Home Loans In Arizona

Arizona is a state in the United States Southwestern region. It is the fourteenth most populous and sixth largest of the fifty states. The state’s capital and largest metropolis is Phoenix. Arizona is part of the Four Corners region, with Utah to the north, Colorado to the northeast, New Mexico to the east, and Sonora and Baja California in Mexico.

The Arizona housing market has steadily grown in recent years, and 2023 appears to be no exception. According to a Zillow analysis, the average Arizona home value is $409,196, a 4.3% increase over the previous year. This will likely continue throughout the year, making it an excellent opportunity to buy Arizona real estate.

Home Loan Programs in Arizona

Several types of mortgages are generally available and popular among home buyers in Arizona. Among them are the following:

• FHA Loans

Arizona FHA loans are mortgages insured by the Federal Housing Administration (FHA), a United States Department of Housing and Urban Development (HUD) branch. They are designed exclusively for home buyers in Arizona. They can be particularly appealing options for people who may not qualify for a conventional loan due to marginal credit or low down payments.

Advantages of FHA Loans

• Lower Credit Score Requirements: FHA loans typically have more lenient credit score requirements than conventional loans. This makes them available to buyers with lower credit scores.
• Lower Down Payment: FHA loans generally require a smaller down payment than conventional mortgages, making them a more affordable option for many homebuyers.

• No Prepayment Penalty: FHA loans have no pre-payment penalties. This means the borrower will not be penalized for paying off the loan early.

Eligibility Requirements of FHA Loans

• Credit Score: FHA requires a minimum credit score of 580. However, some lenders may accept credit scores as low as 500 with restrictions.

• Down Payment: If the borrower’s credit score is at least 580, the minimum down payment requirement for FHA loans in Arizona is 3.5%. Between 500 and 579 credit scores, a 10% down payment is typically required.

• Work History: Borrowers are frequently required to have a two-year stable and verifiable employment history.

• Residential Status: FHA loans typically require the property purchased to be the borrower’s primary residence.

• Loan Limits: FHA loan limits in Arizona vary by county. For 2023, loan limits range from $472,030 for a single-family home in Apache County to $1,019,550 for a four-plex home in Maricopa County.

• VA Loans

The United States Department of Veterans Affairs guarantees VA mortgages in Arizona. They are designed to assist active-duty military personnel, veterans, and certain other groups in becoming homeowners at affordable costs. 

Advantages of VA Home Loans

• No Down Payment: One of the significant advantages of VA home loans is that no down payment is required. This makes it easier for people with little money to buy a house.

• No Private Mortgage Insurance: Unlike conventional loans, VA home loans don’t require the purchase of PMI. This can save the borrower a lot of money over the loan term.

• Lower Interest Rates: VA home loans feature lower interest rates than conventional mortgages. This can lower the overall loan cost and make monthly payments more manageable.

Eligibility Requirements of a VA Loan

You must meet specific criteria to be eligible for a VA home loan. The following are the main eligibility requirements:

• Service Requirements: You must be on active duty and have served for 90 consecutive days or be a veteran who satisfies the length-of-service requirements (90 days during wartime and 181 days during peacetime). Alternatively, you could have served 90 days on active duty or six years in the Selected Reserve or National Guard.

• Certificate of Eligibility (COE): You must request a COE to demonstrate to your lender that you are qualified based on your service experience and duty status.

• Credit and Income Requirements: In addition to meeting the service-related requirements, you must meet your lender’s credit and income loan requirements to obtain financing. While the specifics may differ by lender, a good credit score (usually 620 or higher) and a stable income are typically required.

• Discharge Status: You must be honorably discharged.

• Surviving Spouse Requirements: You may also be eligible if you are the surviving spouse of a veteran who died in duty or from a service-connected disability.

• USDA Loans

USDA home loans in Arizona, also known as the Section 502 Loan Program, assist low- and very-low-income applicants in securing adequate, safe, and sanitary housing in eligible rural areas. The USDA offers payment assistance, a subsidy that temporarily reduces mortgage payments. The family’s income determines the amount of this assistance after adjustments.

Arizona USDA home loans offer a variety of benefits. The absence of a down payment requirement is one of the most significant advantages, making these loans especially advantageous for prospective homeowners who were unable to save for a down payment. In addition, USDA loans feature flexible credit requirements and competitive fixed interest rates. They offer 100 percent financing, no maximum loan amount in Arizona, and no assets required to qualify. Additionally, closing costs can be financed, and these loans have lenient credit requirements, allowing those with marginal credit to qualify.

The eligibility requirements for USDA mortgages are relatively simple. Applicants must meet specific credit, income, property use, and residence location requirements to qualify for a USDA loan. Applicants must be U.S. citizens or permanent legal residents and have a credit score of at least 640, typically. They must have a stable and reliable source of income, a willingness to repay the mortgage (generally 12 months without late payments or collections), and an adjusted household income equal to or less than 115% of the area’s median income. The property must serve as the principal residence and be situated in a rural area that meets USDA requirements. In Arizona, the average household income limit for a family of one to four is $103,500, and the limit for families of five or more can reach $136,600.

• Jumbo Loans

A jumbo mortgage is designed to help you finance the purchase of a home that exceeds the Federal Housing Finance Agency’s (FHFA) maximum loan limits. In Arizona, jumbo loans are frequently required for luxury residences or properties in costly housing markets such as Scottsdale. In most counties, the maximum amount for a conventional conforming loan in 2023 is $726,200, with amounts above this considered “jumbo” mortgages. Some high-cost areas, however, have higher conforming loan limits.

Eligibility Requirements of Jumbo Loans

• Higher Credit Scores: Borrowers typically need a credit score of 700 to qualify for a jumbo mortgage. Some lenders require a higher score of 740 and up.

• Substantial Income: Given the magnitude of jumbo loans, a high income will be required.

• Low Debt-to-Income (DTI) Ratio: Jumbo loans may be subject to more stringent DTI ratio requirements. Your total monthly debt payments should represent a small percentage of your basic monthly income. The optimal DTI for jumbo loans is less than 43%.

• Larger Down Payment: You will likely be required to make a substantial down payment, typically 20 percent or more.

• Cash Reserves: The reserve requirement is a risk-reduction measure employed by lenders in which the borrower must maintain a certain amount of liquid assets or currency. These reserves reassure the lender that the borrower can continue to make payments in the event of financial hardship. A six- to twelve-month reserve is a typical requirement for jumbo loans.

• Conventional Loans

A conventional loan is a mortgage loan that is not government-insured or guaranteed. These loans are instead backed by private lenders such as banks, credit unions, and mortgage firms. They can be both conforming and non-conforming.

Qualification Requirements of Conventional Loans

• Credit: A conventional loan typically requires a FICO score of 620 or higher, although specific requirements may vary by lender. Some lenders require applicants to have a credit score of 640 or higher.

• Income: Lenders will evaluate your employment history and income to determine whether you can afford mortgage payments.

• Down Payment: A conventional loan typically requires a 5% down payment. While a conventional loan can be obtained with as little as 3% down, a 20% down payment can help you avoid the cost of private mortgage insurance (PMI). 

• Debt-to-Income (DTI) Ratio: Lenders usually prefer that your total monthly debts, including your new mortgage payment, be at most 43% of your gross monthly income.

• Reserves: In the event of financial hardship, you may be required to demonstrate that you have enough assets to cover mortgage payments for a few months. The typical conventional loan requirement is a 3-to-6-month reserve.

Arizona conforming loan limits in 2023 are $726,200 for a single-family home, $929,850 for a duplex, $1,123,900 for a triplex, and $1,396,800 for a four-unit home.

• Construction Loans

Arizona construction loans are a form of financing for those who wish to construct a new residence. Unlike traditional mortgages, which provide funds to purchase an existing property, these loans cover construction expenditures. Typically, the loan is disbursed in stages as construction progresses rather than in one large sum at closing.

Qualification Requirements of a Construction Loan

• High Credit Score: Lenders would want borrowers to have a good credit score, which indicates their likelihood of repaying the loan.

• Stable Income: Lenders will want documentation that you have a consistent income and can afford the loan installments.

• Significant Down Payment: Because construction loans are viewed as riskier than traditional mortgages, lenders typically require a larger down payment. This can sometimes exceed 20% of the total loan amount.

• Detailed Construction Plan: This includes the builder’s timeline, required materials, and the project’s total cost. Before extending a loan, creditors must assess the viability of your construction proposal.

Please note that these are general requirements and can vary depending on the borrower’s circumstances. Therefore, you must consult with one of our Construction Loan Specialists, who is familiar with the local market and can provide assistance throughout the construction process.

Apply for a Home Loan in Arizona

Homebuyers in Arizona who work with Capital Home Mortgage stand to gain various advantages. Given the increase in mortgage rates and stricter criteria for issuing new mortgages, they can rely on Capital Home Mortgage for assistance in traversing the evolving mortgage landscape. Homebuyers can access various home loan programs and assistance options, which may help with down and monthly payments. This extensive range of advantages and the non-financial benefits of homeownership demonstrate the value of partnering with Capital Home Mortgage when purchasing a home in Arizona.

Call our Arizona Home Loan Experts at  (480) 360-6650 for any questions. We are here to help!