Conventional Loans in Arizona: Everything Homebuyers Should Know

When most Arizona homebuyers start exploring mortgage options, they quickly realize there isn’t one “best” loan type for everyone. But if you have solid credit, stable income, and a bit saved for a down payment, conventional loans often offer the perfect blend of flexibility, competitive rates, and long-term savings.

Whether you're buying a home in Phoenix, Scottsdale, Tucson, Mesa, Chandler, Gilbert, Flagstaff, or anywhere across the state, understanding conventional loan features can help you make a confident decision.

What Is a Conventional Loan?

A conventional loan is a mortgage not backed by the federal government, unlike FHA, VA, or USDA loans. These loans are provided through private lenders and come in two main forms:

• Conforming loans (meet Fannie Mae/Freddie Mac guidelines)

• Non-conforming loans (including jumbo loans)

In Arizona’s dynamic housing market, especially in higher-priced regions, both types can be relevant depending on the home’s price point.

Why Arizona Buyers Choose Conventional Loans

Conventional loans are extremely popular among Arizona buyers for several reasons:

✔ Lower Interest Rates for Strong Credit Profiles

Borrowers with credit scores of 700+ often qualify for some of the lowest interest rates available.

✔ Flexible or Optional Mortgage Insurance

Unlike FHA loans—where mortgage insurance is required for most borrowers—conventional loan PMI can be removed once you reach 20% equity.

✔ Low Down Payment Options

Certain Arizona buyers can qualify for 3% down, while standard options range from 5% to 20%.

✔ Fewer Property Restrictions

Conventional financing offers more flexibility for condos, townhomes, and certain single-family properties—helpful in markets like Phoenix, Tempe, and Scottsdale.

Conventional Loan Requirements in Arizona

To qualify for a conventional mortgage, Arizona lenders typically look for:

Minimum Credit Score

Usually 620+, though higher scores yield better terms.

Down Payment

• 3% for eligible first-time buyers

• 5–20% for most borrowers

• 20% to remove PMI upfront

Debt-to-Income Ratio (DTI)

Preferred DTI is 45% or lower, though some scenarios allow exceptions.

Property Eligibility

Conventional loans can be used for:

• Primary homes

• Secondary/vacation homes

• Investment properties

This flexibility is key for buyers eyeing rentals, especially in Arizona’s short-term rental markets like Sedona or Scottsdale.

How Conventional Loans Fit Arizona’s Competitive Market

In many Arizona cities—such as Phoenix, Mesa, and Chandler—conventional loans help buyers stand out because:

• They often close faster

• Sellers view conventional buyers as highly qualified

• Appraisal rules can be more flexible

• Offers may appear stronger in competitive bidding situations

That’s a real advantage in a market where desirable homes move quickly.

Conventional vs. FHA Loans in Arizona

Choose a Conventional Loan If You:

• Have solid to strong credit

• Prefer mortgage insurance that can be removed

• Want flexibility on property types

• Want the lowest long-term cost

Choose an FHA Loan If You:

• Have lower credit or higher debt

• Need easier qualification requirements

• Want lower upfront cash needed

Your loan advisor can run both loan types to compare monthly payments, cash needed at closing, and long-term costs.

Refinancing Into a Conventional Loan

Many Arizona homeowners refinance from FHA to conventional to:

1. Remove Mortgage Insurance (PMI)

Conventional PMI can be removed once you have 20% equity—unlike FHA MIP, which often lasts for the life of the loan.

2. Secure Better Rates

Improved credit scores or better financial stability may unlock lower conventional rates.

3. Take Advantage of Market Conditions

Arizona homeowners regularly refinance when rates drop or home values rise.

Covering Closing Costs on a Conventional Loan

Arizona buyers have several options to reduce or eliminate closing costs, including:

• Seller concessions (depending on market conditions)

• Lender credits in exchange for a slightly higher rate

• Gift funds from family or employer

• Arizona down payment assistance programs

Your loan officer can help you explore the best option based on your county and price range.

Is a Conventional Loan Right for You?

You may be a strong candidate for a conventional mortgage if you:

• Have a good credit history

• Have a low-to-moderate debt load

• Want flexibility and strong long-term savings

• Have some money available for a down payment

But every situation is different—and comparing loans side-by-side is the best way to know for sure.

Work With Team CD – Fairway Home Mortgage

Whether you're buying your first home, upgrading, investing, or refinancing anywhere in Arizona, Team CD at Fairway Home Mortgage is here to help you explore your options and choose the mortgage that fits your goals.