Navigating Arizona Conventional Mortgages in 2025

In 2025, conventional mortgages remain a popular choice for Arizona homebuyers, offering flexibility and competitive terms. Understanding the nuances of these loans can empower you to make informed decisions on your homeownership journey.

What is a Conventional Loan?

A conventional loan is a mortgage not backed by a government agency, such as the FHA or VA. Instead, these loans adhere to guidelines set by Fannie Mae and Freddie Mac, making them a staple in the mortgage industry. The main appeal is a competitive rate and often no private mortgage insurance when the home has 20% equity or more versus and FHA loan that could require mortgage insurance premium (MIP) on a monthly basis.

Government loans like FHA and VA often do not offer financing on second homes or investment properties making Conventional Loans the most common loan type.

There are tons of resources across the internet designed to help educate and empower intelligent homeownership.

Credit Score Requirements

Credit score plays a major role in determining your eligibility and pricing for a conventional mortgage. Most lenders require a minimum credit score of 620 to qualify for a conventional loan backed by Fannie Mae or Freddie Mac. Borrowers with stronger credit, typically in the 700s or higher, tend to receive significantly better interest rates and lower overall costs. A solid credit profile can also help offset other challenges, such as a higher debt-to-income ratio or a smaller down payment. If your credit score needs improvement, taking the time to raise it before applying can lead to meaningful long-term savings.

Debt-to-Income Requirements

Debt-to-income (DTI) ratio is a key factor in qualifying for a conventional mortgage. It measures the percentage of your gross monthly income that goes toward paying debts, including your future mortgage payment. Most conventional loans backed by Fannie Mae and Freddie Mac allow a maximum DTI of 45%, although some highly qualified borrowers may be approved with ratios up to 50%.

This includes all monthly obligations like credit cards, auto loans, student loans, and the projected mortgage payment (including taxes, insurance, and HOA fees, if applicable). Keeping your DTI below these thresholds not only improves your chances of approval but may also help you qualify for better interest rates.

Down Payment Requirements

Contrary to the common belief that a 20% down payment is mandatory, many conventional loans allow for lower down payments. First-time homebuyers can often qualify with as little as 3% down. The typical down payment for all home buyers was an average of 18%.

In Arizona, the average down payment in 2024 was 14.5%, with a median of $31,885. In hot markets like Phoenix, competitive bidding often favors well-qualified buyers who offer larger down payments.
While down payment size matters, it’s just one part of a buyer’s overall qualification. Credit, income, and debt ratios matter too.

Credit score, income stability, and debt-to-income ratio all play a critical role in determining loan eligibility and terms.

2025 Arizona Conventional Loan Limits

The Federal Housing Finance Agency (FHFA) sets annual loan limits for conventional loans. In Arizona, the conforming loan limit for a single-family home is $806,500 in most counties. It’s essential to check specific county limits, especially in high-cost areas.

Maricopa County, home to Phoenix, Arizona, is the largest county in Arizona. The 2025 county loan limit there is $806,500. Conventional loans let buyers make strong offers and refinance later. Higher loan limits increase future cash-out opportunities. Buy under budget now, then use a refinance or home equity loan later to fund renovations.

Some of the best Phoenix, Arizona neighborhoods give plenty of opportunity for creative financing. The cash savings can be used to renovate, upgrade, remodel, and improve older homes. Arizona conventional mortgages are great way to accomplish this.

Loans that go above the loan limit enter Jumbo loan territory and can require stricter underwriting guidelines.

Benefits of Conventional Loans

1. Competitive Interest Rates for Strong Borrowers
Conventional loans offer low rates for strong borrowers—and refinancing with better credit can lead to major lifetime savings.

2. Low Down Payment Options Starting at 3%
First-time buyers may qualify with just 3% down, making homeownership more accessible with less upfront savings required. For repeat buyers, 5–20% down remains common and flexible.

3. No Upfront Mortgage Insurance Premium
Unlike FHA loans, conventional mortgages don’t require a large upfront mortgage insurance payment, reducing your closing costs.

4. Cancelable Private Mortgage Insurance (PMI)
With a conventional loan, PMI can be removed once you reach 20% equity. If you’re refinancing, this is a major opportunity—homeowners with rising home values can often eliminate PMI by switching from FHA or low-down-payment loans.

5. Access to Cash-Out Refinancing
A conventional cash-out refinance lets you tap into your home’s equity and receive the difference as cash. This can be used to consolidate debt, fund home improvements, or boost liquidity for major expenses.

6. Higher Loan Limits Than FHA
In 2025, the conventional loan limit in most Arizona counties is $806,500—much higher than the FHA cap. This is especially helpful if you’re purchasing or refinancing in a high-cost area or buying a larger home.

Working with Agave Home Loans

At Agave Home Loans, we specialize in guiding Arizona residents through the mortgage process. Our team offers personalized solutions, ensuring you find the right loan to fit your needs. Whether you’re purchasing your first home or considering refinancing, we’re here to help every step of the way. Arizona conventional mortgages are a popular way our clients accomplish homeownership.

Frequently Asked Questions

What is the minimum credit score for a conventional loan in Arizona?
Typically, a score of 620 is the minimum requirement, but higher scores can secure better terms.

Can I get a conventional loan with less than 20% down?
Yes, many programs allow for down payments as low as 3%, especially for first-time buyers.

What are the 2025 loan limits in Arizona?
The standard limit is $806,500 for single-family homes, but this can vary by county.

How can I eliminate PMI?
Once you’ve achieved 20% equity in your home, you can request the cancellation of PMI.