Home Purchase Loans In Prescott

Potential home buyers in Prescott, Arizona, should expect a competitive atmosphere in the present housing market. The median sale price of a property in Prescott increased by 0.8% over the previous year. Prescott real estate sells typically after 49 days on the market. Buyers should be prepared for a market in which the supply of homes exceeds the demand and a little increase in the time residences stay on the market compared to last year.

Purchase Loan Programs in Prescott

Prescott home buyers have plenty of options when financing a home purchase. The most common programs are the following:

• Conventional Loans

As you begin the exciting adventure of homeownership in Prescott, Arizona, you will come across many loan options. The conventional loan is one of the most popular, thanks to its low-interest rates and flexible conditions. Understanding the complexities of conventional loans, particularly the distinction between conforming and non-conforming loans, is essential for making sound financial decisions.

A conventional loan is not guaranteed by a government agency, such as the Federal Housing Administration (FHA) or the Veterans Administration (VA). Private lenders primarily provide these loans and require a minimum down payment of 3 – 5%. Conventional conforming loans follow strict rules established by Fannie Mae and Freddie Mac, government-sponsored enterprises that assure mortgage market liquidity. These recommendations include loan limitations, debt-to-income ratios, and credit score criteria. The conforming loan limit for a single-family residence in Prescott in 2023 is $726,200.

Non-conforming loans exceed the conforming loan limits. In Prescott, any loan over $726,200 falls into this category. Non-conforming loans, while providing more flexibility for borrowers who require larger loans, can have higher interest rates and stricter underwriting standards.

• VA Loans

If you are a United States military member in Prescott, Arizona, a VA loan, guaranteed by the United States Department of Veterans Affairs, is a substantial option in your homebuying process. This loan is a benefit available to service personnel, veterans, and qualifying surviving spouses, and it is notable for its favorable terms. A VA loan in Prescott allows for 100% financing, which means there is no down payment required, and it does not require private mortgage insurance (PMI), which is usually required for loans with less than a 20% down payment. Furthermore, VA loans sometimes have reasonable interest rates and low closing fees, making them an appealing alternative for qualified Prescott homeowners.

You must meet specific service requirements to qualify for a VA loan in Prescott. These include 90 consecutive days of wartime active service, 181 days of peacetime active service, or six years in the National Guard or Reserves. Spouses of service members killed in the line of duty or who have a service-related disability are also eligible. In addition to service requirements, you’ll need a Certificate of Eligibility (COE) to show lenders you’re eligible for a VA loan. Individual lenders in Prescott determine credit and income standards, although the VA’s support frequently results in more flexible criteria than other loan kinds. Understanding these qualifying standards is critical as you explore the numerous mortgage alternatives in the Prescott real estate market.

• FHA Loans

As a prospective homebuyer in Prescott, Arizona, you should be familiar with an FHA loan, a form of mortgage insured by the Federal Housing Administration (FHA), part of the United States Department of Housing and Urban Development (HUD). An FHA loan is intended to lessen the barriers to homeownership, which is especially helpful if you have a low credit score or have limited funds for a down payment. These loans are distinguished by their lenient credit standards and modest down payments of as little as 3.5% of the home’s purchase price. In Prescott, where house costs vary, an FHA loan may represent an affordable way to become a homeowner, mainly if you are a first-time buyer or have limited financial resources.

Various types of FHA or HUD loans are available in Prescott, each customized to unique homebuyer needs. The Basic Home Mortgage Loan 203(b) is the most prevalent and is suitable for purchasing a new or existing one-to-four-family home in Prescott. Suppose you want to buy a fixer-upper or need to do major renovations. In that case, the FHA 203(k) Rehabilitation Mortgage Insurance program may be right for you because it combines the cost of home modifications and the home purchase into one loan. The FHA offers the Home Equity Conversion Mortgage (HECM) to persons aged 62 and up, which is a reverse mortgage program that allows you to convert a portion of your home value into cash. Finally, the FHA’s Energy Efficient Mortgage program encourages the acquisition of an energy-efficient house in Prescott or one that can be made so through renovations. 

The HUD Section 184 loan program, which is expressly established for American Indian and Alaska Native families, appears to be a viable choice. This program, supported by the United States Department of Housing and Urban Development, provides flexible underwriting rules and low down payment requirements, making homeownership more accessible to qualified individuals and families in Prescott.

Each program focuses on a different part of home financing and remodeling, making them essential options to consider during your Prescott home-buying process.

• Jumbo Loans

When you find your dream home in Prescott, Arizona, and the price exceeds the conforming loan limit, a jumbo loan may be a viable option. Jumbo loans are designed exclusively for customers looking for financing for high-value properties that exceed the standard limit, which is presently set at $726,200 in Prescott.

While jumbo loans provide greater flexibility in purchasing your preferred property, they have stricter eligibility restrictions than conforming loans. To qualify, you must show a credit score of at least 700, preferably above 720, which is usually necessary for Prescott jumbo loans. A debt-to-income ratio (DTI) of less than 43%, preferably closer to 36%, suggests your capacity to handle existing debt while making mortgage payments. Jumbo loans frequently require a 20% or higher down payment, depending on the lender and your financial profile. Lenders will want proof of your income and employment stability to guarantee you can afford the loan installments easily. Extra assets like savings or investments strengthen your application while providing lenders more confidence.

If you meet these jumbo loan requirements, you can use the power of a jumbo loan to buy your ideal home in Prescott, Arizona, regardless of its valuation.

• Construction Loans

As you plan to build your ideal residence in Prescott, Arizona, a construction home loan can help you bridge the gap between your vision and reality. These specialty loans provide the necessary financing throughout construction, making your dream home a reality.

Construction home loans are classified into two types: One-Time Close and Two-Time Close construction loans. The one-time close simplified strategy combines construction and permanent finance into a single loan. The loan immediately converts to a permanent mortgage upon completion of construction and appraisal, eliminating the need for a second loan application and closing costs.

Two-time close requires two distinct loans: one for construction and one for permanent finance. Following the completion of construction, you will close the construction loan and finalize a permanent mortgage with a separate lender. While this option requires more steps and may incur additional costs, it may provide better options regarding interest rates and loan terms.

• Non-Qualified Mortgage Loans

As you look into different mortgage alternatives in Prescott, Arizona, it’s critical to comprehend non-qualified mortgage (non-QM) loans, especially if you have an unusual income or credit history. Non-QM loans do not meet the Consumer Financial Protection Bureau’s demanding criteria for a Qualified Mortgage (QM). This implies that whether you’re self-employed, have unpredictable income, a high debt-to-income ratio, or a less-than-perfect credit score, a non-QM loan may provide you with the flexibility you need for home finance. These loans are intended to assess your ability to repay using other means and documentation, giving a path to homeownership that traditional loans may not allow.

In Prescott, there are numerous types of non-QM loans available. One type is the bank statement loan, which is especially useful if you are self-employed. Lenders will check your bank statements instead of traditional income documentation to determine your financial stability. Another form is an asset-based loan, in which lenders look at your liquid assets rather than your income to determine your loan eligibility. This can be advantageous if you have significant assets but inconsistent income. Non-QM loans include interest-only loans, in which you pay only the interest for a fixed length of time before beginning to pay down the debt. These are appealing if you anticipate a growth in your income in the future. Furthermore, loans with larger debt-to-income ratios than permissible under QM loans are available to persons with higher debt levels. Understanding these Prescott possibilities is critical because they provide alternate paths to homeownership for folks who may need to fit the standard loan mold.

Apply for a Home Purchase Loan in Prescott

Capital Home Mortgage is a mortgage company that provides a wide range of services to consumers in Prescott, Arizona. We offer various mortgage loans, including FHA, VA, Conventional, USDA, Jumbo, and HUD 184 loan programs.

Contact a Prescott Home Loan Specialist at (480) 360-6650.