Home Purchase Loans In Flagstaff

Home buyers in Flagstaff, Arizona, might expect a somewhat competitive atmosphere in the present housing market. The median sale price is up 8.5% from the prior year. Since last year, the median sale price per square foot has increased by 10.9%. Flagstaff homes typically sell after 17 days on the market, down from 34 days the previous year. On the other hand, the number of residences sold in September 2023 was 14.6% lower than the last year. As a result, prospective house buyers should brace themselves for a fast-paced market with rising costs.

Purchase Loan Programs in Flagstaff

Prospective house buyers in Flagstaff, Arizona, are provided with various home financing options. The following programs are commonly encountered:

• Conventional Home Loans

A conventional mortgage in Flagstaff, Arizona, is a home loan accessible through or guaranteed by a private lender, Freddie Mac and Fannie Mae, two government-sponsored enterprises, but is not insured by the federal government. Conventional mortgages come with competitive interest rates and reduced down payment requirements, comprising both conforming and non-conforming loans. They are well-liked by diverse borrowers, including those buying their first and second or subsequent homes.

The primary distinction between conforming and non-conforming loans, the two types of conventional mortgages, is the amount borrowed. Conforming loans adhere to the rules established by the Federal Housing Finance Agency (FHFA) and other federal agencies. These loans are so-called because they meet the criteria established by Fannie Mae and Freddie Mac, which include maximum lending limitations. 

The 2023 conforming loan limits in Flagstaff, Coconino County, are $726,200 for a single-family residence, $929,850 for a duplex, $1,123,900 for a triplex, and $1,396,800 for a quadplex.

Non-conforming loans surpass Fannie Mae and Freddie Mac’s maximum lending limit. These loans cannot be sold to Fannie Mae or Freddie Mac because they exceed the conforming lending restrictions. Non-conforming loans are generally utilized for purchasing more expensive homes, and they frequently come with somewhat higher interest rates due to the lender’s higher level of risk. It is vital to know that conforming and non-conforming loans have creditworthiness requirements.

• FHA Home Loans

In Flagstaff, Arizona, an FHA loan is a mortgage insured by the Federal Housing Administration (FHA) and offered by an FHA-approved lender. These loans are intended to make homeownership more accessible to people with lower incomes or credit scores. FHA loans provide a lower down payment requirement, often 3.5% of the purchase price, making them a reasonable alternative for many buyers. They additionally require the borrower to pay mortgage insurance, which limits the lender’s loss if the borrower defaults on the loan.

An FHA loan requires a credit score of 580 or higher (but individuals with a score between 500 and 579 may still qualify with at least a 10% down payment). There should be no history of bankruptcy or foreclosure in the previous two or three years. The borrower’s debt-to-income ratio should be less than 43%, with exceptions for compensating factors. Income, assets, liabilities, and credit histories are also examined. It’s crucial to note that lenders have considerable leeway in establishing their own while the government specifies basic rules.

The 2023 FHA loan limits in Flagstaff, Coconino County, are $517,500 for a single-unit property, $662,500 for a duplex, $800,800 for a triplex, and $995,200 for a four-plex.

• VA Home Loans

A VA mortgage in Flagstaff, Arizona, is a home loan guaranteed by the United States Department of Veterans Affairs (VA) and made available by a VA-approved lender. These loans help veterans, active-duty military personnel, and qualifying surviving spouses purchase homes. VA loans are noteworthy for requiring no down payment, making them an appealing alternative for many buyers. Because the Department of Veterans Affairs backs the loan, lenders have more confidence and can provide more advantageous terms.

A VA home loan requires the applicant to be an eligible veteran, active-duty military member, or eligible surviving spouse with a valid Certificate of Eligibility (COE). The applicant must complete the required minimum active-duty service, which varies depending on when they served. They must meet the lender’s credit and income requirements, use the loan for a qualifying purpose, such as homeownership, and occupy or expect to occupy the home within a reasonable time, usually within 60 days after closing.

• USDA Home Loans

A USDA home loan is a no-money-down mortgage available to low- and moderate-income borrowers in primarily rural areas. These loans are part of a national program established by the United States Department of Agriculture to assist in creating loans for first-time homeowners and those who do not meet standard mortgage requirements. The USDA offers two types of home loan programs: the Section 502 Guaranteed Loan and the Section 502 Direct Loan. Both assist eligible home buyers with low to moderate incomes in purchasing homes in rural and small-town areas.

The key distinction between a USDA Direct Loan and a Guaranteed Loan is that Guaranteed Loans are provided by a private mortgage lender and are intended for borrowers with “moderate” income. Additionally, USDA Guaranteed Loans necessitate the purchase of mortgage insurance. USDA Direct loans, on the other hand, are designed to assist low-income borrowers in becoming homeowners. These loans are less common; however, a USDA direct loan can be obtained through the USDA. In this scenario, the USDA functions as the lender, providing the funding to acquire the property. Instead of working with a private lender, you will work directly with the USDA.

• Non-Qualified Mortgage Loans

A non-qualified mortgage or a non-QM loan does not meet specific Consumer Financial Protection Bureau (CFPB) standards. These criteria dictate which characteristics loans must (or must not) contain and which techniques lenders must employ when analyzing applicants’ finances and ability to repay. Non-QM loans are intended for borrowers with difficulty qualifying for a typical mortgage due to creditworthiness and income level or predictability. Non-QM loans have less stringent credit and income standards but have more significant down payments and higher interest rates.

Non-QM loans have less stringent income and credit standards. Borrowers, for example, may be able to utilize alternate forms of income documentation, such as tax returns, bank/investment account statements (or other proof of assets), rental income, or 1099s, instead of W-2 forms and paystubs, to establish their ability to repay the loan. Borrowers’ loans may consume a more considerable percentage of their income than the average amount preferred by conventional lenders – up to 50%. In other circumstances, there is no waiting time after bankruptcy or foreclosure, allowing people to get a mortgage immediately. Non-QM loans are often intended for borrowers who fall short of the stringent eligibility standards of a QM loan. These loans may have more lenient underwriting requirements. Higher DTI percentages or different income verification procedures may be permitted. Non-QM loans may also have advantages like more affordable down payment requirements.

• Jumbo Loans

A jumbo mortgage, sometimes called a jumbo loan, is financing exceeding the Federal Housing Finance Agency’s (FHFA) lending limits. Unlike a conventional mortgage, Fannie Mae or Freddie Mac cannot purchase, guarantee, or securitize a jumbo loan. These loans are intended to fund more expensive properties than conforming loan limitations permit. A jumbo loan varies by geographic location, but it is usually more than $726,200 and can go up to $5 million.

A jumbo loan has more considerable amounts often used for more expensive homes. Jumbo loan interest rates are typically higher than those on conventional mortgages. Jumbo loans include more stringent qualifying criteria, such as a higher credit score, income/asset requirements, and down payment requirements. Borrowers must have considerable cash or assets, excellent credit, and a low debt-to-income ratio to qualify for a jumbo loan. 

• Construction Loans

A construction loan is a short-term, high-interest loan used to finance the construction of a house or other real estate project. Before getting long-term funding, the builder or home buyer obtains a construction loan to pay the project’s expenses. These loans cover purchasing land, developing plans, obtaining permissions, and purchasing labor and materials. A construction loan’s initial term is usually a year or less when the construction project must be finished.

Construction loans are classified into two types: one-time close and two-time close. A one-time close construction loan, also known as a construction-to-permanent loan, enables you to obtain both loans (construction and permanent) at the same time. Your loan will be converted to a regular mortgage after finishing the work. The most significant advantage of a one-time close construction loan is that you do not have to go through underwriting twice. On the other hand, a two-time close construction loan requires you to get accepted for two different loans. The first loan will cover the physical construction of your home, and you will then need to apply for — and be approved for — a separate long-term loan on the completed house to refinance the construction loan to a 15- or 30-year mortgage. If you have revisions to the original plans and specifications, often known as change orders, a two-time close construction financing is advantageous.

Apply for a Home Purchase Loan in Flagstaff

Capital Home Mortgage offers solutions for all mortgage needs as a direct mortgage lender and servicer in Arizona. You can choose the best loan program to fit your needs and budget with the assistance of our experienced mortgage staff. Since every loan is unique, our loan officers provide clients with the tools, support, and freedom to select the best mortgage program. 

Call (480) 360-6650 to speak with a Flagstaff Home Loan Specialist.