Real estate agents explaining how to buy a house in Arizona

How Much Money Do I Need to Buy a House in Arizona?

Before you start looking for homes for sale in Phoenix, Arizona, plan out your finances. Many people experience surprise when they learn how much out-of-pocket expense comes with purchasing a home. There’s much more to it than a mortgage and a down payment. Here’s what you need to plan for when you want to buy a house in Phoenix, Arizona.

Cash for a Down Payment

You’ll need to save between three and 20 percent of the cost of the home for a down payment. Yes, some zero-down options do exist, but you’ll find qualifying for them tough. Most mortgage types require 10 to 20 percent.

Some types of mortgage, such as VA or USDA, require no money down. An FHA loan requires a 3.5 percent down payment. Some conventional loans go as low as three percent down. Which type of mortgage you qualify for decides which down payment amount you need.

To combat this variability, determine your budget and set a maximum home price for which you know you can qualify for a mortgage. Complete the pre-qualifying application to determine the amount of mortgage you qualify for.

If you can afford a $250,000 home, saving 20 percent of that cost keeps you safe. If you qualify for a mortgage that requires only 10 percent down, you save that plus the rest of the costs.

This planning gets you started saving, but many other homebuyer costs exist, too. Here’s a list of the costs of home buying in Arizona (and most places) that few first-time homebuyers know about.

Earnest Money

You’ll typically need one percent of the purchase price for an earnest money deposit. Also called a good faith money deposit, it refers to a small deposit that shows a buyer’s genuine interest in purchasing a home.

Inspections Fee

When a seller accepts your offer on their home, you have ten days to have the home inspected, including any well system or septic system and a termite inspection. The general home inspector may recommend additional inspections, such as an HVAC, structural, or swimming pool inspection. These items add to the cost. The total cost of inspection fees ranges from $300 to $600, depending on the number of inspections needed, the features of the home, and its size.

Home Appraisal

Although they sound similar to someone outside the housing or real estate industry, home inspection and appraisal do different jobs. The mortgage lender requires the appraisal to ensure that the purchase price remains at or below the home’s market value. The appraiser uses a standard set of criteria by which to appraise the fair market value of the home based on the general physical condition of the home. Expect the home appraisal to cost between $400 and $600. You pay this to the lender directly and cannot roll it into the mortgage loan.

Closing Costs

The term closing costs refers to a catch-all phrase encompassing the fees charged by all organizations and individuals assisting in your home purchase. Unlike the earnest money, a flat fee of one percent, the closing costs vary from two to five percent of the home’s price.

Closing costs include the following:

  • Escrow fees charged by the escrow organization that handles the money exchanged between the home buyer, home seller, and the mortgage lender add to the cost. In Arizona, typically, one to two percent of the loan.
  • Title insurance policy is insurance that covers third-party claims to a property arising after the closing. These wouldn’t appear on a title search since they typically refer to contractors who worked on the home but weren’t paid.
  • Mortgage lender’s fees range from $300 to $500 and cover the costs of processing the mortgage papers and initiating the loan.
  • Pre-paid expenses range depending on your location but typically include six to 12 months of homeowners’ insurance premiums plus two months of property taxes and any loan interest that accrues from the closing of the home to the end of the month.
  • Recording fee refers to a fee charged by the state and local government to transfer ownership of the home from one individual to another. It varies by location but averages about $125 nationally.
  • Title service fees typically range between three to six percent of the home’s cost, based on your location, how clear the chain of title is, what defects to the title need correcting, and which title agent you choose.
  • Origination fee, a one-time fee from your mortgage lender equaling half a percent to one percent of the total loan cost. The lender charges it for issuing and holding the loan to mitigate the risk of making the loan.
  • The underwriting fee, a one-time fee charged by the lender for researching whether to approve you for the mortgage, also adds to the closing costs. In Arizona, expect this cost to range between $400 and $600.

Using a buyer’s agent can help you reduce some of these costs. They typically negotiate with the seller to have them pay some or all of your closing costs. The buyer’s agent receives a commission for working with you, typically two to three percent of the home’s sale price.

What If You Move from Out of Town?

Moving from outside of Phoenix also adds to your cost. The typical moving cost from outside the metro to Phoenix is about $2,000. Also, if you previously rented a furnished apartment or home, add at least $1,000 for the essential furniture.


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