Home Purchase Loans In Tempe

The housing market in Tempe, Arizona, is competitive. On average, homes in Tempe receive two offers and have an average selling time of approximately 37 days. The median sale price of a property in Tempe has increased by 10.9% compared to the previous year. Furthermore, Tempe’s median sale price per square foot has increased by 3.4% compared to last year. Hence, potential property purchasers should anticipate a cutthroat market characterized by escalating prices.

Purchase Loan Programs in Tempe

Tempe home buyers have various options when financing a home purchase. The most prevalent among them are the following:

• Conventional Loans

Unlike FHA, VA, or USDA loans, a conventional mortgage in Tempe, Arizona, is a house loan not insured or guaranteed by the federal government. A prospective Tempe homeowner obtains a conventional mortgage from a private lender, such as a bank or mortgage company. Compared to government-backed loans, this type of loan usually requires a better credit score and a more significant down payment. However, it provides greater flexibility regarding loan amounts, varieties, and terms. You can, for example, choose between a fixed-rate mortgage and an adjustable-rate mortgage, as well as a loan term that fits your financial goals, such as 15, 20, or 30 years. Furthermore, by eliminating a government guarantee, you can avoid certain costs or insurance premiums commonly connected with federally backed loans.

There are two types of conventional mortgages: conforming loans and non-conforming loans. A conforming loan adheres to the Federal Housing Finance Agency’s (FHFA) maximum loan limitations and meets the financing criteria of Fannie Mae and Freddie Mac, the two government-sponsored enterprises that buy and guarantee most mortgages in the United States. The conforming loan limit in Tempe is determined annually and might change depending on the local real estate market. A non-conforming loan, on the other hand, exceeds these limits and does not meet the criteria established by Fannie Mae and Freddie Mac. These loans are sometimes called ‘jumbo’ loans and are typically utilized to purchase high-value homes. They often need higher credit scores, larger down payments, and may have higher interest rates than conforming loans, reflecting the lender’s increased risk.

• FHA Loans

Suppose you’re considering getting an FHA mortgage as a Tempe, Arizona resident. In that case, it’s important to know that this kind of loan is government-backed and insured by the Federal Housing Administration (FHA). This loan program is intended to assist first-time homebuyers and lower-income borrowers with trouble qualifying for a conventional loan. The fact that an FHA loan in Tempe requires a smaller down payment—as little as 3.5% of the price of the house—is one of its main benefits for you. This is much less than conventional loans, which generally demand a down payment of between 5% and 20%.

Furthermore, FHA loans have more accommodating credit standards, which makes them a desirable choice if your credit history isn’t flawless. Another advantage is your flexibility in managing your initial house purchase costs. The down payment can come from various sources, such as savings, financial gifts from relatives, or down payment assistance programs.

You need to meet specific requirements to be eligible for an FHA loan. First, you need a valid Social Security number, legally living in the U.S., and old enough to sign an Arizona contract. Your credit score is a big part of determining if you can get a loan and how much down payment you need. You would need a credit score of at least 580 to make the 3.5% down payment. You can still get in if your number is between 500 and 579, but you must put down at least 10%. An FHA-approved appraiser must also tell you the property you want to buy meets specific safety, security, and structural soundness standards. The FHA also sets limits on how much you can borrow. These limits are based on the Tempe home market. These limits are changed occasionally, so checking the most recent limits is essential for home-buying. Additionally, you must have a two-year steady employment history, and your debt-to-income ratio should be less than 43%. However, there are exceptions with compensating factors.

• VA Loans

A VA mortgage is a significant benefit if you are a veteran, active-duty service member, or eligible family member. The Department of Veterans Affairs (VA) backs this loan, intended to provide long-term funding to eligible American veterans or their surviving spouses (assuming they do not remarry). The VA mortgage is distinguished by the ability to purchase a home in Tempe with no down payment, distinguishing it from conventional and FHA loans. Furthermore, VA loans do not require private mortgage insurance (PMI), typically required for other loans with less than a 20% down payment. This can save you a lot of money over the life of your loan. VA mortgages also have lower interest rates and less stringent credit standards, making them an appealing and accessible alternative for financing your Tempe home.

To be qualified for a VA loan in Tempe, you must meet the Department of Veterans Affairs’ specified service standards. These standards differ depending on whether you are a veteran, active-duty service member, National Guard or Reserve member, or surviving spouse. You must have served a minimum period of active service, and your release must not have been dishonorable. Once your eligibility has been determined, you must receive a Certificate of Eligibility (COE) to verify your service. The COE can be obtained online, by mail, or from your Tempe lender. It’s also necessary to have a good credit score. However, VA loans frequently have less stringent credit standards than conventional loans.

Furthermore, while the VA does not set an income threshold, you must have a regular income and a debt-to-income ratio demonstrating your ability to repay the mortgage. Finally, the home you wish to buy with a VA loan must be your principal residence. It must fulfill minimum property requirements to ensure safety, sanitation, security, and structural soundness.

• USDA Loans

A USDA mortgage is a home lending program supported by the United States Department of Agriculture that aims to help residents of rural and some suburban areas achieve homeownership. As a potential borrower in Tempe, this type of loan is especially beneficial if you want to live in an area that meets the USDA’s definition of rural. A key advantage of a USDA mortgage is that it provides 100% financing, which means you can buy a property with no down payment. This feature is impressive, especially compared to conventional loans, which frequently need large down payments. Furthermore, USDA loans often have lower interest rates and mortgage insurance fees. To qualify for a USDA loan in Tempe, your household income must be less than 115% of the area median income, and the home must be located in an eligible rural area as determined by USDA.

The USDA home loan program is divided into two main categories: direct loans and guaranteed loans. The USDA Direct Loan, or the Section 502 Direct Loan Program, is designed exclusively for low and very low income candidates. Individuals or families who currently lack safe housing, cannot secure a home loan from traditional sources, or have an adjusted income at or below the low-income limit for the area where they wish to live are eligible for loans under this program, which the USDA directly issues. On the other hand, the USDA Guaranteed Loan program is aimed at borrowers with moderate income. In this situation, the USDA guarantees a portion of the mortgage granted by a cooperating local lender. This guarantee allows lenders to offer borrowers more favorable terms, such as no down payment. While the Guaranteed Loan program covers a broader income range, specified income limits apply, and the property must be located in an eligible rural location. Both initiatives aim to boost rural America’s economy and quality of life. Still, they cater to different income levels to meet the diverse housing needs of communities such as Tempe.

• Jumbo Loans

A jumbo mortgage is a home loan that exceeds the Federal Housing Finance Agency’s (FHFA) conforming loan limits. If you are a prospective borrower in Tempe and want to finance a home that exceeds the conforming loan limit in the area, you need a jumbo mortgage. Unlike regular mortgages, Jumbo loans are not guaranteed by government-sponsored entities such as Fannie Mae and Freddie Mac. Because of the lack of government backing, lenders take on more risk with jumbo loans, which generally leads to stricter underwriting rules. Jumbo mortgages are useful in higher-priced real estate markets or for luxury residences where loan amounts exceed the local conforming loan limitations. These loans are critical for Tempe homeowners who need more significant loan amounts to purchase their preferred property.

A jumbo loan requires an excellent credit history and a high credit score, usually 700 or more. Lenders also consider your debt-to-income ratio (DTI), preferring 43% or less. The tighter DTI requirement assures you can afford higher monthly mortgage payments. Lenders may want a 20% or bigger down payment than conforming loans. Down payment requirements vary by lender and financial circumstances. Proving financial stability requires extensive documentation, including income, asset, and employment verification. Given the more significant loan amounts and related risks, Tempe lenders may also want higher reserve requirements to ensure you have cash or liquid assets following the home purchase.

• Construction Loans

A construction loan is a short-term loan used to finance the construction of a home or similar real estate project. As a prospective Tempe borrower, you would typically utilize this loan to cover the costs of building your home before applying for a standard mortgage. Construction loans are distinct in that they provide finance for a project that does not yet exist; as a result, they represent a higher level of risk for the lender than regular home loans. Before obtaining a loan, lenders frequently want precise designs, a realistic budget, and a construction timeframe. Construction loan interest rates in Tempe are typically higher than regular mortgage rates and are usually variable throughout the construction phase. As the project advances, the loan money is often disbursed in stages, and you typically pay interest solely on the amount expended until the construction is completed.

There are two types of loans: one-time close and two-time close. A construction-to-permanent loan, also known as a one-time close construction loan, is a handy solution that combines the construction loan and the permanent mortgage into a single loan. This means you only have one loan application and closing process. This form of financing in Tempe allows you to lock in your interest rate beforehand, potentially saving you money if rates rise during construction. Because there is only one set of fees, it simplifies the procedure and lowers closing expenses.

On the other hand, a two-time close construction loan entails two separate loans and two separate closing processes: one for the construction phase and one for the mortgage. You first close on the construction loan, which is converted to a permanent mortgage once the home is completed. While this option gives you more freedom in picking your lender for the permanent mortgage and achieving a better rate post-construction, it also involves additional complications and higher closing fees because you must close twice. Choosing between these two sorts of loans for Tempe residents will be determined by your financial standing, the expected timeline of your construction project, and your risk tolerance for interest rate fluctuations.

• Non-Qualified Mortgage Loans

A non-qualified mortgage (non-QM) loan is a home loan that fails to meet the Consumer Financial Protection Bureau’s (CFPB) tight lending rules for a qualified mortgage (QM). If you are a Tempe borrower and do not meet the standard lending criteria, such as having an irregular income or a higher debt-to-income ratio than is typically allowed, you may want to explore a non-QM loan. Non-QM loans are intended for borrowers who, due to their unusual financial circumstances, are unable to qualify for regular mortgages but are capable of repaying a loan. These loans might benefit self-employed individuals, investors, or those with substantial assets but fluctuating income. They provide greater flexibility in underwriting standards, but this flexibility is frequently accompanied by higher interest rates and fees, reflecting the lender’s increased risk.

In general, you must demonstrate your ability to repay the debt. If you are self-employed or have non-traditional income streams, you may be required to provide alternative income verification, such as bank statements or asset depletion models. Your credit score is also crucial, but non-QM lenders may have less stringent standards than typical lenders. The required minimum credit score varies; however, it is frequently lower than that required for traditional loans. Lenders will also assess your debt-to-income ratio but may tolerate higher ratios than are generally permitted for qualified mortgages. Non-QM loans will likely require bigger down payments to compensate for the lender’s increased risk. As a Tempe borrower, you should carefully analyze the conditions of a non-QM loan, as they can vary greatly. You may contain features such as interest-only payments or balloon payments. While non-QM loans offer an alternative road to homeownership, they necessitate careful financial planning and weighing the risks and advantages.

Apply for a Home Purchase Loan in Tempe

Capital Home Mortgage is a favorable option for obtaining a loan to purchase a home in Tempe due to various compelling factors. Capital Home Mortgage has catered to many contented customers, demonstrating our unwavering dependability and commitment to exceptional service. We offer diverse loan options, including house purchase loans, home refinance loans, and specialist loans such as jumbo home loans, FHA/VA loans, and reverse mortgage loans. This allows us to cater to a broad clientele’s needs and financial circumstances.

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