Home Purchase Loans In Gilbert

The Gilbert, Arizona, real estate market is competitive, with homes receiving an average of two offers and selling in approximately 35 days. Gilbert’s median home sale price is up 0.7% from last year. Gilbert’s median sale price per square foot is up 0.4% from last year. As a result, potential property buyers should brace themselves for a competitive market with gradually rising prices.

Purchase Loan Programs in Gilbert

Home buyers in Gilbert, Arizona, are presented with various mortgage alternatives when seeking home purchase financing. The following are the most commonly observed.

• Conventional Loans

A conventional home loan is a mortgage that is neither insured nor guaranteed by the federal government. This contrasts with VA loans, guaranteed by the Department of Veterans Affairs or FHA loans, which the Federal Housing Administration insures. Borrowers prefer conventional loans because they frequently provide competitive interest rates and flexible terms.

Outside of government programs, conventional loans are an essential choice for homeowners in Gilbert, Arizona, offering a variety of terms and rates. The decision between a conforming and non-conforming loan will be heavily influenced by the value of the subject property and the borrower’s financial status.

The primary distinction between a conventional conforming loan and a non-conforming loan is the loan’s conformity to the rules established by Fannie Mae and Freddie Mac, two government-sponsored enterprises that buy and guarantee mortgages in the United States. A conforming loan complies with specific criteria, which include maximum loan amount limits. 

The 2023 conforming loan limits in Gilbert, Maricopa County, are $4726,200 for a single-family residence, $929,850 for a duplex, $1,123,900 for a triplex, and $1,396,800 for a quadplex.

Conversely, non-conforming loans exceed these limitations or fail to meet other Fannie Mae and Freddie Mac criteria. The jumbo loan is a typical example of a non-conforming loan used to finance properties that are too expensive for a regular conforming loan. Borrowers use these loans to purchase luxury properties or homes in highly competitive real estate markets. They frequently necessitate better credit ratings, more significant down payments, and more thorough financial inspection than conventional loans.

• FHA Loans

An FHA home loan is a mortgage insured by the Federal Housing Administration and intended to assist borrowers who may not qualify for conventional loans. FHA loans are popular among first-time homebuyers and those with low credit scores or smaller down payments. One of its primary advantages is the lower minimum down payment requirement of an FHA loan, which can be as low as 3.5% of the purchase price for borrowers with credit scores of 580 or better. Furthermore, FHA loans are more accessible to people with higher debt-to-income ratios than conventional loans.

A conventional loan, on the other hand, is a mortgage that is not insured or guaranteed by the federal government. This type of loan is better suited to borrowers with better credit, stable income, and the ability to make a more significant down payment. While conventional loans can need as little as 3 – 5% down, borrowers who can put down more often get better interest rates and terms. Conventional loans also do not have the upfront and monthly mortgage insurance premiums that FHA loans have. If the down payment on a traditional loan is less than 20%, private mortgage insurance (PMI) is often required until the borrower achieves 20% equity in the home.

A borrower’s credit score, available down payment, and overall financial position determine whether an FHA or conventional loan is best for them. FHA loans provide an accessible road to homeownership for people who may struggle to meet the tighter requirements of conventional loans. However, conventional loans are often less expensive for borrowers with excellent financial profiles.

The 2023 FHA loan limits in Gilbert, Maricopa County, are $530,150 for a one-unit property, $678,700 for a duplex, $820,350 for a triplex, and $1,019,550 for a four-plex.

• VA Loans

A VA home loan is a mortgage option developed exclusively for United States veterans, active-duty service members, and certain military spouses. The Department of Veterans Affairs guarantees VA loans in the country. This support makes it easier for veterans to acquire finance by providing advantageous terms such as no down payment and no private mortgage insurance (PMI). VA loans are popular among qualified borrowers because of their favorable terms, which frequently feature reasonable interest rates and less stringent credit criteria when compared to conventional loans.

It’s essential to recognize that the VA doesn’t lend money, but it does back up a part of the loan. This lowers the risk for lenders and usually leads to better terms for the borrower. A VA home loan in Gilbert can be a great option for qualified veterans and service members who want to buy a home. It has special perks that make homeownership more accessible and more affordable.

The VA loan eligibility requirements revolve around service criteria. Individuals who served 90 consecutive days of active service during a war, 181 days during peacetime, or more than six years in the National Guard or Reserves are generally eligible. Also eligible are spouses of service members who died in the line of duty or as a result of a service-related disability. Eligible borrowers must get a Certificate of Eligibility (COE) to demonstrate their eligibility to lenders.

• USDA Loans

A USDA home loan is a mortgage program supported by the United States Department of Agriculture to help rural and suburban homebuyers in regions such as Gilbert, Arizona. This program encourages homeownership in less densely populated areas by providing favorable terms such as no down payment and lower interest rates. The USDA loan program is an excellent opportunity for those who meet the income and geographical requirements and want to live outside large urban areas.

USDA loans provide a feasible path to homeownership for residents in or near Gilbert, Arizona, who are considering a home in a rural or suburban location, especially for those who struggle to save for a significant down payment or do not qualify for a conventional mortgage.

The program has two primary loan types: USDA-Direct and USDA-Guaranteed loans.

• • • USDA-Direct Loans – 

These are granted directly by the USDA and are designed for applicants with low and very low incomes. Income requirements vary by area; therefore, unique local guidelines would apply in a town like Gilbert. Direct loans are excellent for people with limited income who cannot obtain regular financing. The USDA evaluates an applicant’s income and ability to repay the loan, and the terms might vary depending on the individual’s financial circumstances, stretching up to 33 years (or 38 years for very low-income borrowers).

• • • USDA-Guaranteed Loans – 

USDA-Guaranteed loans are originated by private lenders such as banks and mortgage companies but are guaranteed by the USDA. This guarantee reduces the risk for lenders, allowing them to offer the borrower attractive terms similar to VA loans. These loans are intended for people with a moderate income. While no down payment is required, borrowers must still meet certain income and credit requirements. The USDA guarantee enables borrowers to obtain more favorable interest rates and terms than they would otherwise qualify for with a conventional loan.

• Construction Loans

A construction home loan is a specific type of financing intended for home builders or those who want to build a new house. Construction loans pay for the expenses involved in building a new home, as opposed to traditional home loans used to finance the purchase of an existing property. Because construction projects have more significant risks than other types of mortgages, these loans are usually shorter in duration and have higher interest rates. The loan amount is typically determined by projecting the home’s post-construction worth.

There are two main types of construction home loans: one-time close and two-time close loans.

• • • One-Time Close Construction Loan – 

This option, also known as a construction-to-permanent loan, combines a construction loan and a mortgage into one loan. This means that there is only one application process and one closing process. Borrowers typically make interest-only payments on their loans during the building phase. The loan is converted into a conventional mortgage when the construction is finished. The convenience of a single loan application and closing, potentially saving time and money, is an advantage of a one-time close loan. These loans, however, may need to be more flexible in terms of lending terms and interest rates.

• • • Two-Time Close Construction Loan –

This loan consists of two different loans and two closings. The first loan is a construction loan intended to finance the construction of a home for one year or less. When the construction is finished, the borrower files for a mortgage to repay the construction loan. This loan gives you more options when choosing a mortgage provider and securing better mortgage conditions. However, it implies going through two approval processes and potentially paying two closing charges.

• Jumbo Loans

A jumbo home loan in Gilbert, Arizona, is a type of mortgage that exceeds the Federal Housing Finance Agency’s (FHFA) conforming loan limits. This limit is $726,200 for a single-family home in Gilbert for 2023, although it can be higher in areas with a higher cost of living. Jumbo loans are used to buy expensive or luxury properties that surpass these limits, making them a popular alternative in costly real estate markets or for large or luxury homes.

Because of the higher risk of more significant loan amounts, jumbo loan eligibility requirements are often stricter than smaller, conforming loans. Borrowers seeking a jumbo loan in Gilbert should have a great credit score, typically 700 or more, though this varies by lender. Furthermore, lower debt-to-income ratios generally are necessary, with lenders preferring less than 43%.

To limit their risk, lenders frequently ask for bigger down payments for jumbo loans, sometimes 20% or more of the home’s purchase price. This contrasts with smaller conforming or government-backed loans, which might have substantially lower down payment requirements. Another common requirement is proof of considerable financial reserves, with lenders sometimes requesting borrowers to show adequate cash reserves to cover a year or more of mortgage payments.

• Non-Qualified Mortgage Loans

A non-qualified mortgage (non-QM) loan is a form of house loan that does not follow the tight lending requirements set by the Consumer Financial Protection Bureau (CFPB) for qualified mortgages (QM). These loans are intended for borrowers who do not meet the typical lending criteria, such as self-employed individuals, those with irregular income, or those with higher debt-to-income ratios. The Dodd-Frank Wall Street Reform and Consumer Protection Act created QM loan requirements to reduce risky lending practices and ensure borrowers are more likely to be able to repay their loans.

Non-QM loans can be a feasible alternative for individuals in Gilbert, Arizona, who may not qualify for a conventional mortgage owing to non-traditional income or other considerations. However, these loans’ higher fees and potential hazards must be considered. Before committing to a non-QM loan, it is critical to understand the terms and analyze your financial stability, as with any financial transaction.

Apply for a Home Purchase Loan in Gilbert

Capital Home Mortgage is a direct lender and mortgage servicer that provides borrowers with a range of mortgage alternatives. Whether you are a newbie to Arizona or were born here, Capital Home Mortgage can help you choose the financing option that best suits your needs and budget. We can assist you whether you require a mortgage to buy a home, refinance, or consolidate debt.

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