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Conventional Loans-Arizona

The goal of home ownership is a critical aspect of the American dream. Individuals and families across the country strive to own a home where they can live comfortably and build equity as an investment in the future. Conventional mortgages make this dream possible.
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While a home purchase is highly desirable, it can also be very difficult. Houses are expensive no matter what market they are in, including the state of Arizona. Most potential buyers are unable to pay for the total cost of a home upfront. That is what conventional mortgage loans are for.

These types of home loans have unique requirements that differentiate them from other products like FHA home loans and VA home loans. Conventional mortgages are available to most borrowers unless they are military service members that qualify for VA loans, have credit scores lower than 620, or do not have the finances to satisfy the lenders.

Typically, you can expect to be approved for a conventional loan 30-60 days after you apply, though this can fluctuate depending on the circumstances of the borrower and the property. There are also conventional loan limits that will affect the terms of the mortgage as set by Fannie Mae and Freddie Mac.

To better understand these loan products, let’s get into the specifics.

Conventional Loan Definition

There are many different kinds of home loans that buyers can apply for, including FHA loans and VA loans. The most common type of mortgage is a conventional loan.

Conventional mortgages are not backed by any government agency in the way that a VA loan or FHA loan is. Instead, they are backed by two entities that are regulated by federal housing enterprise oversight and are known as Fannie Mae and Freddie Mac. Together, these two organizations play a significant role in setting conforming loan limits and backing conventional mortgages.

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Determining Factors

Whether or not you qualify for a conventional loan and what your payment structure will look like depends on several factors.
  • Down Payment

    Typically, the minimum down payment requirement for a conventional mortgage is 3%. Some lenders will not even accept this rate. A down payment is the amount of money that you pay upfront at closing to reduce the total loan amount. The larger the down payment, the lower your monthly payments and loan costs will be.

  • Mortgage Insurance

    If you make a down payment below 20% of the total amount, then you will likely be required to pay mortgage insurance premiums. Private mortgage insurance reduces the risk to the lender in case you default on your payments.

  • Interest Rates

    The status of the real estate market in Arizona determines the interest rate that you can obtain. Interest is essentially the cost of borrowing a conventional loan. A better interest rate means you will pay less over the life of your mortgage loan.

  • Credit Score

    Your credit history is an indication of your ability to pay off debts. A high credit score means that you make on-time payments in the full amount owed. To obtain an Arizona conventional loan, you probably need to have a credit score of 620 or greater. The higher your score, the more competitive the interest rates you can get for your conventional loan.

District Lending Can Answer Your Questions

First-time homebuyers are often overwhelmed by the complex process that comes with applying for conventional home loans. Whether you are searching for conforming loans that fall within the guidelines set by Fannie Mae and Freddie Mac or conventional loans that are beyond those limits, like jumbo loans, District Lending can be the partner you need.
  • Conforming Versus Non-Conforming

    Fannie Mae and Freddie Mac set loan limits for each market, beyond which they will not back up riskier mortgages. The average limit in 2023 is $726,200. This conforming loan limit is important because any mortgage above this number is considered a non-conforming loan or a jumbo loan.

  • Closing Costs

    Fees for the real estate agent, lender, attorney, and other costs are referred to as closing costs. Typically, you can wrap up these fees into your conventional home loan payment plan.

  • Personal Finances

    A conventional home loan is not a guarantee for those who meet the above requirements. You also must have income and a low debt-to-income ratio. Your financial situation can determine the maximum loan amount that you may qualify for.

Work with District Lending Today

Whatever questions you have about the right conventional mortgage loan for your needs, we will be happy to answer them. Check out free tools like our mortgage calculator to figure out what your conventional loan limits are and fiddle around with the various factors that affect home loans.

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