictly a loan that must be repaid with interest.
What happens to AZFA assistance if I refinance my first mortgage?
Your AZFA down payment assistance remains in place as a second lien on the property. For Home Plus DPA, you continue making monthly payments. For Home in Five, it continues accruing forgiveness on its original schedule. The DPA cannot be rolled into your new refinanced first mortgage without AZFA approval and full repayment.
Can I get AZFA assistance if I have student loans or other debt?
Yes, as long as your total debt-to-income ratio (including your proposed mortgage payments, student loans, car loans, credit cards, and all other debts) doesn't exceed the maximum allowed for your loan type - typically 45-50%. Your lender will calculate this during pre-approval.
How much cash do I need to buy a home with AZFA assistance?
Typically $1,000-$3,000 for earnest money deposit, home inspection, appraisal fee (if required upfront), and homebuyer education course. The AZFA assistance covers most or all of your down payment and closing costs, dramatically reducing the cash needed compared to traditional financing where you'd need $10,000-$20,000 or more.
What if I need to sell before my Home in Five DPA is fully forgiven?
You'll repay the unforgiven portion at closing from your sale proceeds. For example, if you received $15,000 and sell after 3 years, you'd repay $6,000 (40% remaining). This is deducted from your proceeds before you receive funds. In most cases, your home's appreciation will more than cover this repayment.
Can I combine AZFA assistance with seller concessions or other help?
Yes! AZFA assistance can be combined with seller-paid closing costs (up to limits for your loan type), lender credits, gift funds from family, and employer assistance programs. This can further reduce or even eliminate your out-of-pocket costs.
Real Example: How Much AZFA DPA Saves You
Without AZFA Assistance
Purchase Price: $325,000
Down Payment (3.5% FHA): $11,375
Closing Costs: $8,500
Prepaids/Escrows: $3,200
Total Cash Needed: $23,075
Most first-time buyers don't have $23k saved
With AZFA Home Plus DPA
Purchase Price: $325,000
First Mortgage: $313,625 (96.5%)
AZFA DPA (3%): $9,409
Your Cash for Remaining Costs: $2,500
Total Cash Needed: $2,500
You Save: $20,575 upfront!
DPA payment: ~$109/month for 10 years
The Math: AZFA assistance reduces your upfront cash needs by approximately $20,000. Even with the $109/month DPA payment, you're saving years of saving time and getting into your home now while building equity instead of paying rent.
Ready to Get AZFA Down Payment Assistance?
Find out how much assistance you qualify for and start your journey to homeownership today.
Phone: 480-330-1724 | Email: [email protected]
Related AZFA & Assistance Resources
AZFA Loans Overview
Complete guide to all AZFA programs
AZFA First-Time Buyer Programs
How AZFA helps first-time buyers
All Down Payment Assistance
Every DPA program in Arizona
FHA Loans Arizona
Combine FHA with AZFA assistance
Conventional Loans
Conventional with AZFA DPA
First-Time Buyer Programs
All programs for first-time buyers