FHA Loan Limits Arizona – Keep Up With Changes
Considering an FHA loan? This federal government program is designed for worthy homebuyers who might not otherwise qualify for conventional loans; it’s especially helpful for first-time homebuyers, consumers with a limited credit history, and those who can’t afford to make a significant down payment.
On January 1, 2014, the Federal Housing Administration (FHA) made some changes to FHA loans in Arizona. The maximum FHA loan for a single-family residence in Maricopa County decreased from $346,250 to $271,050, as did limits in all other Arizona counties with the exception of Coconino, where limits decreased to $362,250.
Note: as this post gets older, the FHA loan limits above that I posted may become outdated. Here is FHA loan limit list for all the counties in Arizona that will automatically be updated as time goes on.
How Do FHA Loans Differ From Conventional Loans?
FHA loans are insured by the U.S. Department of Housing and Urban Development (HUD). Because the loan is backed up by HUD, Arizona mortgage lenders can generally offer lower rates, lower down payments, lower mortgage insurance and lower closing costs.
But FHA loans aren’t just for first-time homebuyers or those with little cash for a down payment. Because it’s usually easier to qualify for FHA loans than conventional loans, many homebuyers choose to secure an FHA loan.
Why Are FHA Loan Limits Arizona Changing?
The FHA was established during the Great Depression of the 1930s, a time when foreclosures were common. Though it was originally intended to provide insurance to lenders — so they’d be more willing to make loans to homebuyers — over time, FHA loans transformed into a way to make the home-buying process accessible to those who may not otherwise qualify for conventional loans.
Fast-forward to 2007; once again, the country was experiencing high rates of foreclosures, thanks to the economic downturn and the bursting housing bubble. In response, Congress raised limits on FHA loans, allowing more people to access credit. FHA loans grew in popularity during the next six years as the housing market recovered from the crash, and by the end of 2013, economic recovery was judged sufficient enough for a decrease in FHA loan limits Arizona.
What do New Limits Mean for Arizona Homebuyers?
The decreased limits will have the greatest effect on homes selling for less than $350,000. Specifically, cash buyers and those with conventional loans may become more common among home sales in this price range.
The new limits may change how you apply for a mortgage. If you want to finance what’s known as a “high limit” loan, you may have to apply for a so-called “Conventional” mortgage which would allow you to get a loan up to $417,000. Any loan above $417,000 would require a “Jumbo Loan”. Jumbo loans tend to have stricter credit requirements, so you’ll need to aim for a credit score of at least 700, says Credit.com.
If you need to go with a conventional loan, you will need to come up with a higher down payment, i.e., a minimum of 5% down. If you need a Jumbo loan, in most cases a 20 percent down payment will be the norm.
For many home buyers, the new limits may mean choosing to buy less house. With requirements for down payment and income on the rise, buyers may have to seek out less expensive homes.
Remember, the decreasing FHA loan limits Arizona are a good thing, as they’re an indication that the economy is on the mend. Overall, a healthy market is a good indication for both home equity and future housing sales.