Arizona ConventionalHome Loans
Arizona's most versatile home loan — 3% down for first-time buyers, cancelable PMI, and competitive rates for good credit. Finance your Phoenix, Scottsdale, or Tucson home with the most widely-used loan in the country.
What is a Conventional Loan?
Mortgage explanations and FAQs by Michael George.
A conventional loan is a mortgage not backed by a government agency — and for most Arizona buyers, that means better rates and lower lifetime cost.
That independence is the whole appeal. Instead of following the rules of a government insurer, conventional loans follow guidelines set by Fannie Mae and Freddie Mac — congressionally chartered companies that buy most of America's home loans. Because those loans can be sold to investors after closing, lenders can offer rates and terms a single bank never could. Everything prices off your actual financial picture: credit score, down payment, debt-to-income ratio, and the property itself.
Flexibility is the other reason conventional financing dominates. It is the only major loan type that covers every property goal — a primary home in Glendale, a cabin in Flagstaff, a rental in Mesa. Government-backed programs tie themselves to primary residences; conventional loans do not. FHFA data puts conventional loans at about 70% of American home-purchase lending, so on most streets in Arizona, that is what your neighbors used.
The loan also shrinks its own cost as you pay it down. Start with as little as 3% down through Fannie Mae's 97% option or Freddie Mac's HomeOne, or through HomeReady or Home Possible if your household income fits. Build equity to 20%, and you can ask for the PMI to come off; at 78% it cancels automatically under federal law. FHA's mortgage insurance, by contrast, usually lasts for the life of the loan. Ask us to model both scenarios side by side.
And when your plans outgrow the guidelines — a loan above the $832,750 Arizona conforming limit, or an investment purchase — the same conventional framework extends into jumbo and investor programs, often with the same lender and the same file you already built.
Who fits best? Buyers with a 620+ credit score, two years of steady income, and a down payment they can document — typically with some reserves left after closing. If that is you, conventional usually wins the total-cost math against every alternative, because you are not paying an insurance premium for a government guarantee you may not need. The self-assessment section below gives you the honest version of that test.
One more distinction worth knowing: "conventional" describes the loan's rules, not its lender. Banks, credit unions, and independent brokers like us all offer conventional loans — but a broker shops several wholesalers at once, which is how one financial profile can collect very different offers on the same day.
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How your quote is actually built. Every conventional rate starts from a base price, then a grid of loan-level pricing adjustments stacks on top: your credit tier, your down payment, the property type, whether you will live there, and the loan's purpose. Two buyers can see the same advertised rate and receive very different offers, which is why the tiers matter — 780+ earns the very best pricing, 740+ is already excellent, and every step down costs a little more. None of it is secret: your Loan Estimate itemizes the result within three business days of application.
The appraisal, in plain terms. A conventional appraiser's job is mostly to confirm market value, with a lighter touch on condition than FHA's stricter safety standard — one reason conventional loans handle older homes and light fixer-uppers well. If the appraisal comes in under your purchase price, you have real options: renegotiate, cover the difference in cash, challenge the report with better comparable sales, or walk away under your appraisal contingency. You can also request a copy of the appraisal and read it yourself.
After the closing table. Your loan will most likely be sold to Fannie Mae or Freddie Mac within weeks of closing — your original lender in name only from then on. The terms never change; only the address on the payment stub does. Watch for two dates: the day your escrow account is set up (property taxes and insurance, collected monthly so the bills never surprise you), and your first PMI review, when your servicer checks whether you have reached the cancellation thresholds. Mark the 80% request date yourself and send the letter — servicers must honor a proper request, and the automatic check is required at 78% of the original value.
When conventional is the wrong tool. If you are a veteran with remaining entitlement, the VA loan's zero-down, no-PMI structure usually beats conventional for a primary residence — this page's comparison table shows the gap plainly. If your credit sits below 620 or your savings are thin, FHA's 580-and-3.5% path exists for exactly that situation. The honest answer is that we would rather lose a deal than put you in the wrong loan, and both of those alternatives are programs we offer every week.
Two questions we hear constantly. First: does checking rates hurt my credit? A credit pull dings a score by a few points at most, and mortgage shopping inside a focused window counts as one inquiry — so shop freely. Second: can I pay PMI upfront instead of monthly? Single-premium PMI exists and can make sense if you plan to refinance soon, but run the math both ways with us before prepaying anything.
Conventional Loan Benefits
From low down payments to cancelable PMI, here's why most Arizona buyers choose conventional.
Flexible Down Payment
Buyers can put as little as 3% down: first-time buyers through Fannie Mae's 97% option and Freddie Mac's HomeOne, or any buyer earning up to 80% of the area median income through HomeReady or Home Possible. Outside those programs, 5% is the standard minimum. Put 20% down and skip PMI entirely.
PMI Cancellation
Unlike FHA mortgage insurance, conventional PMI is cancelable. Request removal at 80% of your home's original value, or sooner under Fannie Mae and Freddie Mac policy once you have about two years of seasoning and your current equity meets their requirements.
Multiple Property Types
Buy a primary residence in Phoenix, a vacation home in Sedona, or an investment property in Mesa — conventional loans cover all Arizona property types.
Competitive Rates
Borrowers with good credit typically get the most favorable rates on conventional loans — a 780+ score earns the very best pricing tier, and 740+ is still excellent.
Fixed or Adjustable
Lock in a 30-year fixed for predictable payments, or consider an ARM if you plan to move or refinance within 5–7 years. We'll help you choose what fits your Arizona plans.
Higher Loan Limits
The 2026 conforming loan limit is $832,750 in all Arizona counties. Loans above that threshold require jumbo financing — we handle both.
Conventional vs. Government Loans
Conventional
- 3-20% down payment
- 620+ credit score
- PMI removable at 20% equity
- All property types
- No upfront funding fee
FHA
- 3.5% minimum down
- 580+ credit score
- MIP for life of loan
- Primary residence only
- 1.75% upfront MIP
VA
- 0% down payment
- No minimum (lender varies)
- No PMI ever
- Veterans, service members, and some surviving spouses
- 2.15% funding fee (first use; 3.3% on a later zero-down use; $0 with service-connected disability)
Conventional vs. FHA: The Full Comparison
The most common question we hear: "Should I go conventional or FHA?" Here's the side-by-side answer.
| Feature | Conventional | FHA |
|---|---|---|
| Minimum Down Payment | 3% | 3.5% |
| Credit Score (typical) | 620+ (780+ for top pricing) | 580+ (500 with 10% down) |
| Upfront Mortgage Insurance | None | 1.75% of loan amount |
| Monthly Mortgage Insurance | PMI (removable at 20%) | MIP (often for life of loan) |
| Debt-to-Income Ratio | Up to 50% with factors | 31/43 standard; up to 40/50 with factors (automated approvals can exceed 50%) |
| Property Standards | Flexible | Stricter HUD requirements |
| Investment Properties | Yes | No (primary only) |
| Loan Limits (2026) | $832,750 conforming | $541,287 (floor) |
| Best For | Good credit, long-term savings | Lower credit, smaller down payment |
| Government Backing | No (private + GSEs) | Yes (FHA insured) |
Data from CFPB, Fannie Mae, and HUD
How Conventional Loans Work
From application to closing — here's what to expect.
Pre-Approval
Get pre-approved to know your budget and show sellers you're serious.
Home Search
Find a property within conforming loan limits ($832,750 standard).
Underwriting
Lender verifies income, assets, credit, and property value.
Closing
Sign documents, pay closing costs (2-5% of loan), get keys.
Loan Sold to GSE
Your lender sells the loan to Fannie Mae or Freddie Mac. You keep the same terms.
Credit Score Tiers & Pricing
Excellent rates. Only the 780+ tier prices better.
Very good rates. Small pricing adjustment.
Good rates. Moderate pricing adjustment.
Qualifying range. Higher rates and/or PMI costs.
Pro tip: One point can matter. A 739 pays more than 740. Check your score before applying and dispute any errors.
Conventional Loan Requirements
Credit Score
A minimum 620 credit score is required for most conventional programs. The very best pricing tier starts at 780+, and 740+ is already excellent. We'll show you where you stand and what it takes to get there.
Down Payment
Buyers can qualify with as little as 3% down — first-time buyers through Fannie Mae's 97% option and Freddie Mac's HomeOne, income-qualified buyers through HomeReady or Home Possible — and 5% is the standard minimum outside those programs. Putting 20% down eliminates PMI and reduces your monthly payment immediately.
Debt-to-Income Ratio
Maximum 45% DTI for most conventional borrowers. Strong compensating factors — like significant reserves — can allow up to 50% with Fannie Mae Desktop Underwriter approval.
Employment Verification
Two years of consistent employment or income history is standard. Self-employed Arizonans and business owners are welcome — we'll work through your documentation to build the strongest possible file.
Property Appraisal
The property must appraise at or above the purchase price. Conventional appraisal standards are less restrictive than FHA, making it easier to buy fixer-uppers or older Arizona homes.
Reserves
Some conventional programs require 2–6 months of mortgage payments held in verified savings after closing. Higher reserve balances can also help offset a higher DTI ratio.
Is a Conventional Loan Right for You?
Good fit if:
- Credit score 680+ (ideally 740+)
- Stable income with 2+ years history
- Can document assets clearly
- Want PMI to go away eventually
- Buying a primary, second home, or investment property
Consider alternatives if:
- Credit below 620
- Recent bankruptcy or foreclosure
- Debt-to-income ratio of 45% or higher
- You need maximum flexibility on appraisal issues
- You're a veteran eligible for a VA loan (0% down, no PMI)
Our Position
We'd rather lose a deal than put you in the wrong loan. If conventional isn't right for you today, we'll say so — and help you find what is.
What Are Your Rights as a Mortgage Borrower?
Federal law protects you throughout the mortgage process. Know your rights.
Loan Estimate
Within 3 business days of application, you must receive a Loan Estimate showing rates, fees, and monthly payment.
CFPB: Loan Estimate ExplainerNo Steering
Lenders cannot steer you toward loans that benefit them over you. You have the right to shop and compare.
CFPB: Consumer Resources3-Day Review
You have 3 business days to review your Closing Disclosure before signing. Don't be rushed.
CFPB: Closing DisclosureTypical Closing Costs
Typical fees on a conventional purchase — so there are no surprises at the closing table.
| Fee Type | Typical Range | Notes |
|---|---|---|
| Origination Fee | 0.5% - 1% of loan | Negotiable. Some lenders offer "no origination" with a higher rate. |
| Appraisal | $400 - $700 | Required. You can request a copy of the report. |
| Title Insurance | $1,000 - $2,500 | Varies by state. Shop for title companies. |
| Underwriting | $300 - $600 | Administrative fee. Sometimes waived. |
| Recording Fees | $100 - $250 | Government fee to record the deed. |
| Prepaid Interest | Varies | Daily interest from closing to your first payment. |
| Escrow Deposit | 2-3 months | Property tax and insurance reserves. |
Wire Fraud Alert
Never wire closing funds based on email instructions alone. Always call your title company using a verified phone number to confirm wiring details. Scammers intercept emails and steal down payments.
Conventional Loan FAQ
Study this topic for the NMLS exam — MLO Mastery: Qualified Mortgage (QM) · Adjustable-Rate Mortgage (ARM)
Ready for a Conventional Loan?
Get pre-approved in as little as one business day and make offers in Arizona's competitive market with confidence. Our local team is ready to help you move fast.