When you buy a home, opportunities open up in your future because it is an investment that allows you to build equity in the property the longer you live there.
What if your dream home is waiting in the state of Arizona? That house could become a much-needed retreat from the rest of the world for your family, helping you build stronger relationships and investing in your future.
A house can be the biggest investment you will make in your lifetime, so coming to this decision is not easy. Most people cannot afford to buy a home outright to pursue the American dream.
While many buyers may be able to secure conventional loans for their purchase, some first-time homebuyers might have a hard time meeting the requirements for a conventional loan.
Factors that Affect FHA Mortgage Loans
Your credit score is an indication of your borrowing history. Lenders will check your credit score to see if you will reliably pay back the debt that you owe. The lower your credit score, the more risky you are considered to be. The minimum FICO score to get an FHA loan approved in Arizona is 500, while the down payment will vary. A credit score can play a role in what type of loan you qualify for and the interest rate that you are eligible for, which may dictate the need for an FHA loan.
The down payment is the amount of money you can pay upfront at the time of closing. For traditional conventional loans, the minimum down payment requirement is 3.5%, but you can put forward any size down payment above that to lower the monthly mortgage payments and the total sales price of the loan. FHA loan borrowers must put forth a down payment, though the percentage is typically lower. For example, if your credit score is below 580, the down payment for an FHA loan in Arizona would be 10%.
Personal Situation with Finances
Another factor that lenders will look at includes your debt-to-income ratio. This number compares the amount of debt you owe with the money you are making. The lower your debt-to-income ratio is, the more likely lenders are to see you as a safe borrower. Lenders will analyze pay stubs, bank accounts, tax returns, and other factors that affect debt-to-income ratios to determine your maximum loan amount. An FHA loan has more lax requirements for a borrower’s financials than other types of loans. Bear in mind that you’ll probably need a 2-year employment history to get an FHA loan in Arizona, although there are some exceptions.
There are many fees associated with the transaction, known as closing costs. These can include attorney fees, real estate agent fees, title searches, lender fees, and more. The total amount of closing costs will affect the mortgage balance and loan terms. Arizona FHA loans have an advantage in this regard since seller closing cost contributions are allowed in this state.
Real Estate Market
While most counties in Arizona will have comparable interest rates, other markets might lead to higher prices and rates. For example, Maricopa County is likely to have a far more competitive real estate market than most in Arizona. The state of the market will play a big role in the loan terms you can obtain.
Arizona FHA Loan Limits
Lower Credit Scores
In general, conventional mortgages are only given to those with a credit score of 620 or higher. Arizona FHA loans typically require a credit score of 580 or more, as well as a strong credit history, though exceptions may be made down to 500.
Quick Pre-Qualification with District Lending
Getting pre-qualified for a loan is a crucial step, especially in lively real estate markets. Fortunately, you can get pre-qualified for an FHA home loan very quickly with District Lending, ensuring that you will not be at a disadvantage when putting in offers on homes in Arizona while having a short sale process. A free quote won’t even affect your credit score.
Lower Down Payment Requirements
For an Arizona FHA loan through District Lending, we only ask for a 3.5% down payment to qualify. This ensures that you have an easier time affording the down payment and getting that much closer to owning your first home.
Payment Assistance Programs in Arizona
Whether you need down payment assistance or help planning out your monthly payments, we can work together to create a manageable strategy for covering the purchase price of your Arizona home. Arizona’s down payment assistance programs will ensure that you feel confident becoming a homeowner, even if it seems unaffordable at first. Some programs in the state you could take advantage of include the HOME Plus Program, the HOME Down Payment Assistance Program, or the Pathway to Purchase Down Payment Assistance Program.
Plus, if there are gift funds that you can take advantage of, we can help you navigate that payment process as well.
Conventional lenders require a monthly mortgage insurance premium to be paid if the down payment is below 20%. Since an Arizona FHA loan is partially backed by the government, FHA mortgage insurance can cost a little less each month. However, unless you put down a substantial down payment, you will still have to pay some insurance premiums for Arizona FHA mortgages.
FHA Loan Limits
The amount of money you can borrow with an Arizona FHA loan is limited. While conventional mortgages may have higher loan limits, an FHA loan is designed to make homeownership more accessible, so it doesn’t make much sense to have a super high maximum loan amount. Property value and location will play a big role in these limitations.
There are a few other requirements that must be met to qualify for an FHA loan. The home in question must be your primary residence. It also cannot be a second home.
How District Lending Can Help
At District Lending, we love to help people looking for homes in Arizona land a great deal on FHA mortgages. Just because you cannot afford the terms of a conventional mortgage does not mean that you do not deserve to own your first home.
We offer FHA loans as well as other loan products like conventional, jumbo, and even VA loans. Our team can walk you through the Arizona FHA guidelines so that you are fully aware of the loan scenario that you are applying for. In the future, we can also help you with an FHA streamline refinance.