Joe Huljak • November 13, 2026

Down Payment Decisions: More Down or Keep Cash for Repairs?

Most first-time buyers in Arizona come to me with the same savings question, just phrased a dozen different ways. How much should I put down? Can the seller help with my closing costs? Should I get a fixed rate or an adjustable rate? These feel like three separate decisions, but they're really one: how do I make the most of the money I have so I can get into a home and stay there?

The short answer: Putting more money down lowers your monthly payment and may eliminate private mortgage insurance, but keeping cash reserves for repairs and emergencies is equally important for first-time buyers. Seller concessions can sometimes cover part of your closing costs, reducing how much cash you need at closing. For most first-time buyers in Arizona, a fixed-rate mortgage provides more predictability than an adjustable-rate loan.

The longer answer depends on your specific numbers, and that's what this article walks through.

Should You Put More Down or Keep Cash Reserves?

This is the question I hear most often from first-time buyers in the Phoenix metro and across Arizona. The instinct to put down as much as possible makes sense on paper. A bigger down payment means a smaller loan, a lower monthly payment, and less interest paid over 30 years. On a conventional loan, reaching 20% down means you avoid private mortgage insurance altogether, which can cost between 0.5% and 1.5% of the loan balance per year.

But here's the part that doesn't show up in that math: Arizona homes need maintenance. Air conditioning units in the Valley run hard. Roofs age. Water heaters fail. And when something breaks in the first year, you need cash to fix it.

The Real Risk of Going in Cash-Poor

Draining every dollar of savings to hit a bigger down payment leaves you what I call house rich and cash poor. You own the home, but you're one HVAC repair away from a credit card balance that starts eroding the financial foundation you just built.

Most lenders want to see that you have reserves after closing, typically two to three months of mortgage payments sitting in the bank. That's not just a lender preference; it's a sanity check. Arizona buyers who close with nothing left in savings are one surprise expense away from real stress.

The practical guideline most first-time buyers should follow:

Put down enough to get into a loan program that works for your income and credit
Keep a minimum of 2 to 3 months of mortgage payments in reserve after closing
Budget separately for immediate repairs and move-in costs, which often run $2,000 to $5,000 even on a move-in-ready home
Avoid the temptation to wipe out your emergency fund to chase a lower monthly payment

When a Bigger Down Payment Makes Sense

There are situations where putting more down is the right call. If you have strong reserves and the extra down payment eliminates PMI entirely, the math can favor going bigger. On a $400,000 home in Scottsdale or Chandler, eliminating PMI could save you $150 to $300 per month, and that adds up fast.

A larger down payment also gives you instant equity, which matters in a market where home values can shift. More equity means more cushion if you ever need to sell or refinance.

The key word is "if." If you have reserves left over after a larger down payment, and if the PMI savings justify the trade-off, then putting more down makes sense. If you're stretching to hit 20% and you'll have nothing left, you're solving one problem by creating another.

For a deeper look at how different down payment amounts affect your loan options, see How Much Money Do You Really Need for a Down Payment.

What Are Seller Concessions and How Do They Work?

Seller concessions are one of the most underused tools in a first-time buyer's toolkit, and they're especially worth understanding in Arizona's market.

A seller concession is when the seller agrees to pay a portion of your closing costs as part of the purchase negotiation. Instead of you bringing that money to the closing table, the seller covers it, which frees up cash you can keep as reserves or put toward your down payment.

Closing costs in Arizona typically run between 2% and 5% of the loan amount. On a $375,000 purchase, that's $7,500 to $18,750. Seller concessions can meaningfully reduce that number.

Concession Limits by Loan Type

Lenders cap how much a seller can contribute, and the limits vary by loan program:

FHA loans: Sellers can contribute up to 6% of the purchase price toward the buyer's closing costs
Conventional loans with less than 10% down: The cap is 3% of the purchase price
Conventional loans with 10% to 25% down: The cap rises to 6%
VA loans: Sellers can contribute up to 4% of the purchase price, plus they can pay all of the buyer's loan-related closing costs with no set cap on that portion
USDA loans: Sellers can contribute up to 6% of the purchase price

The important thing to understand is that seller concessions are negotiated, not automatic. In a buyer's market, or when a home has been sitting, sellers are often willing to contribute. In a competitive multiple-offer situation, asking for concessions can cost you the deal. Timing and market conditions matter.

What Concessions Can Cover

Seller concessions can be applied to:

Lender origination fees
Appraisal fees
Title insurance and title search fees
Prepaid property taxes and homeowners insurance (the escrow setup at closing)
Discount points to buy down your interest rate

They cannot be used to cover your down payment itself. That has to come from your own funds, a gift, or an approved assistance program.

Key insight: In the Phoenix metro, where inventory has been tight, buyers sometimes offer slightly above asking price and then request concessions to offset closing costs. The net result can be similar to a lower offer with no concessions, but it lets the buyer preserve cash. Whether that strategy makes sense depends on the appraisal, the seller's situation, and your loan type. Talk through it with your lender before you write the offer.

Fixed-Rate vs. Adjustable-Rate: Which Is Right for a First Home?

The short answer for most first-time buyers in Arizona: get a fixed-rate mortgage.

Here's why that's almost always the right call, and what the exceptions look like.

How a Fixed-Rate Mortgage Works

A fixed-rate loan locks your interest rate for the entire loan term, typically 30 years. Your principal and interest payment never changes, regardless of what happens in the market. If rates go up, you're protected. If rates go down, you can refinance later.

That predictability is worth a lot when you're new to homeownership. You're already managing property taxes, homeowners insurance, HOA fees (common in Scottsdale, Gilbert, and Tempe developments), and the unexpected costs that come with any home. The last thing you need is a mortgage payment that can shift on you.

How an Adjustable-Rate Mortgage Works

An ARM offers a lower rate for an initial fixed period, often 5, 7, or 10 years, then adjusts periodically based on a market benchmark. Today's most common ARM is the 7/6 SOFR ARM, which means the rate is fixed for seven years, then resets every six months.

ARMs typically carry a 2/1/5 cap structure:

The rate can rise by no more than 2 percentage points at the first adjustment
No more than 1 percentage point at each subsequent adjustment
No more than 5 percentage points total over the life of the loan

On a $400,000 loan starting at 6.27%, the worst-case scenario at year seven would be a rate of 8.27%, which could add roughly $270 per month to your payment. That's a real number, and it's worth running before you sign.

The Decision Comes Down to One Question

How long are you planning to stay in this home?

Under 7 years: An ARM is worth evaluating. You capture the lower initial rate and sell or refinance before the adjustment kicks in.
7 to 10 years: The math gets murkier. There's meaningful risk that the adjustment hits before you're ready to move.
10 or more years: Get the fixed rate. The certainty of knowing your payment won't change in year eight, year twelve, or year twenty is worth the modest premium.

Most first-time buyers in Arizona are buying a home they plan to live in for a decade or more. They're not relocating in five years. They're putting down roots in Peoria or Mesa or Tucson. For those buyers, an ARM introduces payment risk that isn't offset by the initial rate savings.

"An ARM can be a good choice if it is a strategic decision instead of, 'This is the only way that I can afford a mortgage.'" - Hannah Jones, Senior Economist at Realtor.com, via CNBC Make It

If an ARM is the only thing that makes a home affordable, that's a signal to revisit the price point, not the loan structure.

For buyers considering the FHA-to-conventional path (buying with FHA now, improving credit, then refinancing to conventional in 12 to 18 months), a fixed-rate FHA loan is almost always the right starting point. Learn more about that strategy at FHA First, Conventional Second.

How to Think About All Three Decisions Together

These three decisions, down payment size, seller concessions, and loan structure, don't exist in isolation. They interact with each other, and the right answer for one affects the others.

Here's how I walk through it with buyers:

Start with your loan program. Your credit score, income, and debt load determine which programs you qualify for. That sets the minimum down payment and tells you what seller concession limits apply. If you're going FHA, the concession cap is 6%. If you're going conventional with less than 10% down, it's 3%. Understanding what happens during mortgage pre-approval is the first step to knowing which programs are actually on the table for you.

Then figure out your total cash need. Add up your down payment, estimated closing costs, and a reserve cushion of at least two to three months of mortgage payments. That's your real number. If seller concessions can reduce the closing cost portion, great, but don't count on them until they're in a signed contract.

Finally, choose your loan structure based on your timeline. If you're planting roots in Arizona for the long haul, lock in a fixed rate and stop second-guessing it. If you have a specific, realistic reason to believe you'll sell or refinance within seven years, an ARM is worth discussing. Otherwise, the fixed rate wins on predictability every time.

The mistake most first-time buyers make: They optimize for the lowest possible monthly payment today without thinking about what happens in year two when the HVAC goes out. The goal isn't the lowest payment. It's the strongest overall financial position, which means a payment you can sustain, reserves you can tap, and a loan structure that won't surprise you.

Arizona's housing market, particularly in the greater Phoenix area, has rewarded buyers who got in and stayed in. The buyers who stretched too thin on their down payment or took on an ARM they didn't fully understand are the ones who ended up in trouble when life happened. The buyers who kept their reserves, understood their loan, and got into a fixed-rate mortgage are the ones who built real wealth.

Get pre-approved before you start shopping. Know your numbers before you fall in love with a house. And if you're not sure how to allocate your savings, that's exactly what a good lender is for.

Frequently Asked Questions

Is it better to put more down or keep cash for repairs?

For most first-time buyers in Arizona, keeping cash reserves is just as important as maximizing your down payment. Putting 20% down eliminates PMI on a conventional loan, but if doing so leaves you with no emergency fund, you're exposed to real financial risk the moment something breaks. A good rule of thumb is to keep at least two to three months of mortgage payments in reserve after closing, plus a separate buffer for immediate repairs and move-in costs.

Can seller concessions cover my closing costs?

Yes, seller concessions can cover some or all of your closing costs, depending on your loan type and how much the seller agrees to contribute. FHA loans allow up to 6% of the purchase price in seller concessions. Conventional loans cap it at 3% if you're putting less than 10% down, or 6% if you're putting 10% to 25% down. Concessions are negotiated as part of your offer, not guaranteed, so whether you can get them depends on market conditions and the seller's situation.

Should I choose a fixed-rate or adjustable-rate mortgage for my first home?

For most first-time buyers in Arizona who plan to stay in their home for 10 or more years, a fixed-rate mortgage is the right choice. It locks your interest rate for the life of the loan, so your principal and interest payment never changes. An adjustable-rate mortgage (ARM) can make sense if you have a specific, realistic plan to sell or refinance within seven years, but if the ARM is what makes a home affordable that otherwise isn't, that's a sign to reconsider the price point rather than add payment risk.

How much cash should I keep after closing?

Plan to have at least two to three months of your projected mortgage payment in reserves after closing. On top of that, budget for immediate move-in costs and minor repairs, which often run $2,000 to $5,000 even on a home that's in good condition. In Arizona, factor in the age and condition of the HVAC system specifically, since air conditioning replacement is one of the most common and costly first-year expenses for new homeowners in the state.

Not sure how to allocate your savings? Talk it through with Joe. Call or text 414.617.3042, or start your pre-approval at joonago.com.

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