Home Plus has been a very popular down payment assistance program in Arizona for many years. It is offered statewide in all counties, and can be combined with various first mortgage programs such as FHA, VA, USDA and conventional home loans.

The Home Plus home buyer down payment assistance program offers home buyers down payment assistance in the form of a silent second mortgage that is forgiven partially over three years from the time the house is purchased. The Home Plus program is administered by the Arizona Industrial Development Authority, a nonprofit corporation and political subdivision of the State of Arizona.

The various loan programs that are offered through Home Plus have different qualifying guidelines. This includes having Home Plus income limits.

Why Does Home Plus Have Income Limits in Arizona?

Home Plus and the other down payment assistance programs in Arizona were designed to help responsible Arizonans become homeowners who may not be able to overcome the barriers to homeownership on their own.

The Home Plus down payment assistance program gives borrowers a chance to become a homeowner, even if they lack the minimum down payment required.

Maximum income limits are used to make sure that the Home Plus down payment assistance program is better aligned with these housing goals.

Income Limits for Home Plus Using FHA Loans With All Down Payment Assistance Options

The maximum income limit for the Home Plus down payment assistance program combined with FHA financing for all down payment assistance options is $136,609 for all counties in Arizona.

Income Limits for Home Plus Using VA Loans With All Down Payment Assistance Options

The maximum income limit for the Home Plus down payment assistance program combined with a VA home loan for all down payment assistance options is $136,609 for all counties in Arizona.

Income Limits for Home Plus Using USDA Loans With All Down Payment Assistance Options

The maximum income limit for the Home Plus down payment assistance program combined with a USDA mortgage for all down payment assistance options is $136,609 for all counties in Arizona.

Home Plus Income Limits When Using Fannie Mae HFA Preferred or Freddie Mac HFA Advantage Loan Programs With All Down Payment Assistance Options AND Borrower Income is Over 80% AMI

The maximum income limit for the Home Plus down payment assistance program combined with a conventional Fannie Mae HFA Preferred or Freddie Mac HFA Advantage loan program for all down payment assistance options is $136,609 for all counties in Arizona.

Home Plus Income Limits When Using Fannie Mae HFA Preferred or Freddie Mac HFA Advantage Loan Programs With All Down Payment Assistance Options AND Borrower Income is Under 80% AMI

The maximum income limit for the Home Plus down payment assistance program combined with either the Fannie Mae HFA or the Freddie Mac HFA program for all down payment assistance options varies by county.

What is AMI?

AMI stands for Area Median Income. Every year, the Department of Housing and Urban Development (HUD) publishes annual income limits based on household size that are used to determine the maximum household income. The Area Median Income (AMI) is the midpoint of an area’s income distribution. In other words, half of the families in an area earn more than the median and half earn less than the median. If your household income falls between 51% and 80% of your area’s AMI, you are considered a low-income household.

Fannie Mae provides this tool to help you lookup the Area Median Income in your region. It shows the applicable Area Median Income (AMI) for each applicable census tract. Lender may use the AMI limits for purposes of determining income eligibility for HomeReady or other loans — such as the Home Plus Fannie Mae HFA Preferred and the Freddie Mac HFA Advantage programs — that have AMI requirements.

How is Household Income Calculated?

When applying for a mortgage, the gross income from both the borrower and co-borrower is included in the qualifying income. Gross income is the amount of income that a borrower makes before income taxes. In order to be used to qualify for a loan, income must be considered stable and durable. Although this is subjective, mortgage companies have to examine an applicant’s income source to obtain a satisfactory level of comfort that the borrower has the ability to repay the loan. Typically, a lender will want to see that the borrower has had a stable source of income for the past two years and that the income is likely to continue for at least the next three years.

The typical income used for qualifying purposes includes:

• standard salary or hourly pay
• overtime income
• bonus income
• commission
• self-employment income
• disability income
• social security income
• any other income that an applicant receives on a regular basis.

Determining a Mortgage Amount a Borrower Can Afford

As mentioned, a lender must determine a borrower’s ability to repay a loan in order to provide loan approval. Once the household income is determined, the mortgage company will review the borrower’s monthly required payments for consumer debts. Lenders pay attention to the debts on a credit report. For most Arizona home buyers looking to use the Home Plus down payment assistance programs, these debts include some or all of the following:

• credit card minimum required payments
• auto loan payments
• student loan payments
• installment loan payments
• alimony and/or child support payments
• payment arrangements for taxes owed for previous years

Debt-To-Income Ratios

Once the mortgage company has calculated an applicant’s usable gross monthly income and total monthly debts, the lender will calculate the borrower’s debt-to-income ratios. A debt-to-income ratio is an applicant’s total monthly debt payments divided by his or her usable gross monthly income. Lenders must calculate to debt-to-income ratios to determine how much an applicant can qualify to borrow.

Front-End Ratio

The first debt-to-income ratio that the lender will calculate is the borrower’s front-end ratio. This is the borrower’s total potential monthly housing payment divided by the applicant’s usable gross monthly income. The housing payment must include the full PITI payment. PITI stands for principal, interest, tax and insurance (homeowners insurance). In addition to these items the full payment also must include mortgage insurance and monthly HOA payments when applicable. So, if an applicant wants to buy a home with a $1500.00 PITI mortgage payment and the borrower has $6000 in monthly income, his front-end ratio would be 25%. $1500 / $6000 = 25%

Back-End Ratio

The next ratio that a lender will calculate is the borrower’s back-end ratio. The back-end ratio is the applicant’s combined amount of the proposed monthly housing payment and all other monthly debt payments divided by his or her usable monthly gross income. So, for example, if an applicant has a potential mortgage payment of $1500, a car payment of $275, a student loan payment of $60 and a minimum monthly credit card payment of $100 and his/her monthly income is $6000, then the back-end ratio is 32%. ($1500 + $275 + $60 + $100) / $6000 = 32%

Note: Maximum debt-to-income ratios are listed throughout this site, for the various down payment assistance programs (ex. 50%). Unless specifically stated otherwise, the maximum debt-to-income ratio is referring to the back-end ratio.

How Your Debt-To-Income Determines How Much You Qualify to Buy

Here is a quick explanation of how a lender will calculate what home purchase price you qualify to buy.

• Based on the information that you provide during the loan application interview, your loan officer will select the best loan program to meet your needs.
• Your loan officer will confirm the maximum back-end debt-to-income ratio allowed for the selected mortgage program.
• Your loan officer will calculate your usable gross monthly income.
• Your loan officer will multiply your usable gross monthly income by the maximum debt-to-income ratio to determine the maximum debt ceiling.
• Your loan officer will review your total monthly debt payments (excluding your potential mortgage payment) and subtract them from the maximum debt ceiling. This will leave the maximum allowable total monthly mortgage payment.
• Your loan officer will make sure that this amount does not exceed the maximum front-end ratio requirement.
• Your loan officer will check to see what the current interest rate is for the selected loan program, estimate tax, insurance and HOA payments in the area you are looking to buy and use these variables to determine the maximum loan amount that you qualify to buy.
• The loan officer will apply the minimum down payment required to the calculation to determine the maximum purchase price.

Pay Attention To How Your Maximum Purchase Price is Calculated

It is important that you know how your maximum purchase price is calculated so you can make sure your lender is giving you the best opportunity to buy in the price range you want. There are many different variables in play.

Here are some things that you must consider:

• The lower the rate, the more you will qualify to buy.
• Loan programs have different interest rates.
• Each house has a different tax, insurance and HOA amount. Your loan officer needs to be fairly acquainted with the area where you are looking to buy.
• Lenders can calculate your income differently. If they are too conservative, they may qualify you for less than you want. If they are too aggressive, they may over-qualify you.
• You need to check for errors on your credit report to make sure that it is reporting your monthly debt obligations correctly.

You might find out that your debt-to-income ratio is too high and it is keeping you from qualifying to buy homes in the price range that you want. If this happens, here are some things that you can do to lower your debt-to-income ratio:

• Ask a family member to co-sign for the loan.
• Ask your employer for a raise.
• Look for homes that are priced lower.
• Pay off or pay down some debts.
• Put more money down.
• Select a different loan program that has a lower rate.
• Get seller concessions and use them to buy down your interest rate.

There are other strategies that you can employ. It’s important that you talk to an experienced lender to get the right advice and form the right plan. Remember, it is not difficult to qualify for the Home Plus program. You aren’t placed on a waiting list or ranked against other applicants. You just have to meet the standard criteria to qualify for the loan.

The Home Plus assistance program is among the most flexible programs offered in Arizona. It even allows you to purchase a home with others that will not be on the loan. If you meet the standard criteria, you have a variety of ways to get yourself approved for this program.

If you have any questions, please contact us. We are eager to assist you in your homebuying journey.