Funding Your First Home in Arizona – 6 Requirements To Consider

Navigating the real estate world can be confusing for a first-time home buyer. With so many loan options and lending phrases, it’s not always clear on which loan to choose. The Federal Housing Administration (FHA) offers one loan type, which is popular among first-time home buyers for many reasons. Find out if an FHA loan is right for you.


What Is An FHA Loan?


An FHA loan is a way for homeowners to finance a home purchase, refinance an existing mortgage, or renovate a home. While FHA loans are commonly known as first-time home loans, this isn’t always the case.


Sometimes, FHA loans are also available to other buyer types. FHA loans are popular among new home buyers because they tend to have less strict eligibility requirements than other loan types, like conventional.

Why Buy In Arizona?


Whether you choose an FHA, conventional, or any other loan type, buying a home in a location where the market is consistent and you enjoy living is important. Arizona is an exceptional place to call home, with affordable home prices and high demand. In fact, more and more seniors are choosing Arizona to retire, meaning there will continue to be demand in the housing market, helping maintain the value of your new home.

Arizona also offers endless outdoor recreation and is one of the sunniest states in the country, with over 300 sun-filled days each year. Arizona continues to make the list of top places to live, with up-and-coming cities like Phoenix and Sedona.

What Are FHA Loan Requirements?


FHA loan requirements may vary but typically include the following:

  • Debt-to-income ratio: FHA typically requires a maximum 43% debt-to-income ratio.
  • Steady pay: FHA requires borrowers to prove steady income and employment.
  • Minimum credit score: Most FHA lenders require borrowers to have at least a 580 credit score. (They may approve borrowers between 500 and 579 with a higher down payment).
  • Down payment: You’ll have to show that you have the money available to cover the down payment requirements of the loan you choose.
  • Primary residence: FHA only issues funds to borrowers who want to purchase a primary residence. (You must live in the home for at least one year).
  • Habitable home: The home you purchase using an FHA loan must also be habitable, meaning it doesn’t require extensive repairs or renovations.

Home buyers in all 50 states can take advantage of an FHA loan, but the maximum borrowing limits may vary based on the city, county, and state you live in. Based on FHA rules, this refers to the maximum you can borrow when buying a house. The FHA loan limits Arizona residents can expect will depend on the county and number of units, ranging from $472,030 to $1,019,550 for 2023.

Pros Of An FHA Loan


FHA loans offer many advantages, making them a popular choice for new home buyers in Arizona. Perhaps the biggest benefit of an FHA loan is that it doesn’t have as strict eligibility requirements as other loan types. FHA may issue lending to borrowers with less-than-perfect credit scores. An FHA loan may also be an option for borrowers with a previous bankruptcy on their record.

Cons of an FHA Loan


You’ll also want to note any potential downsides of any loan you’re considering. Even a solid loan choice, like an FHA loan, has a few cons. FHA loans are an excellent choice for borrowers with dings on their credit reports, but depending on your credit score, you may have to put down a larger down payment to qualify. 

Most FHA loans have built-in mortgage insurance premium (MIPs), which adds to your monthly loan payment. Finally, FHA loans are only available to primary residence purchases, meaning it’s not an option if you plan to purchase an investment property. Discussing your options with your lender is the best way to choose a loan type that fits your ownership plans.

Alternatives to FHA Loans


With so many lending options available, you can easily find one that meets your unique needs and goals. You have other options, even if an FHA loan isn’t right for you or your purchase. A Veterans Administration (VA) loan also has less strict requirements, and some applicants may even qualify for as little as a $0 down payment.

Conventional loans are traditional loans not backed by the government. Many conventional loans still conform, which means they follow the government’s set maximum limits. Jumbo loans are for buyers who want to purchase a property that exceeds these maximum lending guidelines. Jumbo loans typically have much higher interest rates and faster repayment periods.

Not sure which loan is right for you or your real estate goals? Working with a local lender is one of the best ways to choose the right loan for your needs.

FHA loans are popular because of their affordability and easy eligibility requirements. Yet, an FHA loan isn’t right for all buying situations, including investment or vacation properties. You can explore your lending options in-depth and choose the right lender and loan type that fits your unique needs.