FHA loans in Arizona — the most flexible first-time buyer option.
FHA is the loan most first-time Arizona buyers should at least look at. Lower credit floor, lower down payment, more forgiving on debt-to-income. The tradeoff is mortgage insurance, but for a lot of buyers, getting in the door beats waiting two more years to save.
FHA at a glance
| Down payment | 3.5% (FICO 580+) · 10% (FICO 500–579) |
| Minimum FICO | 580 (most lenders) · some allow 500 with 10% down |
| Maximum DTI | Up to 56.99% with compensating factors |
| Mortgage insurance | Upfront 1.75% + annual ~0.55%; life of loan if <10% down |
| 2026 AZ loan limit | ~$524K–$540K floor (most AZ counties at floor), verify current |
| Property types | 1–4 unit primary residence; FHA-approved condos OK |
| Gift funds | 100% allowed from family |
| Seller concessions | Up to 6% of purchase price |
| Best for | Lower credit, smaller savings, higher DTI, first-time buyers |
What an FHA loan actually is
An FHA loan is a mortgage insured by the Federal Housing Administration. The FHA itself doesn't lend money. Cornerstone (and any other FHA-approved lender) makes the loan, and FHA insurance covers the lender if the loan defaults. That insurance is what lets us approve buyers with lower credit, less down payment, and higher DTI than conventional loans accept.
FHA exists to help first-time buyers and lower-income borrowers buy homes. About 20% of all U.S. home purchases use FHA financing, much higher among first-time buyers.
When FHA is the right call in Arizona
- Your credit is 580–720. FHA pricing is friendly to mid-range credit. Conventional gets aggressive about pricing below 740.
- You don't have a big down payment. 3.5% is the floor. With AZ DPA stacked on top, your out-of-pocket can be near zero.
- Your DTI is high. FHA goes to ~57% with strong compensating factors. Conventional usually caps at 45–50%.
- You have a recent credit event. Bankruptcy, foreclosure, or short sale: FHA waiting periods are shorter than conventional.
- You're using gift funds. 100% of your down payment can come from family, no minimum borrower contribution required.
When FHA is the wrong call
- Typically, conventional will price better If your credit is 740+ and you have 5%+ down. Conventional PMI drops off automatically at 78% LTV, while FHA mortgage insurance is for the life of the loan unless you put 10%+ down.
- You're buying a non-FHA-approved condo. FHA has a list of approved condo projects. If your target isn't on it, you need conventional or a different program.
- The home has FHA-disqualifying issues. Peeling paint on pre-1978 homes, missing handrails, broken windows, an inactive pool, etc. FHA appraisers flag these. They have to be fixed before closing.
- You plan to refinance in 1–2 years. FHA's upfront mortgage insurance (1.75% of the loan) is partially refundable on early refinance, but you're still leaving money on the table vs. starting with conventional.
FHA mortgage insurance, plainly
FHA mortgage insurance has two parts:
- Upfront MIP, 1.75% of the loan amount, financed into the loan (not paid out of pocket). On a $400,000 FHA loan that's $7,000 added to your loan balance.
- Annual MIP, typically 0.55% Of the loan balance, divided by 12 and added to your monthly payment. On the same $400,000 loan, that's about $185/month.
How long does annual MIP last?
| Down payment | Loan term | MIP duration |
|---|---|---|
| < 10% | 30 years | Life of loan |
| ≥ 10% | 30 years | 11 years |
| < 10% | 15 years | 11 years |
| ≥ 10% | 15 years | 11 years |
Most FHA buyers put 3.5% down on a 30-year loan, which means MIP for the life of the loan. The standard exit strategy: refinance to conventional once your loan-to-value hits 80% (typically 5–7 years in, depending on appreciation and how much principal you've paid down).
Real numbers — Phoenix metro example
Here's a realistic FHA scenario for a Phoenix-area first-time buyer:
| Item | Amount |
|---|---|
| Purchase price | $425,000 |
| Down payment (3.5%) | $14,875 |
| Base loan amount | $410,125 |
| Upfront MIP financed (1.75%) | $7,177 |
| Total loan amount | $417,302 |
| Monthly P&I (illustrative ~file-specific pricing) | ~$2,638* |
| Monthly MIP (~0.55%) | ~$191* |
| Estimated taxes + insurance + HOA | ~$425 |
| Total monthly payment | ~$3,254* |
| Estimated closing costs (2–4%) | ~$8,500–$17,000 |
| Cash to close | ~$23,000–$32,000 |
Rates are illustrative; your actual rate depends on credit, debt-to-income, and current market. With Arizona down payment assistance, the cash-to-close on this scenario can be significantly reduced depending on program structure.
*As calculated using a mortgage calculator (Qualifier Plus IIIx). Illustrative only — not a quote or commitment to lend.
FHA + Arizona down payment assistance
FHA is the most common first mortgage paired with Arizona down payment assistance programs. Most AZ DPA programs (Home Plus, Home In 5, Arrive Home, Chenoa) work specifically with FHA first mortgages.
Depending on the DPA program structure, the assistance could cover some — or in many cases most — of your closing costs plus down payment. That meaningfully reduces what you bring to the closing table; the exact amount depends on the specific program, your loan size, and your scenario.
Down Payment Assistance Arizona →FHA property requirements
FHA appraisers do double duty, they confirm the value AND check minimum property standards. Common Arizona FHA appraisal flags:
- Peeling, chipping, or flaking paint on homes built before 1978 (lead paint era)
- Missing or broken handrails on staircases
- Missing or broken window screens, broken windows
- Active leaks or visible water damage
- Inactive or non-functioning swimming pools (very common AZ flag)
- Wood-destroying insect activity (termites, required termite inspection in AZ)
- HVAC, electrical, or plumbing not in working order
- Roof with less than 2 years of remaining life
If the appraiser flags an issue, the seller usually has to fix it before closing, or you walk. Your real estate agent should know how to handle this in the contract.
FHA loan limits in Arizona
FHA sets a different loan limit by county based on local home prices. Most Arizona counties — including Maricopa (Phoenix metro) and Pima (Tucson) — sit at the national floor: $524,225 for a single-family home. Coconino County (Flagstaff) is higher. Full per-county table: FHA loan limits in Arizona 2026 — all 15 counties.
If you need to borrow above the FHA limit on a higher-priced AZ home, look at conventional loans (up to ~$806K–$832K) or jumbo financing.
Common FHA questions
What's the minimum credit score for an FHA loan in Arizona?
FHA accepts 580 with 3.5% down. Scores between 500 and 579 can still qualify but require 10% down. Most Arizona FHA lenders set their own overlays at 580 or 620. Cornerstone goes to 580.
Do I have to be a first-time buyer to use FHA?
No. FHA has no first-time buyer requirement. You just have to occupy the home as your primary residence. Repeat buyers use FHA all the time.
Can I use FHA for an investment property?
No. FHA is for primary residences only. You can buy a 2–4 unit property with FHA if you live in one of the units, though.
How much do FHA closing costs run in Arizona?
Typically 2–4% of the loan amount. On a $400,000 loan, that's $8,000–$16,000. Most of that is title, escrow, lender fees, and prepaid taxes/insurance. Full closing-cost breakdown →
Can the seller pay my FHA closing costs?
Yes. FHA allows up to 6% in seller concessions, which covers most or all of typical closing costs in Arizona. This is a normal negotiation point in your offer.
How do I get rid of FHA mortgage insurance?
Two options: refinance to conventional once your loan-to-value hits 80% (most common), or wait 11 years if you put 10%+ down. With less than 10% down on a 30-year FHA, MIP is for the life of the loan unless you refinance.
Can I use FHA on a manufactured home in Arizona?
Yes, on permanently affixed manufactured homes that meet FHA's manufactured home standards. Mobile homes that aren't permanently affixed don't qualify. Manufactured homes in Maricopa, Pinal, and rural AZ counties are common FHA scenarios.
How long after bankruptcy can I get an FHA loan?
Two years after Chapter 7 discharge. One year after Chapter 13 discharge if you've been making on-time plan payments and the court approves. Three years after a foreclosure.
Curious if FHA fits your situation?
20-minute call. We'll tell you whether FHA, conventional, or another loan type is your best path.