Buying a home in Phoenix is an exciting journey, but one of the biggest questions homebuyers face is: “How much house can I afford?” With home prices fluctuating and interest rates shifting, understanding your buying power is crucial.
As a mortgage expert with 10 years of experience helping Arizona homebuyers secure the best financing, I’ll walk you through the key factors that determine affordability—including income, credit score, debt-to-income ratio, and down payment options.
By the end of this guide, you’ll have a clear picture of what you can afford in today’s Phoenix housing market, plus expert tips to maximize your buying power.
1. Understanding Your Buying Power
Your affordability is determined by four main factors:
1️⃣ Income: Lenders typically recommend that your monthly mortgage payment (including principal, interest, taxes, and insurance) should not exceed 28-31% of your gross monthly income.
2️⃣ Debt-to-Income Ratio (DTI): Most lenders prefer a total DTI under 43%, meaning all of your monthly debts (including your future mortgage payment) shouldn’t exceed 43% of your income.
3️⃣ Credit Score: A higher credit score means better mortgage rates. Generally, a score above 620 qualifies for conventional loans, while FHA loans may allow scores as low as 580.
4️⃣ Down Payment: The more you put down, the less you’ll need to borrow. FHA loans start at 3.5% down, while conventional loans often require 5-20%.
2. What Are Home Prices Like in Phoenix?
As of 2024, the median home price in Phoenix is around $450,000. Here’s what that means for affordability:
- With 10% down ($45,000) and an average 7% interest rate, your estimated monthly payment would be around $3,000 (including taxes and insurance).
- With 5% down ($22,500), your monthly payment would be slightly higher due to mortgage insurance.
- A 20% down payment ($90,000) eliminates private mortgage insurance (PMI) and reduces your monthly costs.
3. Loan Types & How They Affect Affordability
Different loan programs impact your affordability, monthly payment, and down payment options. Here’s how:
✅ FHA Loans (Best for First-Time Buyers & Low Credit Scores)
✔ Credit Score: 580+ (or 500 with 10% down)
✔ Down Payment: 3.5% minimum
✔ DTI Limit: Typically 50% max
✔ PMI: Required for the life of the loan
🔹 Great for buyers with lower credit scores and minimal savings for a down payment.
✅ VA Loans (Best for Veterans & Active Military)
✔ Credit Score: 580+ (some lenders allow lower)
✔ Down Payment: 0%
✔ DTI Limit: Flexible, up to 50%+
✔ PMI: None
🔹 The best loan option for eligible military service members and veterans!
✅ Conventional Loans (Best for Good Credit & Larger Down Payments)
✔ Credit Score: 620+
✔ Down Payment: 5-20%
✔ DTI Limit: Usually capped at 45%
✔ PMI: Required if putting less than 20% down
🔹 Ideal for buyers with strong credit and more savings.
✅ Down Payment Assistance Programs (Best for First-Time Buyers & Low-Income Borrowers)
✔ Credit Score: 640+ (varies by program)
✔ Down Payment: As low as 0% (grant or loan-based)
✔ DTI Limit: Usually 45% or less
✔ PMI: May apply depending on the loan type
🔹 Great for first-time homebuyers in Phoenix who need financial help!
✅ DSCR Loans (Best for Real Estate Investors)
✔ Credit Score: 680+ preferred
✔ Down Payment: 20-25%
✔ DTI Limit: No personal income verification required
✔ PMI: Not required
🔹 Best for real estate investors who qualify based on property cash flow instead of personal income.
4. How to Calculate Your Ideal Budget
Use the 28/36 rule:
- 28% of monthly income → mortgage payment limit
- 36% of monthly income → total debt limit (including credit cards, car loans, student loans, etc.)
🔹 Example: If you make $90,000/year ($7,500/month)
- Your ideal max mortgage payment: ~$2,100/month
- Your total debt limit: ~$2,700/month
Want a personalized affordability estimate? Schedule a free consultation with me today!
5. Tips to Boost Your Home Buying Budget
✅ Improve your credit score for better interest rates
✅ Save for a larger down payment to reduce monthly costs
✅ Pay down high-interest debt before applying for a mortgage
✅ Consider first-time homebuyer assistance programs
🔥 Ready to Find Out How Much You Can Afford? 🔥
📞 Call me today at 480-330-1724 or start your mortgage application online here!