If you’re planning to buy a home in Arizona, you have several options available, including a conventional mortgage, FHA, VA, or USDA loan. But if you’re buying an expensive property, you may find that you can’t borrow enough money to finance the purchase using these traditional loans.
Fortunately, an alternative may be a better option for you. Keep reading as we explore jumbo loans, the requirements needed to obtain one and the jumbo loan limits.
What Is A Jumbo Loan In Arizona?
Conventional loans limit how much you can borrow, even if you meet all eligibility requirements. According to the Federal Housing Finance Agency, the 2023 conforming loan limit for a one-unit home in Arizona is $726,200. This is the maximum amount that you can borrow using a conventional mortgage. If you’re planning to buy an $800,000 home using a conventional loan, you will need to have a down payment of $73,800 to pay for the remaining balance of the home.
A jumbo loan is a specialized type of financing designed to help you buy a property that is more than the conventional mortgage limit. Rather than basing the maximum amount you can borrow on a traditional mortgage loan limit, jumbo loans use your gross monthly income and existing debts to calculate how much you can borrow. If you need to borrow more than the conventional mortgage limit to purchase a property, a jumbo loan could help you to get the financing you need.
Jumbo loan requirements
It’s more challenging to qualify for a jumbo loan than a conventional mortgage, so it’s essential to be familiar with the unique jumbo loan requirements. Most lenders require a credit score of at least 720. Lenders often have strict requirements about your debt-to-income ratio (DTI), with some requiring that your DTI be no higher than 45%.
You will also need a sizable down payment, often at least 20% of the home’s purchase price. When purchasing a $1 million home, that down payment may need to be $200,000 or more. Requirements can vary by lender, so you may be able to find a lender who allows for a lower down payment.
Similar to applying for a conventional loan, you must submit financial statements, including your bank statement, two to three years of tax returns and W-2 or 1099 statements.
Arizona Jumbo Loan Limit
A loan limit refers to the maximum amount of money you can borrow using that particular loan. According to the Federal Housing Finance Agency, these limits, also called conforming loan limits, are calculated based on a formula established by the Housing and Economic Recovery Act of 2008. That loan limit is critical because any loan above that limit is considered a jumbo loan with different requirements. Arizona’s 2023 jumbo loan limit for a single-family one-unity property is $726,200.
If you’re planning to buy an Arizona home and need to borrow more than $726,200, then a jumbo loan can help you finance that purchase. Some jumbo loans don’t have upper limits. However, a lender may limit the amount you can borrow with a jumbo loan.
As you explore jumbo loans in Arizona, you can choose from several different jumbo loan types:
- Jumbo fixed-rate mortgage: Your mortgage interest rate and the monthly payment will remain consistent throughout your loan. If interest rates are low when you apply for your loan, you can enjoy those low rates during the whole term, even if rates increase. But if rates drop during the term, you will need to refinance to take advantage of those lower rates.
- Jumbo adjustable-rate mortgage: Your mortgage interest rate will be fixed for the first few years of your mortgage. After the first five to ten years, your interest rate will fluctuate depending on market interest rates, and your monthly payments can change each year.
- Jumbo cash-out refinance: If you already have a jumbo loan with a high-interest rate, but the market interest rates have dropped, refinancing can help you to secure a lower interest rate. You can also take out a lump sum of cash during the refinance, which you can use for home repairs or other major expenses.
Since jumbo loans don’t follow conventional mortgage rules, you may find more flexibility with this loan type, especially if you take the time to research different lenders. Jumbo loans often have interest rates similar to conventional loans’ interest rates. Lending requirements vary, and some lenders are willing to accept lower credit scores or a higher debt-to-income ratio. You may find some leniency with the required down payment amount, and some lenders may waive their private mortgage insurance requirement, too.
Apply For A Jumbo Loan To Help Secure Your Next Home
Conventional loans are practical solutions for many home purchases. Still, you might need to consider jumbo loans when buying a more expensive property. If you need to borrow more than $726,200 for your Arizona home purchase, a jumbo loan can give you the financing you need. Arizona Central Credit Union offers jumbo loans with low down payments and will consider prior bankruptcy, foreclosure, and short sales. You can get 100% financing for up to $1,250,000 to purchase your new home1.
Learn more about the jumbo loans offered by Arizona Central Credit Union today.
1.Borrowers may qualify for less than the maximum loan amount as determined by credit, collateral, property value, income and other determining factors.
