What Is a Conventional Loan?
A conventional loan is a mortgage that's not insured or guaranteed by the federal government. Most conventional loans in Arizona conform to the standards set by Fannie Mae and Freddie Mac, which means they meet specific guidelines around loan size, credit score, and debt-to-income ratio.
For Arizona buyers with steady income, a credit score above 620, and at least 3-5% saved for a down payment, conventional loans are usually the most flexible and cost-effective option.
Who Conventional Loans Are Right For
A conventional loan tends to make sense if you:
- Have a credit score of 620 or higher
- Have a stable employment history (typically two years)
- Can put down at least 3% (5% is more common)
- Have a debt-to-income ratio under 45-50%
- Are buying a primary residence, second home, or investment property
- Don't qualify for or don't want a government-backed loan (FHA, VA, USDA)
If your credit is below 620, an FHA loan is probably a better fit. If you're a veteran or active-duty military, a VA loan is almost always the better choice.
Conventional Loan Down Payment Options in Arizona
| Down Payment | Loan Program | Best For |
|---|---|---|
| 3% | Conventional 97 / HomeReady / Home Possible | First-time buyers with good credit |
| 5% | Standard Conventional | Repeat buyers, most borrowers |
| 10% | Standard Conventional | Buyers wanting lower PMI |
| 20%+ | Standard Conventional | No PMI, best pricing |
A note on PMI (private mortgage insurance): If you put down less than 20%, conventional loans require PMI. The good news — unlike FHA mortgage insurance, conventional PMI drops off automatically once you reach 22% equity in your home, or you can request its removal at 20%. That makes conventional loans cheaper than FHA over the long run for most borrowers who can hit the credit and down payment thresholds.
2026 Conventional Loan Limits in Arizona
For 2026, the conforming loan limit for a single-family home in most Arizona counties is $806,500 (verify current FHFA limits). High-cost counties may have higher limits. Loans above the conforming limit are called "jumbo loans" and have their own guidelines.
| Property Type | 2026 Loan Limit (Most AZ Counties) |
|---|---|
| 1-Unit (Single Family) | $806,500 |
| 2-Unit (Duplex) | $1,032,650 |
| 3-Unit (Triplex) | $1,248,150 |
| 4-Unit (Fourplex) | $1,551,250 |
Limits adjust annually. Confirm with Jason for the most current numbers.
Conventional vs. FHA — Which One Is Right for You?
| Feature | Conventional | FHA |
|---|---|---|
| Minimum Credit Score | 620 | 580 (with 3.5% down) |
| Minimum Down Payment | 3% | 3.5% |
| Mortgage Insurance | PMI (drops at 20% equity) | MIP (lasts the life of the loan in most cases) |
| Loan Limits (2026) | $806,500 (most AZ counties) | $524,225 (most AZ counties) |
| Property Type | Primary, second home, investment | Primary residence only |
| DTI Ratio Max | 45-50% | Up to 56.99% with strong factors |
Quick rule of thumb: If your credit is 680 or higher and you can put 5%+ down, conventional is usually cheaper over the life of the loan. If your credit is in the 580-660 range, FHA is often the better path.
Jason will run the actual numbers both ways so you can see which one wins for your specific situation.
