FHA Loan
FHA Loans
FHA loans are mortgages insured by the Federal Housing Administration, making them a popular option for first-time buyers and those with lower credit scores or smaller down payments. With down payment as low as 3.5% and more flexible credit requirements than conventional loans, FHA loans open the door to homeownership for buyers who might not otherwise qualify.
Key Requirements & Features
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Minimum credit score: FHA technically allows scores as low as 500-579 with 10% down, but 620+ is a more realistic target for most buyers, typically requiring just 3.5% down with little to no reserves
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Down payment: As low as 3.5%
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Mortgage Insurance Premium (MIP): Requires an Upfront MIP (UFMIP) of 1.75% of the loan amount, plus an annual MIP of 0.55%, paid monthly unlike conventional PMI, FHA mortgage insurance often lasts the life of the loan unless you refinance
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Debt-to-income (DTI) ratio: Can go as high as 57% depending on Automated Underwriting System (AUS) findings and overall loan profile
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Loan limits: FHA loan limits vary by county. For most Arizona counties, the limit is $541,287. Maricopa and Pinal counties allow up to $557,750, and Coconino County allows up to $609,500
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Property types: Primary residences only for new purchases. (Existing FHA loans on former primary residences may qualify for a non-credit-qualifying streamline refinance even if the property is no longer your primary home.)
FHA loans tend to be the best fit if you:
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Have a credit score of 620 or higher and want to put down as little as 3.5% in many cases, no cash reserves are required, though some borrowers may need extra reserves depending on their overall loan profile (technically FHA allows credit scores down to 500, but in practice this requires significantly more reserves and assets, making 620+ the realistic target for most buyers)
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Have charge-offs or collection accounts that a conventional loan might factor into your debt-to-income ratio, FHA guidelines often don't require these to be included in DTI calculations, even though major events like bankruptcy or foreclosure still factor into your credit profile and eligibility timeline
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Have a higher debt-to-income ratio and need a loan program with more flexibility
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Plan to live in the home as your primary residence, at least initially, FHA requires owner-occupancy at the time of purchase (typically for about a year), though many buyers later convert the property to a rental once that period passes
Not the best fit if: you're buying a second home or investment property (as your initial use), have strong credit (700+) with enough savings for 5%+ down (a conventional loan may offer better long-term value without lifetime mortgage insurance), or need a loan amount above your county's FHA limit. In those cases, a conventional loan or one of our alternative loan programs may be a better fit.
Frequently Asked Questions
What credit score do I need for an FHA loan in Arizona?
FHA technically allows scores as low as 500 with a 10% down payment, but in practice this requires substantial reserves and assets that most buyers in that range don't have. A 620+ score is a more realistic target for most buyers, and typically only requires 3.5% down with little to no cash reserves.
Do FHA loans count collections or charge-offs against me?
Not usually in your debt-to-income calculation, this is one of the ways FHA is more forgiving than conventional loans. That said, larger credit events like bankruptcy or foreclosure still affect your credit profile and eligibility timeline.
How much mortgage insurance will I pay on an FHA loan?
FHA loans require an Upfront Mortgage Insurance Premium (UFMIP) of 1.75% of the loan amount, plus an annual MIP of 0.55%, paid monthly. Unlike conventional PMI, FHA mortgage insurance typically lasts the life of the loan unless you refinance.
What are the FHA loan limits in Arizona?
FHA loan limits vary by county. Most Arizona counties have a limit of $541,287, while Maricopa and Pinal counties allow up to $557,750, and Coconino County allows up to $609,500.
Do I have to live in the home if I buy it with an FHA loan?
Yes, at least initially. FHA requires the home to be your primary residence at the time of purchase, typically for about a year. After that, many buyers go on to rent the property out or move, which is common and doesn't violate FHA rules.
Can I refinance an FHA loan if it's no longer my primary residence?
If you already have an FHA loan and have since moved, you may still qualify for a non-credit-qualifying streamline refinance on that property, even though new FHA purchase loans require the home to be your primary residence. This can be a good option if you're keeping the home as a rental or second home and want to lower your rate without a full credit review.
Should I get an FHA loan or a conventional loan?
It depends on your credit score, savings, and long-term plans. FHA can be a better fit if you have lower credit or want charge-offs/collections excluded from your DTI, while conventional may offer better long-term value if you have strong credit and can avoid lifetime mortgage insurance. We're happy to walk through your specific situation and help you compare both options.
How do I get started with an FHA loan in Arizona?
As a licensed Arizona mortgage broker, we compare FHA loan offers across our network of lenders, reach out for a free pre-approval consultation.
Ready to See Your Options?
Tell us a little about what you’re looking for, and one of our Arizona loan officers will reach out. No pressure, just options.
