Arizona is a perfect place for a vacation home. With its 300 days of sunshine, the mild climate makes it ideal for winter getaways or summer vacations. Plus, with all that sun, it’s great for solar power, so your electricity bills could be very low.
Due to Arizona’s prime location as a retirement haven, as well as a popular vacation spot, demand for vacation homes is high and inventory is limited. This can drive up prices. Here are the most popular cities to buy your Arizona vacation home :
Tucson
Tucson is the second largest city in Arizona and is one of the most popular places to live. Located in the Sonoran Desert, Tucson is known for its outdoor activities, such as hiking, rock climbing and biking. It’s also home to several national parks.
The city has a population of over one million people and is the second-largest city in the state. It’s located about 75 miles southeast of Phoenix. The city itself is nestled in a valley surrounded by several mountain ranges making it an excellent location for outdoor enthusiasts.
front yard of a Tuscon home source: Pixabay
The University of Arizona is located in Tucson and is the second-largest employer in the area. There are also two major military bases nearby that provide employment, including Davis-Monthan Air Force Base and Fort Huachuca Army Base. Buyers financing a vacation home here typically use conventional second-home programs, though self-employed borrowers may find a bank statement loan a better fit if write-offs reduce their taxable income.
Phoenix
Phoenix is a high-growth area. The city has a population of more than 1.4 million and is the largest city in Arizona. It is one of the fastest-growing cities in the nation, due to its warm winter climate, great restaurants and recreational opportunities, including hiking and golfing.
As a result, Phoenix has become a popular vacation destination for people who want to escape cold northern winters or enjoy a warm weather getaway. Financing options here follow the same general path as most major markets — conventional loans for qualifying buyers, with alternative programs available for self-employed borrowers or those purchasing as investment properties.
Mesa
Mesa is located about 20 miles from downtown Phoenix. It is home to the Mesa Arts Center, which offers exhibitions and performances in music, dance, theater and visual arts. Residents also enjoy outdoor recreation at nearby Usery Mountain Regional Park.
Golfers can play at more than 50 golf courses in Mesa. This is a great area to purchase your Arizona vacation home, and conventional second-home financing is generally straightforward here given Mesa’s stable, suburban character.
Yuma
Yuma is located on the Yuma River near the Mexican border. Its economy historically revolved around agriculture with much of its produce shipped by way of the Colorado River before being trucked or flown to other parts of the country.
Today, tourism contributes to the economy as many travelers stop here on their way to California or other nearby states.
Sedona
In the northern part of Arizona, Sedona is packed with things to do and see. It’s surrounded by natural beauty, including sandstone red rocks and mountains.
Red Rocks Sedona. source: Pixabay
Situated in the Coconino National Forest, Sedona has numerous hiking trails. It also offers some of the best mountain biking trails in America. You can explore hundreds of miles of Jeep trails or take in the scenery on horseback.
If you want to shop and dine, Sedona has plenty of options for that as well. Main Street is lined with charming shops and restaurants. Sedona’s STR demand is among the strongest in Arizona — investors financing a vacation rental here typically use a DSCR loan to qualify on projected rental income rather than personal tax returns.
Lake Havasu City
If you love the water, Lake Havasu City probably already sounds like the perfect place to buy your Arizona vacation home. The Arizona city is situated right on the Colorado River, where residents and visitors can enjoy boating, fishing and swimming in the lake.
The area also has a number of fun attractions for families, including a London bridge, historic downtown and famous Route 66. This city is ideal for a vacation home purchase because it offers relatively low prices with plenty of amenities. For buyers purchasing as investment properties, Lake Havasu’s strong waterfront rental demand makes it a natural fit for DSCR loan qualification.
Flagstaff
There are few things more beautiful than Flagstaff’s scenery, with its spruce trees, mountain peaks and deep blue skies. This charming mountain town is not only known as one of Arizona’s top tourist destinations; it’s also been named as one of America’s best places to live by U.S. News & World Report.
In addition to boasting natural beauty and great weather all year long, Flagstaff offers some excellent dining options and plenty of fun activities for families and couples alike. Buyers financing a vacation home here often use conventional second-home loans, though self-employed borrowers with significant write-offs may find a bank statement loan qualifies them for more.
Scottsdale
Scottsdale is a great place to buy a vacation home for many reasons. It’s beautiful and filled with a variety of activities and attractions.
There are plenty of cultural events, golf courses and shopping — from small boutiques to major malls. Scottsdale is one of the top short-term rental markets in the Southwest, and investors purchasing vacation rentals here commonly use a DSCR loan to qualify on the property’s income potential rather than their own W-2s or tax returns.
Financing an Arizona Vacation Home
Once you’ve chosen a city, the next step is understanding how lenders look at vacation home purchases — because the loan type depends largely on how you plan to use the property.
Second Home vs. Investment Property
Lenders draw a hard line between a second home and an investment property. A second home typically means you’ll occupy the property for a meaningful portion of the year and aren’t primarily buying it to generate rental income. Second home loans often carry conventional interest rates and down payment requirements similar to a primary residence, but lenders may restrict how many days per year you can rent it out.
If you’re buying primarily to rent it short-term — as many Arizona vacation home buyers do — lenders classify it as an investment property. This changes the loan structure: you’ll generally need a larger down payment, and conventional underwriting will look at your full debt-to-income picture.
The good news is that investment property buyers have programs specifically designed for rental income qualification. DSCR loans and bank statement loans often work better than conventional financing for vacation rental investors, and both are available for Arizona properties.
DSCR Loans for Arizona Short-Term Rentals
Scottsdale, Sedona, and Lake Havasu City are consistently among the top short-term rental markets in Arizona, and investors buying there increasingly use DSCR loans for a straightforward reason: qualification is based on the property’s income, not the buyer’s personal income.
DSCR stands for Debt Service Coverage Ratio. The lender compares the projected (or trailing) rental income to the mortgage payment. For new acquisitions, lenders typically use AirDNA or a similar market data source to estimate income. For existing rentals with a track record, they use actual revenue history. If the property’s income covers the payment, the loan works — no W-2s or tax returns required from the borrower.
Additional benefits worth noting for Arizona vacation rental buyers: LLC vesting is available (useful for liability protection on short-term rentals), and there are no rental day limits that would restrict how you list the property on Airbnb or VRBO. Arizona DSCR loans →
Bank Statement Loans for Self-Employed Buyers
A significant share of Arizona vacation home buyers are self-employed — real estate agents, contractors, small business owners, consultants. The problem is that successful self-employed borrowers often show low taxable income because they take legitimate business write-offs. Conventional underwriting uses taxable income to size the loan, which can leave a borrower qualifying for far less than they can actually afford.
Bank statement loans solve this by qualifying on 12 to 24 months of bank deposits instead of tax returns. Lenders apply an expense factor to the deposits and arrive at an income figure that typically reflects what the borrower actually earns and spends. For self-employed buyers eyeing Scottsdale, Sedona, Flagstaff, or any other Arizona market, this can be the difference between qualifying and not. Arizona bank statement loans →
No-Tax-Return Options
Both DSCR and bank statement loans offer a path to financing without the conventional tax return requirement. If you’re buying for investment use, DSCR is usually the cleaner option since qualification is driven by the property’s income. If you plan to use the property personally as well as rent it, a bank statement loan lets you qualify on your actual cash flow. A loan officer can walk through both options side by side once you have a target property and price in mind.
Ready to explore financing for your Arizona vacation home? Check your eligibility → or call (833) 350-9185 .
Arizona is a wonderful place to visit. It’s a fine spot for a vacation home on its own merits, but you get the added benefit of yet another destination you can travel to on your downtime. No matter how you slice it, Arizona is a great state with much to offer — the perfect place to purchase your next vacation home.