Home Purchase Loans In Peoria

The housing market in Peoria, Arizona, is somewhat competitive. The median home sale price was down 0.11% from the prior year. Typically, homes sell after 35 days on the market. Long-term estimates, however, predict an increase in the average home price in the Peoria area by 2028. As a result, prospective home buyers should expect a competitive market with long-term growth potential.

Purchase Loan Programs in Peoria

Homebuyers in Peoria have various options when financing a home purchase. The most prevalent among them are the following:

• Conventional Home Loan

A conventional home loan in Peoria, Arizona, is not insured or guaranteed by any government agency, such as the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the Department of Agriculture (USDA). However, these loans follow the rules established by Fannie Mae and Freddie Mac, two government-sponsored firms that buy and securitize mortgages. Conventional loans frequently require a better credit score and a larger down payment than government-backed loans.

The primary distinction between a conventional conforming loan and a non-conforming loan is the lender’s adherence to the limits set by Fannie Mae and Freddie Mac. A conforming loan rigorously adheres to these regulations, which vary by location and are adjusted regularly. The conforming loan limits for Peoria, Arizona, would be particular to the Maricopa County area. In contrast, a non-conforming loan, such as a jumbo loan, surpasses these limits. Due to their larger size and increased risk, non-conforming loans often have more strict underwriting standards, such as higher credit score requirements and more significant down payments.

The 2023 conforming loan limits in Peoria, Maricopa 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.

• FHA Home Loan

An FHA home loan is a mortgage insured by the Federal Housing Administration intended to lower homeownership challenges in Peoria, Arizona. This loan benefits first-time homebuyers or individuals who may not qualify for conventional financing due to poor credit or a lack of down payment savings. The FHA does not lend money directly; instead, it insures loans made by licensed lenders, reducing their risk and allowing them to make loans with more favorable terms.

You must meet specific requirements to qualify for an FHA loan in Peoria. To begin, you must have a minimum credit score of 580 to be eligible for the highest financing, which allows for a down payment as low as 3.5% of the purchase price. You can still qualify if your credit score is between 500 and 579, but a 10% down payment is likely. Your debt-to-income ratio (DTI) is also essential, with the recommended limits being a front-end ratio (housing-related expenses) of no more than 31% of your gross income and a back-end ratio (total debt) of no more than 43%. Mortgage insurance fees, including an upfront and annual cost, are required to protect the lender in the event of a default. The property you intend to buy with an FHA loan in Peoria must be appraised by an FHA-approved appraiser and meet specific safety and security standards. Finally, FHA loans are only available for primary residences, ruling out investment properties and second homes. The loan amount must also conform to the FHA-set limits for Maricopa County, which are subject to periodic modifications.

The 2023 FHA loan limits in Peoria, Maricopa County, are $530,150 for a single-family residence, $678,700 for a duplex, $820,350 for a triplex, and $1,019,550 for a four-plex.

• VA Home Loan

A VA home loan is a mortgage developed exclusively for military service members, veterans, and eligible spouses. It has the support of the Department of Veterans Affairs (VA). If you are a military member or a veteran living in Peoria, Arizona, you are eligible for this type of loan. One of the key benefits of a VA loan is that it often does not demand a down payment, which sets it apart from conventional and FHA loans. Furthermore, VA loans do not require private mortgage insurance (PMI), which may lower your monthly mortgage payments.

To qualify for a VA loan in Peoria, you must meet the Department of Veterans Affairs service standards. These qualifications include completing a certain amount of active duty service, which varies based on when and where you served. For example, if you served during a war, your mandatory service period may be lower than during peacetime. You must also complete particular service criteria as a reservist or member of the National Guard. You must also obtain a Certificate of Eligibility (COE) to demonstrate your service to lenders. This certificate can be obtained online, by mail, or from your Peoria lender. The property you wish to buy must be appraised by a VA-certified appraiser and serve as your principal residence. Furthermore, while the VA does not mandate a minimum credit score, Peoria lenders may have their own. To guarantee you can comfortably handle your mortgage payments, you must demonstrate a stable income and meet the lender’s debt-to-income ratio guidelines.

• USDA Home Loan

A USDA home loan is a mortgage program administered by the United States Department of Agriculture that encourages homeownership in rural and some suburban areas of the country, including Peoria, Arizona. A USDA home loan offers a unique opportunity if you are looking to buy in specific locations and meet certain income requirements. These loans are notable for their affordability, as they provide 100% financing (no down payment), lower mortgage insurance fees, and lower interest rates than the market. They want to help low- to moderate-income people and families become homeowners in less densely populated areas.

There are two types of USDA loans: USDA Direct and USDA Guaranteed. Potential borrowers must understand the differences between them. USDA Direct Loans are made directly by the USDA and are intended for candidates with extremely poor or low income. To qualify, your income must fall within certain limits, which vary by area and household size. This financing type is ideal if you have a lower income and require more substantial help, such as potential mortgage payment subsidies.

On the other hand, USDA Guaranteed Loans are provided by commercial lenders but backed by the USDA. This support lowers the risk for lenders, allowing them to offer more advantageous conditions. If your income is up to 115% of the area’s median income and you meet other lender-imposed requirements such as creditworthiness and debt-to-income ratios, you are qualified for a USDA Guaranteed Loan. Both loans require the property to be located in a USDA-defined eligible rural area.

• Jumbo Loans

A jumbo mortgage exceeds the Federal Housing Finance Agency’s (FHFA) conforming loan limits. If you are considering buying a property in Peoria, Arizona, and the loan amount exceeds the specific Maricopa County threshold, you would be looking into a jumbo loan. This loan is frequently used in highly competitive real estate markets to finance luxury properties or homes. Because these loans provide a more significant risk to lenders due to their size, they often have stricter underwriting standards than traditional conforming loans.

You must meet more strict eligibility requirements to qualify for a jumbo loan in Peoria. A higher credit score is typically required, usually around 700 or higher, demonstrating good creditworthiness. To show your ability to manage and repay the higher loan, your debt-to-income ratio (DTI) should also be reasonably modest, often not exceeding 43%. Furthermore, you will likely need to keep significant cash reserves, equivalent to several months of mortgage payments, to satisfy lenders of your financial stability in the event of unanticipated situations. Depending on the loan size and lender standards, lenders also want a more significant down payment, ranging from 10% to 20% of the purchase price. Furthermore, the approval process for a jumbo loan in Peoria may include a more thorough examination of your financial history, including income verification, asset evaluation, and a comprehensive property appraisal to confirm it justifies the enormous loan amount.

• Construction Loans

A construction home loan is a type of financing created exclusively for people in Peoria, Arizona, who want to build a new home rather than buy an existing one. This financing covers the costs of building your home, including materials, labor, and land development. In contrast to standard mortgages, which give a lump sum to purchase a house, construction loans often disburse payments in phases as the development advances. Because of the inherent construction risks, they are short-term loans with higher interest rates.

Construction home loans are classified into two types: two-time close construction loans and one-time close construction loans. Two separate loans and two separate closings are involved in the two-time close construction loan. The first loan is the construction loan, which pays for the cost of constructing your home and is usually interest-only during construction. Once the work is finished, you must obtain a second loan, a regular mortgage, to pay off the construction loan. This process has two sets of documentation and two sets of closing charges.

On the other hand, a one-time close construction loan, also known as a construction-to-permanent loan, combines the construction loan and the permanent mortgage into a single loan. This means you only have to go through one loan approval and closing process, eliminating the administrative burden and saving money on closing fees. However, because the lender commits to a long-term loan before the house is finished, this option may come with higher interest rates or more severe qualification standards.

• Non-Qualified Mortgage Loans

A non-qualified mortgage (non-QM) loan does not meet the Consumer Financial Protection Bureau’s (CFPB) rigorous criteria for a qualified mortgage. Suppose you are a potential borrower in Peoria, Arizona. In that case, a non-QM loan may be an option if traditional mortgage products do not suit your financial situation—for example, due to irregular income, self-employment, or a higher debt-to-income ratio. These loans are intended to serve a broader spectrum of borrowers who do not fit into the traditional lending box yet can repay a loan.

Some distinguishing characteristics of a non-QM loan in Peoria include more flexible underwriting guidelines. For example, instead of the typical W-2 forms or tax returns, lenders may be prepared to use alternative documentation to establish income, such as bank statements or asset depletion loans. This flexibility can be beneficial if you are self-employed or have a variable income. Non-QM loans may also have higher debt-to-income ratio limitations than typical mortgages, giving you more flexibility if you have a lot of debt. However, these loans frequently have higher interest rates and may require a more significant down payment to compensate for the lender’s increased risk. Non-QM loans in Peoria also commonly have different loan arrangements, such as interest-only payments for a set time, which can be helpful for some financial strategies but may involve additional risks. Because these loans are not subject to regular mortgage rules, it is critical to thoroughly understand their conditions and ensure they correspond with your long-term financial objectives.

Apply for a Home Purchase Loan in Peoria

Capital Home Mortgage can assist you if you want to buy a home in Peoria. We offer several substantial benefits to Peoria property purchasers. To start with, a home mortgage allows for payment flexibility. Second, because Peoria’s property values are constantly rising, it provides the chance for capital appreciation, which could increase the value of a homeowner’s investment over time. Finally, by using Capital Home Mortgage, buyers may benefit from current Peoria housing market trends, such as rising inventory and slowing price rise in 2023, which have opened up new opportunities for prospective purchasers.

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