Conventional loans in Arizona — the long-term low-cost option for strong-credit buyers.
Conventional is the standard mortgage in America. It's not government-backed; it follows guidelines set by Fannie Mae and Freddie Mac. For first-time buyers with credit at 700+ and any meaningful savings, conventional usually beats FHA on lifetime cost, mostly because the mortgage insurance falls off automatically once you have equity.
Program figures verified July 2026 — details change; confirm your scenario with us.
Conventional at a glance
| Down payment | 3% (FTHB programs) · 5% standard · 20% to avoid PMI |
| Minimum FICO | 620, best pricing at 740+ |
| Maximum DTI | 45% standard, up to 49.99% with strong compensating factors |
| Mortgage insurance | PMI required <20% down; drops off automatically at 78% LTV |
| 2026 loan limit (most AZ counties) | $832,750 single-family, verify current |
| Property types | 1–4 unit primary, second home, or investment property |
| Gift funds | 100% allowed from family on FTHB programs |
| Seller concessions | 3% (3–10% down) · 6% (10–25% down) · 9% (25%+ down) |
| Best for | Strong credit, longer-term hold, plan to build equity |
Conventional vs FHA — the real comparison
This is the choice most Arizona first-time buyers face: FHA or conventional? It comes down to credit, savings, and how long you'll own the home.
| Factor | FHA wins | Conventional wins |
|---|---|---|
| FICO 620–700 | Yes (FHA pricing better) | No |
| FICO 700–740 | Sometimes | Sometimes |
| FICO 740+ | No | Yes |
| Plan to hold 3+ years | Sometimes | Usually wins long-term |
| Plan to refinance soon | Sometimes | Sometimes (lower upfront cost) |
| Need higher DTI (50%+) | Yes | No |
| Recent credit event | Yes (shorter waiting periods) | No |
| Smaller down payment | Sometimes (3.5% FHA) | Sometimes (3% conventional FTHB) |
| Investment property | No (primary only) | Yes |
| PMI drops off automatically | No (life of loan if <10% down) | Yes (at 78% LTV) |
The biggest tiebreaker for first-time buyers in Arizona is usually mortgage insurance. FHA mortgage insurance lasts the life of the loan in most cases. Conventional PMI drops off automatically. Over 10 years, that single difference often makes conventional cheaper even if the upfront monthly payment is similar.
The 3% down conventional programs (HomeReady & Home Possible)
Conventional loans aren't just "20% down." For first-time buyers, Fannie Mae and Freddie Mac offer 3%-down programs:
- Fannie Mae HomeReady: 3% down, 620 FICO floor, income limit 80% of area median (in Maricopa, ~the current 2026 AMI limit (verify by address)), reduced PMI rates compared to standard conventional
- Freddie Mac Home Possible: Same 3% down structure, similar income cap, similar PMI discount; slightly different DTI calculation rules
- Standard 3% down (Conventional 97): 3% down, 620 FICO, no income limit, but PMI is at standard rates
The income cap on HomeReady/Home Possible matters for Phoenix metro buyers. If your income is over the cap (~the current Maricopa AMI limit), you'd use Conventional 97 instead, same 3% down but standard PMI pricing.
Stack 3%-down conventional with Arizona DPA →Private mortgage insurance (PMI) — how it actually works
Conventional PMI is the cost of putting less than 20% down. The good news: it goes away.
- Cost: Pricing varies by file of the loan annually, paid monthly. Your specific PMI rate depends on credit, down payment, and DTI. A FTHB with 5% down and 720 FICO might pay ~0.55% annually; the same buyer with 3% down and 660 FICO could pay 1.1%+.
- Cancellation rules (federal HPA): PMI cancels automatically When your loan-to-value reaches 78% based on the original amortization schedule and original home value.
- Earlier cancellation: You can request PMI removal at 80% LTV with a current appraisal at your expense. Useful in fast-appreciating Arizona markets. Phoenix, Scottsdale, and Gilbert appreciation has often pushed buyers under 80% LTV faster than the schedule.
- PMI is tax-deductible In some years/situations, talk to a CPA. The deduction has been on-and-off in recent tax law.
The PMI math vs FHA mortgage insurance: on a $400,000 conventional loan with 5% down at 720 FICO, PMI runs about $180/month. After 5–7 years (or sooner if AZ appreciation continues), PMI drops off. FHA on the same loan keeps mortgage insurance for the life of the loan (or until refinance). That's the long-term cost story.
Real numbers — Scottsdale example with strong credit
| Item | Amount |
|---|---|
| Purchase price | $525,000 |
| Down payment (5%) | $26,250 |
| Loan amount | $498,750 |
| Monthly P&I (illustrative) | ~$3,070 |
| Monthly PMI (~0.45% with 740 FICO) | ~$187 |
| Estimated taxes + insurance + HOA | ~$510 |
| Total monthly payment (initial) | ~$3,767 |
| Estimated payment after PMI drops (year ~6–7) | ~$3,580 |
| Estimated closing costs (2–4%) | ~$10,500–$21,000 |
| Cash to close | ~$36,750–$47,250 |
Compared to FHA on the same purchase price: conventional saves ~$60–$80/month upfront, and ~$190/month after PMI drops. Over 10 years, that's $20,000+ in savings vs FHA, even though the day-one payments look similar.
Conforming loan limits in Arizona for 2026
Conventional loans are called "conforming" when they fit within Fannie Mae and Freddie Mac's loan limit. The 2026 conforming limit for most Arizona counties is $832,750 for a single-family home. Above this limit, you'd need a jumbo loan, which has stricter qualification (typically 700+ FICO, 10–20% down minimum).
Most AZ counties, including Maricopa, Pima, Yavapai, Coconino, sit at the standard limit. There are no "high-cost" county designations in Arizona currently.
Verify the current 2026 conforming limit for your county before making offers above $832,750. Limits are revised annually by FHFA and posted in November/December.
Conventional appraisal — different from FHA/VA/USDA
Good news: conventional appraisers don't enforce the strict minimum property requirements that FHA, VA, and USDA do. They check value only. That makes conventional the easier loan to use on:
- Older Arizona homes with cosmetic issues
- Homes with non-functioning pools (huge in AZ)
- Homes with peeling paint, missing handrails, or other minor "fixer" issues
- Condo projects not on the FHA/VA approved list
- Multi-unit properties used as investments
If the home you want has any FHA/VA-style flag and the seller won't fix it, conventional is often the path forward.
Common conventional questions
What's the minimum down payment for a conventional loan in Arizona?
3% down is the minimum for first-time buyers, available through Fannie Mae HomeReady, Freddie Mac Home Possible, or Conventional 97, all with a 620 minimum credit score. Standard conventional loans ask for 5% down. To skip private mortgage insurance entirely, you'd put 20% down. Gift funds from family can cover the full 3% on the first-time buyer programs.
What credit score do I need for a conventional loan?
620 is the minimum credit score for a conventional loan. Pricing is sensitive to your score: the best terms start at 740+, with additional breaks at 760 and 780. Below 700, conventional pricing gets aggressive enough that an FHA loan, which allows 3.5% down at a 580 score, may actually cost you less month to month.
When does PMI drop off a conventional loan?
PMI cancels automatically at 78% loan-to-value, based on your original purchase price and amortization schedule. You can request earlier removal at 80% LTV with a current appraisal you pay for. In appreciating Phoenix-area markets like Gilbert and Scottsdale, equity often pushes buyers under 80% LTV in 3 to 5 years, well ahead of the schedule.
What's the 2026 conforming loan limit in Arizona?
The 2026 conforming loan limit in Arizona is $832,750 for a single-family home, and it applies to every AZ county, including Maricopa, Pima, Yavapai, and Coconino. Arizona has no high-cost county designation. Above $832,750 you'd need a jumbo loan, which carries stricter qualification. FHFA sets this limit and revises it each November or December.
Can I use a conventional loan on an investment property?
Yes. This is one of conventional's biggest advantages over FHA, VA, and USDA, which are limited to primary residences. Investment properties typically require 15% to 25% down, a higher credit score, and a few months of reserves. The same conforming limit logic applies, and the 2026 single-family limit in Arizona is $832,750.
Can I have a co-borrower on a conventional loan?
Yes, conventional loans allow co-borrowers, including non-occupant co-borrowers such as parents helping a first-time buyer qualify. Their income and credit join the application, which can lift your borrowing power above the 620 minimum score and 45% standard DTI. FHA permits this too. VA and USDA generally do not allow non-occupant co-borrowers.
How long after a foreclosure can I get a conventional loan?
Generally 7 years from a foreclosure completion before you can get a conventional loan. It's 4 years after a deed-in-lieu or short sale, and 4 years from a Chapter 7 bankruptcy discharge. FHA waiting periods are shorter, 3 years on a foreclosure and 2 years on Chapter 7, which is one reason a recent credit event can tip the decision toward FHA.
Can I stack conventional with Arizona down payment assistance?
Yes. Most Arizona DPA programs pair with conventional first mortgages, not just FHA. Home Plus offers up to 5% statewide at a 620 FICO, and Home in Five offers up to 6.5% in Maricopa County at a 640 FICO. A 3%-down conventional plus DPA can mean near-zero out of pocket. DPA programs don't stack with each other, so you pick one per purchase. More on AZ down payment assistance →
What is a jumbo loan in Arizona?
A jumbo loan is any conventional loan above the 2026 conforming limit, which is $832,750 in every Arizona county. Jumbo loans carry stricter qualification: typically a 700+ credit score, 10% to 20% down, lower DTI limits, and 6+ months of reserves. We originate jumbo loans across Arizona, so ask if you're shopping above $832,750.
Strong credit and some savings? Conventional may be your move.
20-minute call. We'll model FHA vs conventional side-by-side with your real numbers, including the long-term mortgage-insurance math, and tell you the cheaper path.